Lahdenperä, P (2010) Conceptualizing a two-stage target-cost arrangement for competitive cooperation. Construction Management and Economics, 28(7), pp. 783-796. ISSN 1466433X
Abstract
The owner may involve design and construction service providers in a project at different stages of planning and design. Early involvement of the versatile know-how of service providers places the owner at the services providers' mercy as to pricing. Late involvement, when design is close to completion, allows using price competition to ensure reasonable pricing. Then, design usually does not involve interplay between the key parties to benefit the project. The aim of the conceptualization is to overcome the above-mentioned problem by generating a novel type of two-stage target-cost contracting system which combines early selection and price containment. There the calculated tender price is based on both the owner's estimates and the tenderers' unit cost and overhead data while the project scope is not yet fully established. Selected service providers then develop the project and its designs in cooperation with the owner before the actual target-cost is set. Incentives have been created to lower the target-cost below the earlier calculated tender price. The idea is to spur actors to invest especially in the critical pre-implementation development phase. Subsequent risk sharing is believed to increase the cooperation between parties further. The model offers a means, especially for European public owners, to enter into a cooperative relationship that is of value in the case of projects involving special challenges and a great deal of uncertainty. The European Procurement Act requires costs to be taken into account in the selection.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | alliancing; early contractor involvement; incentive contracts; public sector procurement; target-cost |
| Index terms: | competition, unit cost, cooperation, public sector procurement, public owner, incentive contract, early contractor involvement, tender price, design and construction, project scope, implementation, estimate, pricing, alliancing, owner |
| Subjects: | market analysis, sociology, tendering, psychology, contractual arrangements, economic analysis, financial and cost management, scope management |
| Topics: | Organizational Design, Stakeholder Management, Procurement, Cost Management, Business Strategy, Research Practice, Project Management |
| Descriptive scope: | 2 PC |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here