These are usually cost reimbursement contracts as (d) above, but with an esti- mated target cost set for the works cost, and a fixed or percentage fee for the contractor’s head office overheads and profit. If the contractor’s expenditure exceeds the target he has to bear a proportion of the excess; if his expenditure is less than target he receives a proportion of the difference as a bonus. Thus there is a financial incentive to the contractor to be efficient and save costs. But setting a fair target price can be difficult, and impossible if the amount of work to be done is unpredictable. If a.
