A research framework for exploring risk allocation mechanisms for target cost contracts in construction

Daniel W.M. Chan, Albert P.C. Chan, Patrick T.I. Lam, Joseph H.L. Chan, Will Hughes, Tony Ma

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

5 Citations (Scopus)

Abstract

To achieve better value for money in construction procurement, a wider application of more innovative integrated procurement approaches is often recommended by policy-makers, such as Guaranteed Maximum Price (GMP) and Target Cost Contracting (TCC) contractual arrangements. The merits of these procurement strategies lie in their incentives for the contractor to become efficient and to achieve cost savings, as well as to allocate risks on an agreed basis between the employer and the contractor. The GMP arrangement, based on a target cost concept, has become increasingly popular in Hong Kong over recent years. Overseas experience derived from both the United Kingdom and Australia have shown that these procurement strategies can accrue many perceived benefits to both employers and contractors, provided that the risk factors are adequately identified, analyzed, shared and managed. A study is in progress on the Key Risk Factors and Risk Sharing Mechanisms for GMP/TCC procurement methods in Hong Kong, the United Kingdom and Australia. The research findings of this study are expected to help the decision-makers to generate clearer insights into equitable risk allocation amongst different contracting parties, especially between the employers and contractors at an early stage of project delivery and to mitigate the potential risks associated with GMP/TCC schemes.

Original languageEnglish
Title of host publicationProceedings of CRIOCM 2008 International Research Symposium on Advancement of Construction Management and Real Estate
EditorsChang-Chun Feng, Ming-Xuan Yu, Zhen-Yu Zhao
PublisherThe Hong Kong Polytechnic University, Hong Kong
Pages289-296
Number of pages8
ISBN (Electronic)9789623676113
Publication statusPublished - 2008
Event2018 International Research Symposium on Advancement of Construction Management and Real Estate, CRIOCM 2008 - Beijing, China
Duration: 31 Oct 20083 Nov 2008

Publication series

NameProceedings of CRIOCM 2008 International Research Symposium on Advancement of Construction Management and Real Estate

Conference

Conference2018 International Research Symposium on Advancement of Construction Management and Real Estate, CRIOCM 2008
CountryChina
CityBeijing
Period31/10/083/11/08

Keywords

  • Guaranteed Maximum Price
  • Research framework
  • Risk factors
  • Risk Sharing Mechanisms
  • Target Cost Contracting

ASJC Scopus subject areas

  • Business and International Management
  • Urban Studies
  • Architecture
  • Strategy and Management
  • Building and Construction

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