Target cost contracts: Adopting innovative incentive mechanisms to improve the project delivery process

Target Cost Contracts are widely recognised as cost-led procurement models which incentivise client and contractor to work collaboratively and develop mutual gains. Their use on recent high profile projects and inclusion in the recently published UK Government Construction Strategy recognises Target Cost Contracts as a “cost-led procurement model.” They have been identified as a model capable of producing the “15-20%” cost savings required for public sector construction projects by 2015, and act as key drivers for their use. This research aims to facilitate innovation in future Target Cost Contracts by expanding the current incentives offered to include a wider variance of stakeholders and performance metrics. A cross-sectional study utilising semi-structured interviews to test the initial findings generated by the literature review was employed to validate the use of such innovative incentives. Incentivising alternative performance metrics is required to generate greater motivation amongst project stakeholders, although there was insufficient evidence to suggest that incentive frameworks could achieve this. Incentive frameworks to include the design team and alternative performance metrics have been defined for testing in future research which could be pilot tested in practice.