When using a Target Price, what is provided through a contingency pool?

In project delivery, particularly when using a Target Price approach, a contingency pool serves as a financial reserve designed to cover unforeseen costs that may arise during the execution of the project. The purpose of this pool is to allow for flexibility within the budget, enabling the project team to manage unexpected expenses without jeopardizing the overall financial viability of the project.

The contingency pool also creates an opportunity for profit in the project delivery context. If the project is completed under budget or with fewer unforeseen issues than anticipated, any unused portion of the contingency can be shared among the parties involved, effectively providing a financial incentive. This not only encourages efficient project management but also fosters collaboration and motivation among stakeholders to keep costs down. By aligning interests through potential profit-sharing, the contingency pool can enhance overall project success.