procurement guide - target cost design & build
As with traditional Design and Build, a contractor is selected, normally in competition, to Design and Build the building.
Tenders are invited on the basis of an "Employer's Requirements" which sets out the specification of the building required and defines the planning and other restrictions. The contractor is responsible for the design team, although the client should retain the services of consultants to protect his interests and act on his behalf.
The contractor's costs are audited by the Quantity Surveyor and the contractor is paid the actual cost of the work so long as it is less than the tendered Target Cost. In addition, any saving on the Target Cost Design and Build tender sum is split, normally 50/50 (but can be varied) between the contractor and the client.
Like Design and Build a form of "Develop then Design and Build" can be adopted with Target Cost Design and Build. However because of the inherent sharing of savings the potential for such economies being made is reduced and unlikely to be as attractive to the contractor.
- Establishes the client's maximum financial commitment (subject to client variations). If the contractor's costs exceed the Target Cost, only the Target Cost sum is paid.
- Leaves responsibility with the contractor for organising and programming the design team's activities. The client is therefore not responsible for extensions of time in the event that design information is not produced on time.
- Variations are normally pre-agreed and the client has the opportunity to instruct or otherwise knowing the consequences in terms of cost and time.
- Gives single point responsibility.
- Leads to a less adversarial attitude between contractor and client as both benefit from savings
- Can give prior warning of future financial problems as the Quantity Surveyor has complete access to the contractor's actual costs.
- The risk for unforeseen circumstances is shared more equitably between the client and the contractor.
- Provides the client with arguably a less sophisticated building in terms of design detailing then would be the case with other forms of procurement.
- Gives less control over the work in total and of the costs of any variations required.
- Can be difficult in certain instances to precisely define the standards and quality of design required.
Appropriate for contracts where the client requires a firm lump sum price but where risks are likely to be priced by the contractor in the tender. Probably appropriate for less sophisticated buildings where the standards and quality can be easily defined.