In NEC terget cost contracts (C/D) sharing formula may range from 10% to 90% to the Contractor, the share may vary over a range of actual cost outcomes? What sharing would you recommend?
As an expert, I am going to say ‘it depends’. I have written an article on this which appeared in the NEC3 User’s Newsletter. However, you can find it direct at the bottom of this web page : http://www.leadingedgeprojects.co.uk/Resources/Articles.aspx
As Jon says - it really does depend on a number of factors such as:
- clients attitude to risk and requirement for cost certainty
- complexity and uncertainty of the works
- known relationship between the Parties
You need to pick the right percentage to incentivise to achieve the required output. To little benefit and the Contractor will not be incentivised to cut costs and this will be also reflected in a higher tender price. Too good incentives and the client may end up paying more than they might have.