4 TARGET CONTRACTS UNDER TARGET CONTRACTS. THE CONTRACTOR IS SET CER...

Under target contracts. the contractor is set certain targets of cost and time

and paid an incentive for achieving them; and sometimes also a bonus for

exceeding them. Quite often, a target contract arises when a contractor starts

out on a reimbursable basis but, as the work progresses, it becomes possible

for the parties to agree targets and rewards for achieving them. In this way, the

employer gives the contractor a real incentive to keep the costs down and to

keep to programme. He also retains a large measure of control over the works,

and has the same opportunity for an early start as he would have had with a

reimbursable contract.

Where the targets are not met, however, there is a risk of disputes over

who  was responsible, and it might be difficult to define sufficiently clearly

in advance what events or circumstances are to affect the contractor ’ s entitle-

ments. Related to this, the scope for implementing changes to the work once

the targets have been agreed upon could be limited.