Achieving better performance through target cost contracts

Abstract

PurposeThis paper aims to explore the implementation framework, project performance, underlying motives, perceived benefits, potential difficulties, as well as critical success factors, of adopting the target cost contracting (TCC) form of procurement, based on an in‐depth real‐life case study of a challenging underground railway station modification project in Hong Kong.Design/methodology/approachThe case project was analysed by means of the related project documentation and face‐to‐face interviews with the relevant senior representatives from the client organisation.FindingsThe target cost‐based procurement strategy generates a plethora of benefits throughout the whole delivery process of the project case, including the provision of cost incentives for the contractor to work efficiently, aligning individual goals of various contracting parties with the overall project objectives, achieving better value for money and more satisfactory overall project performance in terms of time, cost and dispute occurrence.Practical implicationsAlthough the selected TCC case study project is based in Hong Kong, the research findings and hands‐on experience of the relevant industrial practitioners may be cross‐referenced to other similar TCC projects in other parts of the world for international comparisons.Originality/valueThe paper provides some useful insights into assisting key project stakeholders in maximising the benefits, whilst minimising the detriments brought about by potential difficulties in launching the TCC scheme. It seeks more research evidence to evaluate the entire project delivery process, and capture the levels of success and lessons learned from previous TCC construction projects for generating best practice recommendations to achieve better construction performance.