By Ian Yule

In terms of risk, target cost contracts lie between lump sum contracts where the contractor takes most of the risk, and cost-reimbursable contracts, where the contractor is paid its costs plus a fee. Target cost contracts are similar to the latter, but with a shared risk “pain/gain” mechanism added. The main domestic contract for this type of procurement has traditionally been the NEC New Engineering Contract, Options C and D.

In June this year, a newcomer arrived on the market, namely the Infrastructure Conditions of Contract (ICC) Target Costs Version. It is published by the ACE and CECA, along with a new design and build contract. These both add to the ICC suite of contracts that began with the lump sum version in 2014.