What does a Target Price contract typically allow?

A Target Price contract is a type of contract used in project delivery that establishes a target price for the project with a framework for sharing the risks and rewards associated with cost performance. This type of contract incentivizes the contractor to complete the project under budget by allowing for profit sharing when costs are kept below the predetermined target price.

If the actual costs are less than the target price, the contractor and owner can share the savings, which motivates the contractor to manage costs effectively and identify efficiencies throughout the project. This profit-sharing feature helps align the interests of both parties, leading to more collaborative efforts in reducing costs and improving project outcomes.

The other choices do not accurately reflect the nature of a Target Price contract. Unlimited access to the contractor's financial records is not a standard provision of such contracts, as financial transparency can be arranged differently based on the project terms. Covering cost overruns by the owner runs contrary to the intent of the contract, as it is designed to encourage cost management by the contractor. Lastly, fixed payments regardless of expenses would represent a fixed-price contract rather than a Target Price contract, which actively involves cost performance incentives.