For me, a target cost contract cannot operate without a pain / gain mechanism, so there has to be one in existence somehow. From what you say, this does not seem to be in dispute, it is just what is the pain / gain split.
So the question becomes which one ?
- is the one that the winning Contractor submitted at tender and which, presumably following a trail of correspondence, can be demonstrated to be the one in which the Parties entered into the contract under ? For this to be the case, the last correspondence between the Parties with these details is highly likely to be the one that applies; OR
- has the previous bullet been replaced by an agreement between the Parties (who are the Employer and Contractor, NOT the Project Manager). A Director has this standing to agree a change in the contract, but a manager might well not. Ideally, this is in accordance with clause 12.3, but if both Parties have acted as if (for a sufficient time / number of communications), then it could be by conduct. Note the subjectivity of 'sufficient'.