Evaluating guaranteed maximum price and target cost contracting strategies in Hong Kong construction industry

Abstract

Guaranteed maximum price (GMP) and target cost contracting (TCC) with a pain‐share/gain‐share arrangement have been adopted to integrate the construction delivery process and motivate service providers to seek continuous improvements in project outcomes. However, there is still a lack of research evidence to evaluate the levels of success and lessons learned from these innovative procurement strategies. Based on the analysis of a series of in‐depth interviews on the perceptions of various relevant experienced industrial practitioners, this paper aims to explore the key attributes of GMP/TCC including the underlying motives, perceived benefits, potential difficulties, critical success factors, key risk factors involved and optimal project conditions for adopting GMP/TCC. The research findings are useful in assisting key project stakeholders in minimising the detriments brought about by potential difficulties in and maximising the benefits derived from implementing GMP/TCC concepts. The study is also significant in contributing to new knowledge and practical information of GMP/TCC applications and implementation, in both a national and international context.

Citation

Chan, D.M., Chan, A.P.C., Lam, P.T.I., Lam, E.W.M. and Wong, J.M.W. (2007), "Evaluating guaranteed maximum price and target cost contracting strategies in Hong Kong construction industry", Journal of Financial Management of Property and Construction, Vol. 12 No. 3, pp. 139-150. https://doi.org/10.1108/13664380780001100