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?Read More