Plain English Explanation
Option D combines the target cost mechanism of Option C with a Bill of Quantities for interim valuation. The BoQ is used to value actual work done during the project, and the target price is also BoQ-based. At completion, actual Defined Cost (not re-measured value) is compared against the target, and pain/gain is applied.
Option D is used less commonly than Options A, B, and C. It offers re-measurement certainty for interim payments but adds the complexity of maintaining both a BoQ re-measurement and an open-book cost record. It is sometimes seen on framework agreements or long-term infrastructure programmes.
The CE mechanism still operates in the same way as Options A and B — scope changes and Client-caused events are dealt with as CEs that adjust both the interim payments and the target.
Key Takeaway
Option D requires you to maintain both BoQ measurement records and open-book cost accounts simultaneously — resource this properly from day one or the administrative burden will consume your margin.
What This Means for Subcontractors
Subcontractors under Option D face the combined complexity of BoQ measurement for interim payments and open-book cost accounting for the pain/gain calculation. This is administratively demanding. Ensure your resource is capable of managing both measurement and cost records simultaneously, and clarify with the main contractor exactly what data they require from you.
Common Risks & Disputes
- 1The dual-track accounting burden — measurement for payment and cost tracking for pain/gain
- 2Target adjustment disputes, especially where CEs have not been processed promptly
- 3BoQ measurement disputes on complex civils or infrastructure works
- 4Open-book requirements being more extensive than expected, revealing margin details you would prefer to keep confidential
- 5Pain/gain share not being passed down to subcontractors by the main contractor
Sources
Related Clauses
Priced contract with Bill of Quantities
Priced contract with BoQ — same interim valuation mechanism without pain/gain
Target contract with Activity Schedule
Target cost with Activity Schedule — identical pain/gain mechanism, different valuation
Cost reimbursable contract
Cost reimbursable — open-book approach without any target
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Category Overview
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