On the 25th of June 2025, JCT will launch its latest and last addition to the 2024 updated JCT contract suite, with the JCT Target Cost Contract due to be released.
The release will include a main contract, a sub-contract as well as their respective guides.
The Target Cost Contract appears to be an amalgamation to a certain extent of two current JCT contracts: Design and Build, and Prime Cost.
Under the Target Cost Contract, the contractor will be paid ‘allowable costs’, together with a contract fee, whilst at the same time being contractually responsible for the design and build of the project.
A ‘pain/gain’ mechanism will also be included within the contract, by way of a ‘difference sharing’ approach, in which the contractor’s payment is to be linked to the actual costs and the potential shared savings or overruns between the parties.
This new form of contract will help parties bridge the gap which currently exists, whereby they want to contract on a traditional procurement basis, but with a flexible contract sum arrangement. This new form of contract will reflect this increasingly sought after construction procurement route.
Owing to issues surrounding supply of materials, labour shortages and inflationary pressures, fixed price lump sum contracts can be a less attractive option for parties in today’s construction market as contractors often price in significant contingency for cost fluctuation. It is hoped that the new Target Cost Contract will bridge this gap, where parties want to contract on a traditional construction procurement basis, but with an updated payment mechanism to reflect current economic uncertainty.
Full details of the contract will be revealed, upon its release.
If you would like further information or to discuss the up coming changes, please contact our Construction team.