Conclusion and implications What is interesting about this case is less the verdict, which on one view is unsurprising, and more the impact that a small change in the drafting of a target cost contract can have on the financial outcome for the parties. The standard Target Cost ICE Conditions of Contract (now known as the ICC Conditions of Contract) do not include “default” by the contractor within the definition of Disallowed Cost, although negligence is referred to. It is also interesting to note the Target Cost editions of the NEC and IChemE forms of contract likewise make no mention of “default” (or, indeed, negligence) in calculating Disallowed Cost. Had the standard ICE Conditions been retained on this project, National Rail would have been required to prove negligence on the part of ABC before the costs of delay and inefficient working could be excluded as Disallowed Cost. By including the reference to “default”, National Rail was able to rely simply on the fact of delay by ABC as justifying the exclusion of costs. Such delays may not have been within ABC’s control, something which ABC felt undermined the whole target cost philosophy of the contract. Target cost contracts are intended to be a way to share risk between parties, but the amendments made by Network Rail in this case illustrate the potential for small amendments to dramatically shift the balance of risk from one party to the other. Parties considering entering into target cost contracts should not assume any particular form of target cost logic will apply. This decision shows that the precise wording used in the mechanics of a target cost contract will be given effect even if it deprives the contract of much of its target cost rationale. References: Network Rail Infrastructure Ltd v ABC Electrification Ltd [2019] EWHC 1769 (TCC). Conclusion and implications What is interesting about this case is less the verdict, which on one view is unsurprising, and more the impact that a small change in the drafting of a target cost contract can have on the financial outcome for the parties. The standard Target Cost ICE Conditions of Contract (now known as the ICC Conditions of Contract) do not include “default” by the contractor within the definition of Disallowed Cost, although negligence is referred to. It is also interesting to note the Target Cost editions of the NEC and IChemE forms of contract likewise make no mention of “default” (or, indeed, negligence) in calculating Disallowed Cost. Had the standard ICE Conditions been retained on this project, National Rail would have been required to prove negligence on the part of ABC before the costs of delay and inefficient working could be excluded as Disallowed Cost. By including the reference to “default”, National Rail was able to rely simply on the fact of delay by ABC as justifying the exclusion of costs. Such delays may not have been within ABC’s control, something which ABC felt undermined the whole target cost philosophy of the contract. Target cost contracts are intended to be a way to share risk between parties, but the amendments made by Network Rail in this case illustrate the potential for small amendments to dramatically shift the balance of risk from one party to the other. Parties considering entering into target cost contracts should not assume any particular form of target cost logic will apply. This decision shows that the precise wording used in the mechanics of a target cost contract will be given effect even if it deprives the contract of much of its target cost rationale. References: Network Rail Infrastructure Ltd v ABC Electrification Ltd [2019] EWHC 1769 (TCC). About the authors brad woodroffe senior associate, london stephen fitzpatrick associate, london CMS law tax