How is risk apportioned in Option C: target contract with activity schedule?
The financial risk is shared between the Employer and the Contractor in the following way:
The Contractor tenders a target price in the form of the Prices using the activity schedule. The target price includes the Contractor’s estimate of Defined Cost plus other costs, overheads and profit to be covered by his Fee. The Contractor tenders his Fee in terms of fee percentages to be applied to Defined Cost. During the course of the contract, the Contractor is paid Defined Cost plus the Fee. This is defined as the Price for Work Done to Date. The Prices are adjusted for the effects of compensation events (and for inflation if Option X1 is used).