Identifying the critical success factors for target cost contracts in the construction industry

Abstract

Purpose

The paper aims to present a succinct review of guaranteed maximum price (GMP) and target cost contracting (TCC) concepts and features in general, and to identify the critical success factors for procuring GMP/TCC contracts from the Hong Kong perspective in particular.

Design/methodology/approach

By means of an empirical questionnaire survey geared towards industrial practitioners with direct hands‐on GMP/TCC experience, the opinions of various contracting parties including clients, consultants and contractors were solicited, analysed and compared in relation to GMP/TCC success factors.

Findings

Experienced practitioners shared the unanimous perception that: reasonable share of cost saving and fair risk allocation; partnering spirit from all contracting parties; right selection of project team; well‐defined scope of work in client's project brief and early involvement of contractor in design development, are the most essential ingredients for the successful implementation of GMP/TCC scheme.

Research limitations/implications

Although the research study is based in Hong Kong with a limited sample size, the survey findings and hands‐on experience of the relevant industrial practitioners may be cross‐referenced to other similar investigations in other parts of the world for international comparisons.

Originality/value

The research study has provided some useful insights into assisting key project stakeholders in determining important successful ingredients when launching GMP/TCC scheme. Such an identification of critical success factors would be valuable in formulating effective practical strategies to improve overall project performance, create win‐win opportunities for contracting parties and mitigate the occurrence of construction disputes/claims. It also attempts to seek more research evidence to capture the levels of success and lessons learned from previous GMP/TCC construction projects for generating best practice recommendations for future implementation.

Citation

Chan, D.W.M., Chan, A.P.C., Lam, P.T.I. and Wong, J.M.W. (2010), "Identifying the critical success factors for target cost contracts in the construction industry", Journal of Facilities Management, Vol. 8 No. 3, pp. 179-201. https://doi.org/10.1108/14725961011058820