NEC Awards in Contract Innovation: A pilot term service maintenance contract using target cost contract option

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In December 2020, Drainage Services Department (DSD) launched Contract No. DC/2020/03 to implement maintenance and improvement of existing drains and sewers on Hong Kong Island and Outlying Islands, plus about 400 DSD plants and facilities in Hong Kong. Adopting NEC4 Term Service Contract, this contract represents the Government’s pilot term maintenance contract using target cost option (Option C) in an innovative hybrid mode with  the common priced option (Option A) to implement a step change towards the use of Option C alone. The open-book accounting with the pain/gain share mechanism under Option C has driven the requisite change in people’s mentality and skillset towards collaborative working.


With a “one team – our project” spirit, the contract parties have made a promising start over the first year of the 5-year service period through joint planning of works, subcontract procurement and capturing of cost saving opportunities. The collaborative effort led to winning 1st runner-up at the 2021 NEC Awards in Contract Innovation. With such positive momentum, DSD is confident to complete this Option C learning journey with enhanced performance of the maintenance work delivery. As such, the learning experience could offer invaluable insights into the further use of target cost option in term maintenance contracts.


This article is contributed by the Drainage Services Department of the HKSAR Government.

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