Applicability Of Research Of Target Cost Contract In The Engineering Project Construction Phase

With the development of Construction, and the continual development of the theoretical and practical methods of the contruction projects, the contract which advocating mutual trust and cooperation has been paid more and more attention and application. So how to search for a kind of contract, which reducing risk, reducing claims, giving attention to the interests of the parties in a complex project and providing a kind of incentive mechanism to realize the value of the project is very important.In the1980’s, American Construction appeared the concept of the partners, which in the implementation of Construction Engineering Project Design and Implementation has played a very important role, making Project Cost’s savings as high as40%. This theory is that both partners should be mutual trust, respect and open. This theory has laid the foundation for the emergence and growth of Target Cost Contract (TCC). Target Cost Contract has gradually developed into mature project payment in foreign and was given successful application in large projects in Hong Kong. Compared to study in foreign countries, domestic research on Target Cost Contract is plain. However, using the experience of foreign theoritical system for reference and combined with the current development as the basis, the scholars also put forward some related theory. These theories mainly discuss about cost incentive mechanism, and cost, time, quality incentive effect from the macroscopic level。But they lack standardization, systematization, application, and still need a long way to reach the developed countries.This paper from the view of construction project management, is researching on the applicability of Target Cost Contract in the construction phase so as to promote its development and application. Firstly, This article discusses in detail the basic theory of Target Cost Contract and does a deep analysis to the relevant theories——cooperation and motivation. Secondly, the paper from cost system, key index, operation principle and risk management states the Target Cost Contract, as well as in view of the contract structure, describing the characteristics of the contract operation. At the same time it points out the application conditions and unfavorable factors, and finally comes up with how to improve and promote the application of Target Cost Contract. The contract proposes the guidance advice and shows that the contract is suitable of the subjective and objective environment combined with our country’s not perfected file system and not standard management system. This conclusion based on detailed theoretical analysis is that Target Cost Contract has great potential and development space and will promote the development of construction industry in our country.The innovation point is that using cooperation and incentive theory and combination of the development of construction industry, the contract from connotation to the actual operation gives detailed definition, so as to make the owner and the contractor fully understand Target Cost Contract, make them gradually accepting the new contract, and then will be applied to practical engineering project contract, promote its in actual application, promote our country engineering construction development.This article deficiency is not from empirical angle to Target Cost Contract to do further detailed instructions, but due to the construction industry and other industry convergence theory, especially through the borrow manufacturing industry target cost management of the mature theory, still make this article research results for engineering project management has important application value and theoretical significance.