An investigation of guaranteed maximum price (GMP) and target cost contracting (TCC) procurement strategies in Hong Kong construction industry

Abstract

The construction industry has long suffered from limited trust amongst contracting parties, lack of incentives and misalignment of objectives, which might eventually result in poor project performance. Consequently, the guaranteed maximum price (GMP) and target cost contracting (TCC) approaches have emerged as innovative procurement strategies for clients to minimise risks, avoid claims and integrate the diverse interests of a complex construction project. This research study aims to explore the key attributes of GMP/TCC including the underlying motives, perceived benefits, potential difficulties, key risk factors, critical success factors, overall project performance and optimal project conditions for adopting GMP/TCC scheme in Hong Kong. A set of best practice guidelines are recommended for enhancing the successful implementation of GMP/TCC scheme in the Hong Kong construction industry. The study is significant in contributing to new knowledge and practical information of GMP/TCC applications and implementation, in both a local and international context. Given the favourable project performance outcomes, a wider adoption of GMP/TCC in both the building sector and the infrastructure sector is anticipated with the purpose of delivering projects ahead of schedule, within budget, with high quality and far less disputes or claims.