Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Abstract

Over the past few decades, both the guaranteed maximum price (GMP) and target cost contracting (TCC) arrangements have been regarded as alternative integrated procurement strategies for clients to mitigate risks, minimize claims, integrate the diverse interests of a complex construction project and offer incentives to provide value-added services. However, the adoption of GMP/TCC contracts may also generate significant risks and difficulties that merit considerable attention. This paper aims to provide a concise review of the potential pitfalls of GMP/TCC scheme in general, and identifies the key risk factors and potential difficulties associated with GMP/TCC in comparison with other procurement strategies in construction in particular via an empirical survey of clients, contractors and consultants in Hong Kong. The survey data gleaned from 45 valid replies were analyzed using the mean score ranking technique, Kendall's concordance test and Spearman's rank correlation test. The survey results indicated that 'Involvement of inexperienced or claimconscious contractors in a project procured by a GMP/TCC contract' was considered to be the most significant risk factor; whilst 'Design development must keep pace with main contractor's program for tendering the domestic subcontractors' works packages' as the major difficulty in implementing GMP/TCC projects. The research findings derived from this study are particularly essential in assisting the contracting parties to mitigate the detriments brought about by potential risks or difficulties when embarking on GMP/TCC contracts. It has also generated valuable insights into developing effective recommendations for alleviating the barriers to GMP/TCC success for future construction projects.

How Effectively Safety Incentives Work? A Randomized Experimental Investigation

“…A profound look at literature studies shows that there is dearth of literature focusing on employees' perspective of incentive programs and its effects on their safety behavior and performance [ 33 ]. Moreover, past studies have provided evidence from industrialized countries, e.g., China, UK, USA [ 34 ], or rapidly developing countries, e.g., India [ 29 ], but safety literature from developing economics is scarce and limited [ 1 ]. Furthermore, the results offered by past studies on effectiveness of I/P programs are also mixed and contradictory [ 21 , 29 ].…”

A Guide for Risk Management in Construction Projects: Present Knowledge and Future Directions

“…The subject of risk management in construction projects has been increasingly studying since the 1980s. Most of these studies have focused on how risks are identified or analyzed/assessed in different countries such as Australia [32,33], China [23,34,35], Ghana [36], Hong Kong [37,38], India [39,40], Indonesia [41,42], Italy [43], Korea [44], Malaysia [31,45], Mexico [46], New Zealand [47,48], Nigeria [49,50], Poland [51], Singapore [52,53], Spain [54], Sri Lanka [55], Tanzania [56], the United Kingdom [57,58], the United States of America [59,60], Vietnam [61,62] and Zambia [63]. These studies mostly used survey/interviews or case studies.…”

Σύστημα Υποστήριξης Αποφάσεων Επιλογής Τύπου Σύμβασης Κατασκευής Στα Πλαίσια Της Διαχείρισης Έργων Οδοποιίας

“…γ) προτάσεις υπολογισμού του ύψους των κινήτρων και προσδιορισμού συνοδευόμενων κινδύνων (Ward & Chapman, 1995;Jafaari, 1996;Al-Subhi Al-Harbi, 1998;Arditi & Yasamis, 1998;Berends, 2000;Broome & Perry, 2002;Shr & Chen, 2003;Olsen & Osmundsen, 2005;Chan et al, 2010;Hosseinian & Carmichael, 2013και Boukendour & Hughes, 2014.…”

“…Συχνότερη είναι η περίπτωση κινήτρου για μείωση του κόστους όπου ορίζεται το κόστος -στόχος του έργου και σε περίπτωση μικρότερου τελικού κόστους, ο ανάδοχος και η ΑΑ μοιράζουν το κέρδος, η οποία ονομάζεται στη βιβλιογραφία και ως «Target Cost Contract», σύμβαση προϋπολογισμού στόχου (Broome & Perry, 2002;Chan et al, 2010). Υπάρχει και η παραλλαγή κατά την οποία ο κατασκευαστής εγγυάται ότι το συνολικό κόστος του έργου δεν θα ξεπεράσει κάποιο ποσό αναλαμβάνοντας όλο το επιπλέον κόστος (Veld & Peeters, 1989).…”

“…Μοιάζει με τον ΤΣ ΚΣΚ, αλλά ορίζεται μία τιμή οροφή πάνω από την οποία ο ανάδοχος πληρώνει όλες τις ζημιές γι αυτό και μερικές φορές αναφέρεται ως fixed price incentive (FPI) δηλαδή, κίνητρο μέγιστης τιμής (Veld & Peeters 1989;Berends, 2000). Ουσιαστικά η σύμβαση αυτή είναι παραλλαγή της σύμβασης ΚΣΚ αφού λειτουργεί με τον ίδιο τρόπο στην περίπτωση μείωσης του κόστους, ενώ στην περίπτωση αύξησης του κόστους δεν αναλαμβάνει καμία διαφορά η ΑΑ (Chan et al, 2010;2011 a & b). (Gruneberg et al, 2007;Gruneberg, 2007 (Herbsman et al, 1995).…”