JCT Target Cost Contract revealed next week

Next week sees the long-awaited publication of the JCT Target Cost Contract (2024 Edition). This is the JCT’s first foray into target cost contracting in its mainstream suite (leaving aside the Constructing Excellence form) and at the very least an interesting sign of the times in the UK construction market. The contracts have been introduced in response to demand for a target cost option and the introductory notes refer to the ‘current difficult marketplace’ and explain that the ‘ethos of the contract is risk sharing’. Many client organisations with long histories of using JCT contracts may be much less familiar with target cost contracting.

Little detail is available before publication on 25 June 2025, but as expected, the contracts are based on the 2024 editions of the design & build suite. We expect the target cost model will adopt a similar approach and risk allocation as regards design responsibility, delays and loss & expense.

New but familiar

The main contract operates as a cost-reimbursable agreement with reconciliation against target costs. Similar to the NEC4 and other target cost contracts, the parties establish a Target Cost at the outset which is adjusted to reflect the impact of Changes, Relevant Matters and the other events which impact on the Contract Sum under the Design and Build Contract. Also familiar from other target cost options is an agreed schedule of reimbursable costs (defined as ‘Allowable Costs’) and a ‘Contract Fee’ which may be a percentage of Allowable Costs or a fixed sum. Any pain or gain against target is to be shared between the parties in agreed proportions (either by reference to percentages or to fixed sums).

Allowable Cost and reconciliations

The contract invites users to vary the definition of Allowable Costs (without using a separate schedule of amendment) and will allow for fixed sums rather than actual costs. That flexibility should help parties to avoid the challenge and administrative burden of, for example, having to demonstrate actual employment costs. Less positively, however, an invitation for Employers to amend these provisions, particularly around definitions of excluded cost (see Network Rail v ABC Electrification)[1] may create some tension with the risk-sharing ethos which the JCT are aiming to promote.

Unusually, the contract will allow for a reconciliation of target and actual costs to be undertaken as part of each interim payment process (as an alternative to at final account). It will be interesting to see the detail of those provisions. Sub-contracts allow for target cost and lump sum pricing.

We’ll be sharing a full update and details of our upcoming webinar shortly – watch this space.