Key risk factors and risk mitigation measures for target cost contracts in construction - a comparison between the West and the East

This article is an extension of a research article published in the July 2010 issueof the Construction Law Journal in which the findings of seven face-to-facestructured interviews, conducted in Hong Kong, on the perceptions of key riskfactors and risk mitigation measures for Guaranteed Maximum Price (GMP)contracts and Target Cost Contracts (TCC) were reported. Further to this previousresearch undertaken in Hong Kong, five similar in-depth structured interviewswere conducted in the United Kingdom. The interviewees perceived the change inscope of work, quality and clarity of tender documents, selection of competentsubcontractors and unforeseen ground conditions as key risk factors encounteredin GMP/TCC construction projects. They also considered a basket of measuresincluding: the adjudication of bids in risk assessment; total reflection on potentialrisks in tender documents; use of risk registers; and development of a proper riskmanagement process, as being effective in risk mitigation. The UK findings werecompared and contrasted with those from Hong Kong. It was found that the keyrisk factors associated with GMP/TCC contracts between the two jurisdictions are similar by nature in general. However, differences in perceptions on riskmitigation measures are also observed, which may be due to the disparities in theimplementation of GMP/TCC methodology between the two regions.