On 25 June 2025, JCT released the new Target Cost contract family consisting of the Target Cost Contract 2024 (TCC 2024) and the Target Cost Sub-Contract (the Sub-Contract split in usual JCT fashion into an Agreement (TCCSub/A 2024) and a set of Conditions (TCCSub/C 2024)).
The Target Cost contract family is easily recognisable by the baby pink building-block pattern on the front cover. This release concludes the publication of all contracts within the JCT 2024 suite.
Users of Main Options C and D in the NEC4 family of contracts will be familiar with this type of contract. For those who are not, target cost contracting requires prospective contractors to tender a "Target Cost" and a "Contract Fee" instead of a Contract Sum. The Target Cost should be a genuine and realistic estimate of what the actual cost of the contract works will be. The Contract Fee is an allowance for overheads and profit, which can be a percentage of the actual cost incurred or a fixed sum.
The key feature of a Target Cost contract is that the contractor is paid its actual incurred costs (subject to exclusions for lack of substantiation, amongst other things) in relation to the contract works (the "Allowable Cost" in the JCT Target Cost Contract 2024 and "Defined Cost" within the NEC4 family). If the total cost incurred by the contractor is lower than the Target Cost, both the contractor and the employer typically share the saving in a specified manner. Likewise, if the total cost incurred by the contractor is higher than the Target Cost, the overspend or "pain" is shared between the parties in a specified manner. In practice it is often the case that above a certain threshold, all overspend becomes the contractor's risk. In the JCT Target Cost Contract 2024, the Target Cost is only changed as set out in Schedule 1, most notably in the cases of changes to the contract works and where the contractor incurs direct loss or expense due to a "Relevant Matter".
Under a Target Cost contract, the contractor is required to adopt an open book approach to its costs so that they can be verified as "allowable" by the employer. Therefore, contractors entering into this form of contract must ensure that good, accurate records are kept. Equally, the quantity surveyor role on the employer side gains a new importance in verifying incurred costs. The JCT Target Cost Contract 2024 contains a new provision that allows the employer to carry out cost audits and require an explanation of costs by the contractor.
It is not a requirement to use a JCT Target Cost Sub-Contract with the JCT Target Cost Contract 2024. JCT acknowledge that this will not always be appropriate. It is likely that most sub-contracts used with the JCT Target Cost Contract 2024 will be normal lump sum or measurable sub-contracts, as is the case with NEC4 Main Option C and D main contracts.
The JCT Target Cost Contract 2024 is based on the very popular JCT Design and Build Contract 2024 (DB 2024) and therefore it will be familiar to many and is suitable for most projects where the DB 2024 might typically have been used in both the private and public sectors. This type of contracting is often thought to encourage greater collaboration between the employer and the contractor as both stand to benefit from an underspend or suffer from an overspend.
It remains to be seen whether the JCT Target Cost Contract 2024 will receive a positive reception within the industry. It also remains to be seen whether the Scottish Building Contract Committee (SBCC) will publish a Target Cost contract for use in Scotland – watch this space.
If you are a developer interested in contracting under a target cost contract or are a contractor who has been asked to tender under a target cost contract, do not hesitate to contact one of our construction lawyers for advice.
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