FAQ
FAQ: Target costs and remuneration
F.1 How are the target costs determined?
The target costs are calculated separately for target cost 1 and target cost 2.
The target costs 1 are calculated from the work costs, the general overheads, the financial risk provision and the profit.
The work costs result from the quantities included in the project multiplied by the quoted cost rates for wages, materials, inventory and external services.
The award for the cost of work and the profit is offered by the realization partners in the procurement process.
The financial risk provision is determined by the alliance partners during the dialog on the basis of the risk analysis.
Target costs 2 are determined either according to the scheme of target costs 1, but without a profit mark-up, or as a percentage of target costs 1.
F.2 Is a classic list of deliverables needed to determine target costs?
To determine the target costs, a reliable quantity framework is required, but not prices (but approaches based on the real costs of the implementation partners). This requires a level of maturity in the project that allows the quantities to be determined in concrete terms, i.e. at least at the pre-project stage.) Digital models to which all alliance partners have access should be used. Traditional lists of deliverables will thus become obsolete.
Where such common digital models are lacking, the use of lists of deliverables will continue to be appropriate.
F.3 How is remuneration regulated in the planning and realization phase? Are there any differences here?
If the planning is carried out as part of the award procedure, it shall be remunerated in accordance with the applicable rules (C.4).
The remuneration of the individual contractors in the project alliance for the services rendered is determined by the cost price, the agreed profit mark-up and the agreed participation in any additional or reduced costs. This remuneration model applies in principle to both the planning phase and the construction phase.
Phase-specific differences result from the different emphasis placed on the provision of services in each phase.
In the planning phase, the wage costs of the planning team dominate.
In the realization phase, considerable material costs, equipment costs and possibly external service costs are added to the wage costs.
F.4 How are the work costs remunerated?
The work costs are part of the cost price to be paid by each realization partner. As a rule, these are paid on a monthly basis according to the work involved on the basis of invoices or equivalent evidence.
F.5 How are general business expenses and profit remunerated?
The general business costs (Allgemeinen Geschäftskosten AGK) and the profit represent the so-called contribution margin for the respective realization partner. The percentage surcharges on the work costs for the general business costs and the profit are offered in the competition and stipulated in the alliance agreement.
The contribution margin to be remunerated per monthly instalment is calculated for each realization partner from the work costs to be invoiced multiplied by the imputed percentages specified in the quotation for the work costs and profit.
The respective contribution margin is paid separately for each realization partner and is paid continuously and in full until the target costs Z1 are reached.
F.6 How is the contribution to additional/reduced costs by the realization partners defined?
As an incentive to adhere to the planning and construction costs, the additional/reduced cost contribution specified by the respective contractors is stipulated in the alliance contract
To this end, the client should formulate the boundary conditions in its tender documents for which the realization partners’ participation in the additional or reduced costs applies.
The realization partners offer their cost sharing (e.g. percentage of additional/reduced costs within the range specified by the client) as part of the procurement process and taking into account their own risk-bearing capacity.
Additional cost sharing is calculated by multiplying the cost price to be reimbursed by the additional cost sharing percentage agreed with each realization partner in the alliance agreement. From the month in which the target costs Z1 are exceeded, the additional costs are shared on a pro rata basis.
A reduction in cost sharing is made with the final invoice as a special payment by the client from the reimbursed prime costs multiplied by the percentage for reduction in cost sharing specified by each realization partner in the alliance agreement.
If the client has specified a bandwidth for additional/reduced cost sharing, the realization partners may lose their offered maximum risk contribution if the upper limit is reached or gain it if the lower limit is reached.
F.7 How are subcontractor costs to be classified?
The remuneration that an alliance partner pays its subcontractor in accordance with the contract is part of the cost price to be remunerated.
F.8 Does the responsible realization partner receive remuneration from AGK and profit or a management fee on the subcontractor services?
All costs incurred in the project are reimbursed according to actual costs. This also applies to the management of subcontractor services. This means that the actual costs incurred by each implementation partner for the tendering, awarding and management of subcontractors are eligible for reimbursement. An abstract (percentage) fee for subcontractor management is not reimbursed.
F.9 How and on what basis are own costs reimbursed?
Remuneration of own costs is based on the principle of open books.
The service providers are remunerated by the client.
Accordingly, all required verification documents (time reports, delivery bills, third-party invoices, etc.) will be made available to the client or all alliance partners.
In order to minimize the administrative effort, it is crucial that the alliance partners agree on the use of a uniform system.
F.10 How is the accuracy of own costs verified?
The mechanisms for verifying own costs must be described in the alliance agreement.
Both internal and external (e.g. auditors) control mechanisms can be used to provide evidence.
F.11 Will own costs only be reimbursed to a reduced extent once the target costs have been exceeded?
The cost price is invoiced in full even after the target price has been exceeded. However, the risk sharing contributions are then deducted from this amount by the individual contractors (based on the agreed percentages).
F.12 Are the services of subcontractors and suppliers only remunerated to a reduced extent once the target costs have been exceeded?
Subcontractors and suppliers usually enter into a traditional contractual relationship with an alliance partner (contract for work and services, supply contract). Subcontractors and suppliers must therefore be remunerated in accordance with the agreements arising from this contractual relationship.
F.13 How does the client ensure that the subcontractor share is not suddenly increased?
The implementation partners are contractually obliged to provide services personally. From the outset, it is bindingly determined which service areas should and may be subcontracted.
Further subcontractor services can only be commissioned later by unanimous agreement. The client has the right to veto subcontracting for important reasons.
Shifting the risk to the detriment of the client by awarding subcontractor contracts without agreement would be a violation of the basic principles of the alliance and would therefore be regarded as good cause for objection. Cooperation within the alliance would be considered at risk in the event of such conduct on the part of a realization partner.
F.14 How does the open-book principle work?
The open-book principle begins with the awarding of the contract. This is where the true costs for the work costs, the general contract costs, the risk provision and the profit are disclosed and, where appropriate, verified.
With the principle of open books, the client and all alliance partners are provided with all the necessary documentation for the quantities performed (time reports, delivery bills, third-party invoices, etc.). The requirements of absolute transparency apply. The cost rates submitted with the offer form the basis for the cost calculation.
The alliance agreement regulates which documents and in which form the realization partners must present these and which third parties (e.g. construction economics service providers) may check the documents and calculations on behalf of the client under a confidentiality obligation.