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Article: An empirical survey of the motives and benefits of adopting guaranteed maximum price and target cost contracts in construction

TitleAn empirical survey of the motives and benefits of adopting guaranteed maximum price and target cost contracts in construction
Authors
KeywordsGuaranteed maximum price
Target cost contracting
Motive
Benefits
Hong Kong
Issue Date2011
PublisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/ijproman
Citation
International Journal of Project Management, 2011, v. 29 n. 5, p. 577-590 How to Cite?
AbstractIn light of increasing project complexity, constraints on programme schedule and limited budget, there exists a strong call for changes in contracting procedures in construction. Both the Guaranteed Maximum Price (GMP) and Target Cost Contracting (TCC) approaches with a gain-share/pain-share arrangement have been advocated to achieve better value for money and more satisfactory project performance. This paper aims to review the prevailing practices of GMP/TCC in general, and explore the motives and benefits of implementing the GMP/TCC scheme in comparison with the traditional fixed price lump-sum contract in particular. The research study is based on a comprehensive literature review and an industry-wide empirical questionnaire survey for evaluating the relative importance of motives and benefits associated with GMP/TCC in Hong Kong. The survey data collected from 45 valid completed questionnaires were analysed using the mean score ranking technique, Kendall's concordance test, Spearman's rank correlation test and one-way ANOVA test. The perceived benefits were measured and ranked from the perspectives of the client, contractor and consultant for cross-comparison. The survey findings indicated that the three most common motives of clients behind their decision of adopting GMP/TCC include: (1) to generate an incentive for contractor to achieve cost saving; (2) to develop better working relationship within the project team; and (3) to tap in contractor's expertise in design and innovation. The top three perceived benefits of applying GMP/TCC were found to be: (1) early settlement of final project account; (2) improved partners' working relationship under a partnering arrangement; and (3) capability of integrating contractor's expertise in building designs and innovations prior to construction. The research results are particularly essential in assisting key project stakeholders to realise the potential benefits derived from the use of GMP/TCC contracts and in generating more useful insights into alternative integrated contracting strategies for the construction industry, so as to drive for excellence in overall project performance.
Persistent Identifierhttp://hdl.handle.net/10722/123940
ISSN
2015 Impact Factor: 2.885
2015 SCImago Journal Rankings: 1.497
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorChan, DWM-
dc.contributor.authorChan, APC-
dc.contributor.authorLam, PTI-
dc.contributor.authorWong, JMW-
dc.date.accessioned2010-10-11T07:24:21Z-
dc.date.available2010-10-11T07:24:21Z-
dc.date.issued2011-
dc.identifier.citationInternational Journal of Project Management, 2011, v. 29 n. 5, p. 577-590-
dc.identifier.issn0263-7863-
dc.identifier.urihttp://hdl.handle.net/10722/123940-
dc.description.abstractIn light of increasing project complexity, constraints on programme schedule and limited budget, there exists a strong call for changes in contracting procedures in construction. Both the Guaranteed Maximum Price (GMP) and Target Cost Contracting (TCC) approaches with a gain-share/pain-share arrangement have been advocated to achieve better value for money and more satisfactory project performance. This paper aims to review the prevailing practices of GMP/TCC in general, and explore the motives and benefits of implementing the GMP/TCC scheme in comparison with the traditional fixed price lump-sum contract in particular. The research study is based on a comprehensive literature review and an industry-wide empirical questionnaire survey for evaluating the relative importance of motives and benefits associated with GMP/TCC in Hong Kong. The survey data collected from 45 valid completed questionnaires were analysed using the mean score ranking technique, Kendall's concordance test, Spearman's rank correlation test and one-way ANOVA test. The perceived benefits were measured and ranked from the perspectives of the client, contractor and consultant for cross-comparison. The survey findings indicated that the three most common motives of clients behind their decision of adopting GMP/TCC include: (1) to generate an incentive for contractor to achieve cost saving; (2) to develop better working relationship within the project team; and (3) to tap in contractor's expertise in design and innovation. The top three perceived benefits of applying GMP/TCC were found to be: (1) early settlement of final project account; (2) improved partners' working relationship under a partnering arrangement; and (3) capability of integrating contractor's expertise in building designs and innovations prior to construction. The research results are particularly essential in assisting key project stakeholders to realise the potential benefits derived from the use of GMP/TCC contracts and in generating more useful insights into alternative integrated contracting strategies for the construction industry, so as to drive for excellence in overall project performance.-
dc.languageeng-
dc.publisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/ijproman-
dc.relation.ispartofInternational Journal of Project Management-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectGuaranteed maximum price-
dc.subjectTarget cost contracting-
dc.subjectMotive-
dc.subjectBenefits-
dc.subjectHong Kong-
dc.titleAn empirical survey of the motives and benefits of adopting guaranteed maximum price and target cost contracts in constructionen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0263-7863&volume=29&issue=5&spage=577&epage=590&date=2011&atitle=An+empirical+survey+of+the+motives+and+benefits+of+adopting+guaranteed+maximum+price+and+target+cost+contracts+in+construction-
dc.identifier.emailChan, DWM: bsdchan@inet.polyu.edu.hk-
dc.identifier.emailChan, APC: bsachan@inet.polyu.edu.hk-
dc.identifier.emailLam, PTI: bsplam@inet.polyu.edu.hk-
dc.identifier.emailWong, JMW: jmwwong@hkucc.hku.hk, bsjamesw@gmail.com-
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.ijproman.2010.04.002-
dc.identifier.scopuseid_2-s2.0-79955958592-
dc.identifier.hkuros173580-
dc.identifier.volume29-
dc.identifier.issue5-
dc.identifier.spage577-
dc.identifier.epage590-
dc.identifier.isiWOS:000291960900010-
dc.identifier.citeulike7301419-

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