When it comes to allocating risk, target cost contracts represent something of a happy medium for employers. They lie in between lump sum contracts where the contractor takes most of the risk, and cost‑reimbursable contracts, where the contractor is paid its costs plus a fee. Target cost contracts are similar to the latter, but with a shared-risk “pain/gain” mechanism added.

The main domestic contract for this type of procurement has traditionally been the NEC New Engineering Contract, Options C and D. In June this year a newcomer arrived on the market, namely the Infrastructure Conditions of Contract (ICC) Target Costs Version. It is published by the Association for Consultancy and Engineering (ACE) and the Civil Engineering Contractors Association (CECA), along with a new design and build contract. These both add to the ICC suite of contracts that began with the lump sum version in 2014.

So, how does the new arrival measure up, particularly against the NEC?

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