Target/Ceiling Costs Clause Samples
The Target/Ceiling Costs clause establishes a predetermined financial limit or range for a project or contract, setting either a target cost, a ceiling cost, or both. In practice, this means that the parties agree on a budgeted amount (the target) and a maximum allowable cost (the ceiling), with mechanisms for sharing cost overruns or savings between the parties. This clause is commonly used in cost-reimbursable contracts to incentivize cost control and efficiency, while also protecting the client from excessive expenditures by capping the total amount payable.
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Target/Ceiling Costs. Costs will be referred to as the target cost. All estimates will contain an estimated ceiling cost. The ceiling cost may NOT be exceeded without authorization of the Department. When during the course of service and/or repair job, it becomes apparent that the ceiling costs will be exceeded, the Successful Contractor will immediately inform the Department who approved the estimate, and prepare a new estimate with a revised target cost and new ceiling cost. The revised estimate must be approved prior to incurring costs beyond the previously agreed upon ceiling cost.