Exploring the key risks and risk mitigation measures for guaranteed maximum price and target cost contracts in construction

Abstract

This article aims to identify the key risk factors and propose some risk mitigation measures for Guaranteed Maximum Price (GMP)/Target Cost Contracts (TCC) construction projects, based upon a series of in-depth interviews on the perceptions of relevant experienced industrial practitioners in Hong Kong. The interviewees perceived unforeseen ground conditions, nature of variations and the quality of tender documents to be the three most significant risk factors associated with GMP/TCC, whilst effective risk mitigation measures include more thorough site investigations, the implementation of a partnering approach and the establishment of an adjudication committee and clear tender briefing and tender interview.