Project Management Institute

A comparative study of the benefits of applying target cost contracts between South Australia and Hong Kong

This paper aims to identify and analyze the key benefits of adopting Guaranteed Maximum Price and Target Cost Contracting (GMP/TCC) over and above the traditional lump-sum contractual arrangement through an empirical questionnaire survey conducted in South Australia and compared with the findings in Hong Kong. The main reason for such a comparison is that both Hong Kong and Australia share similar practices in the construction industry in terms of tender documentation and project delivery. The Mann-Whitney U Test indicated differences in perception between the two groups of respondents on the majority of the identified benefits. The differences may be attributed to the different pace of development, the application of the GMP/TCC form of procurement, and the implementation of the partnering approach between Australia and Hong Kong. The paper discusses the application of target cost contracts in construction, defines TCC and GMP, and identifies the pricing structures of GMP and TCC.
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