What Are Target Cost Contracts?

When you sign a contract, there's a certain level of risk that you assume. It's always a possibility that either party will fail to hold up its side of the bargain, resulting in dissatisfaction, delays and inefficiencies.

Going over budget is one of the most frequent reasons for broken contracts. Lump-sum contracts and reimbursable contracts are often both unappealing for one of the two parties because they place all of the cost burden on either the contractor or the client, respectively.

In an effort to resolve this standoff, target cost contracts have emerged as a happy medium between these two extremes. So what exactly is a target cost contract, and when is it most useful for contract management?

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4 Steps to Create an Agile Contract

Traditional contracting focused on risk mitigation, allocation of liability, avoidance of conflicts, and significant financial consequences in the event of non-performance or a breach. Although this approach to contracting persists today, there is a growing desire for companies to incorporate a more relaxed mindset when it comes to negotiating and drafting contracts. The agile contract is one that prioritizes flexibility and outcomes over stringent adherence to doing things a certain way and demanding complete obedience. With constant changes in technology and the ease of conducting affairs across state and national borders, companies will have to adapt to new ways of thinking or risk losing business to a company that is able and willing to do so. Here are four steps to take to create agile contracts:

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