In episode 23 of The Subcontractors Blueprint podcast, Jacob Austin is discussing target cost and cost plus contracting. He criticises cost plus contracts, citing lack of incentives for contractors to save money, leading to cost overruns in projects like major roadworks and HS2. He suggests competitive tendering to encourage cost-effectiveness. Jacob also discusses the administrative burdens of these contracts and the financial consequences of inaccurate tender prices in target cost contracts. He advises contractors to consider risks, make clear exclusions, and include budgets for risks they are asked to hold. KEY TAKEAWAYS: There are major drawbacks of cost plus contracts, such as the lack of incentives for contractors to save money, which can result in significant cost overruns in projects like roadworks and HS2. Competitive tendering can encourage cost-effectiveness in projects, as it allows for contractors to compete based on their ability to deliver quality work within a specified budget. The administrative burdens associated with target cost and cost plus contracts is huge, emphasising the need for contractors to carefully consider the terms and conditions before entering into an agreement. In the NEC forms of contract, risk sums may be included in both the target prices and compensation events. This provides a framework for managing risks and ensuring fair compensation for unforeseen events.   BEST MOMENTS: “These kind of arrangements have become commonplace in a lot of government procurement and what you're seeing is a lot of framework projects and a lot of large scale say civil engineering projects are falling under these kind of contract arrangements. I personally think these contracts are sh*t!” “They're (cost plus contracts) lacking in any target. There's no incentive for the contractor to perform….The job takes as long as it takes, the costs are whatever they are, the fee gets added to it, and the contractor wins." "having done a few of these target cost contracts in my lifetime i actually think these are the worst of all worlds" "how you treat these risk sums when you're pricing the job and when you're pricing the compensation events is really key to maintaining a good target price and maintaining your ability to get a healthy margin out of the job" Jacob is on a mission to help the 1 million SME contractors working within the construction industry. If you've taken something of value from this episode, please share the podcast with someone you know, and pass the value on. HOST BIO: Meet Jacob Austin, a Chartered Quantity Surveyor with a rich background at construction industry giants Balfour Beatty, Kier, and Vistry Group. With extensive involvement in education, health, and residential projects spanning various scales, from £1000s to £100M in concurrent developments, Jacob brings a unique perspective. Having collaborated with numerous small businesses, he's now committed to sharing his expertise to drive their success. Join Jacob on his podcast, where he blends his profound insights and personable approach to offer guidance, industry secrets, and inspirational stories.   LinkedIn - www.linkedin.com/in/jacob-austin/  Instagram - www.instagram.com/qs.zone/  www.qs.zone/all-links