Target Contract | Advantages and Disadvantages

Target contract

It Types of Engineering Contracts in which contractor is paid on a cost-plus percent basis of work performed under this contract. In addition, the contractor receives per increase or decrease of rate amount or it affects either a prior agreed of total cost or target value is paid by measuring the actual work and billed as per the agreed rate of the item.

Advantages

1. The target contract is beneficial for both the owner and contractor.

2. Quality of work is maintained.

3. For the efficiency of the contractor certain incentive is to be paid to the contractor in terms of percentage of a target value.

4. The work is completed with minimum cost and minimum time period.

5. Target contract is a flexible type contract.

Disadvantages

1. In target contract the cost of work is variable.

2. The measurement of the work and accounting procedure is tedious.

3. The target contract encourages the contract to show his skill and expertise, so that the cost is less and profit is more.