Showing papers on "Cost overrun published in 2000"
TL;DR: In this article, a fundamental analysis of the principles underpinning target contracts is presented, showing that there is scope for manipulation of tenders and that suboptimal methods of tender evaluation are in use.
Abstract: Target cost contracts are growing in popularity but concerns remain about the interplay between fee, target, sharing ratios and the final price. This paper offers a fundamental analysis of the principles under‐pinning target contracts. It shows that there is scope for manipulation of tenders and that suboptimal methods of tender evaluation are in use. The paper analyses both fixed fee and percentage fee contracts. Methods of tender evaluation are proposed that will both reduce the scope for manipulation by tenderers and increase the likelihood of the contract being awarded to the tenderer whose final price will be the lowest. The analysis reveals a strong case for setting the contractor's share of cost overrun or underrun at a value that is not less than 50%. Finally, the paper proposes two simplifications that would reduce the number of variables in target cost contracts of the future. One is for the employer to set the fee and the other requires only that a target be tendered but with the fee built into it.
52 citations
TL;DR: A theory of cost and time overruns based on project cost structure is presented and some policy recommendations for commencing new projects are suggested.
Abstract: Cost and time overruns have been a common characteristic of development projects in many countries. This paper presents a theory of cost and time overruns based on project cost structure. The cost of a development project consists of base cost and progress cost. Base cost keeps a project ready for physical progress. Progress cost creates real physical progress on the project. This cost structure has an important inherent dynamic characteristic with implications for the efficiency and effectiveness of project management. An imbalance between annual budget and ongoing projects results in an increasing inefficiency and ineffectiveness unrelated to the quality of management of individual projects. The policy governing the starting rate of the new projects becomes very important in improving project performances. The paper also suggests some policy recommendations for commencing new projects.
9 citations