1 RISK APPORTIONMENT IN TARGET COST CONTRACTS Samuel Laryea School of Construction Economics and Management, Wits University, Johannesburg, South Africa Email: samuel.laryea@wits.ac.za Full reference Laryea, S. (2016) Risk apportionment in target cost contracts, Proceedings of the Institution of Civil Engineers - Management, Procurement and Law, 169(6), pp. 248–257 ABSTRACT Much of the current literature on target cost contracts is approached from the perspective of the client and contractor relationship. While the financial risk of a project is shared between the parties, the share formula is predominantly set by only the client, which demonstrates little evidence of collaboration. The contractor‟s business risk is not explicitly taken into account outside of the fee percentage. However, from a contractor's perspective, the risk in a target cost contract has to be taken into account on two levels. First, the shared risk of the target cost contracts (i.e. the financial risk apportioned through the share formula). Second, the contractor‟s own risk in relation to their tender estimate (i.e. the business risk of the contractor that relates to their profit). The way that five target cost contracts actually concluded in practice was examined as a means to develop a better understanding of how risk actually accrues to the parties. A decision support framework that links the project risk with the contractor‟s risk is proposed. The framework presents nine risk/reward scenarios that contractors tendering for target cost contracts can use as a basis for risk pricing decisions. Keywords: case study, contracting, risk apportionment, target cost contract, tendering