Target Cost Agreement

Maintaining the program. Evaluation of the program in real time is an essential part of the NEC`s philosophy. It is essential that the program is updated. Under the “target costs” option, adjustments should be based on a pre-assessment of the impact of specific compensation events. In the case of a typical extension of time after the post-hoc evaluation, the pressure is to recover all late costs, although some are due to aspects related to the management of the contractor. In practice, the effects of the program are often imperfectly managed under the NEC, for example by a series of compensatory events that are grouped together for evaluation. However, as long as the evaluation is kept up to date, the contractor and the client will understand their position. The agile methodology emphasizes the value of being flexible and reacting to changes and completing work units in short sprints. This means that target cost contracts are well compatible with agile contract management. The case study is based on a commercial project using NEC2, with the main contractor and some subcontractors being subject to incentives at target costs. The employer has taken a target cost approach to strike a balance between risk transfer and demand in the internal administration. Objective cost contracts provide a middle ground that gives both parties confidence that variable costs will not ruin an agreement or result in significant losses for a given project. The contractor`s costs cover both the main institution and the profit elements.

If the contractor does work himself (as opposed to the use of subcontractors), this is generally considered to be part of his actual costs, which are in turn subject to the levy. The costs borne by the contractor in the field, such as shelters. B and the provision of housing staff are also part of the actual costs. NB: according to NRM2: detailed measure for construction work, in relation to parts lists, is defined as “cost target”; `… Total expenses for an item or work package.┬áSince objective cost contracts are a strong incentive for the contractor to stay below budget, they tend to have other positive effects on the project. By participating in the final budget of the project, contractors keep costs fairly low, provide faster and produce a better quality end product. In general, cost control was strongly implemented and the project was defined accurately enough to produce its effects, although significant commercial problems remained at the origin of the project throughout the project.