NEC releases target cost contracts white paper for Hong Kong

The contracts are encouraged by the region's initiative, Construction 2.0.

NEC has published a new white paper that covers the use of target cost contracts for building works in Hong Kong.

The use of target cost contracts in Hong Kong is growing and is encouraged by the Hong Kong government in Construction 2.0. The government wishes to see target cost contracts used more widely, as they drive contractors to achieve good performance by using pain / gain mechanisms that incentivise over performance and penalise under performance.

The government in Hong Kong is encouraging all departments to embrace target cost contracting.

Benefits of target cost contracts

This white paper will explain the benefits of target cost contracts,  and the various options that are available within the NEC family of contracts.

It will then consider the specific considerations for building projects and how to manage those when using NEC target cost contracts.

This includes the selection of multiple subcontractors and suppliers, verification of Defined Cost and value for money in the supply chain, as well as the lack of market experience in the operation of target cost contracts.

Issues

This white paper details the solutions to many of these concerns, including the need for training and upskilling that may be required to be further aligned with Construction 2.0.

The paper will also mention jurisdictional specific issues and how NEC contracts are ideally suited to the other Construction 2.0 main initiatives, moving towards modular construction.

Finally, the appendix will provide examples of building project case studies which have been delivered using target cost contracts from around the world.

Access the white paper here.

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