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Which of the following is a disadvantage to using target contract as a method of contracting?
Suggested Answer: B
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A target contract is a form of contract where both the owner and contractor agree on a target cost, and both parties share any cost savings or overruns. This contract type encourages efficiency but has some drawbacks.
Key Points:
Disadvantages of Target Contracts:
No Competitive Bidding for Targets: The target cost is typically negotiated rather than competitively bid, which could lead to less competitive pricing.
Other Points: While target contracts encourage timely and economical completion and allow for early start and flexibility, the lack of competitive bidding for the targets can be a significant disadvantage.
Conclusion: The correct answer is B. No opportunity to competitively bid the targets because this is a specific disadvantage associated with target contracts.
44 comments · newest first
JI
Jin Dang
17 days ago
B I was studying for the CCP and almost picked C thinking an early start without scope definition would be the obvious downside, but the real issue is that the target cost gets negotiated between owner and contractor rather than put out for competitive bidding, which means there is no market pressure to drive pricing down the way you would get with a traditional bid process. Reference https//www.aacei.org/
RO
Rohan Mehta
17 days ago
B Had this come up while reviewing contract types for the CCP and I nearly overthought it by assuming flexibility in controlling the work was the disadvantage, since that can go sideways in practice, but the actual drawback is that the target figures are negotiated between the parties rather than put out for competitive bidding, which means the owner has no market-based check on whether the agreed cost is actually fair. Reference https//www.costengineering.eu/
PI
Pierre Petit
17 days ago
B The tricky part with this question is that options A, C, and D are all actually benefits of target contracts, so if you go in without a solid understanding of how the target cost is set, it is easy to second-guess yourself and land on the wrong answer. The core issue is that because the target is negotiated between the owner and contractor rather than put out for competitive bidding, there is no market pressure to drive the cost down, which is a real disadvantage compared to other contracting methods. Reference https//www.aacei.org/
MA
Manon Martin
17 days ago
B
What made this question click for me was realizing that in a target contract the pricing process is based on negotiation between the owner and contractor rather than open competition, so there is no market-driven check on whether the agreed target is actually fair or efficient. Reference https//www.aacei.org/
VA
Valentina Torres
17 days ago
B The confusing part about target contracts for me was understanding why negotiated targets are actually a drawback, since going in I assumed flexibility and early start would be the bigger concerns, but the CCP material makes it clear that skipping competitive bidding can leave the owner with no price benchmark to validate whether the agreed target is fair or realistic. Reference https//www.aacei.org/
PO
Pooja Pandey
17 days ago
B What caught me off guard preparing for the CCP is that target contracts are often praised for their collaborative structure, so it feels counterintuitive to frame the negotiated cost arrangement as a weakness, but that is exactly the point the question is testing since no competitive bidding means the owner has less leverage to ensure the target reflects true market pricing. Reference https//www.aacei.org/
HO
Hoa Yoon
17 days ago
B When I first reviewed target contracts for the CCP, I kept focusing on scope and risk sharing as the main issues, so the competitive bidding angle wasn't the first disadvantage that came to mind, but thinking about it from an owner's cost perspective, negotiated targets with no market competition can absolutely result in inflated baseline costs that neither party is incentivized to challenge. Reference https//www.aacei.org/
SA
Samira Ali
17 days ago
B The part that got me was that all four options could loosely sound like disadvantages if you're not careful, but the key is recognizing that options A, C, and D are actually listed as benefits of target contracts in most AACE study material, which makes B the only true drawback since the target cost is negotiated rather than put out for competitive bid. Reference https//www.aacei.org/
CH
Charles Clark
29 days ago
B
Studying for the CCP, I found the tricky part here is that A, C, and D all sound like they could be disadvantages depending on context, but the question is asking specifically about a structural limitation of target contracts, and not being able to competitively bid the targets is baked into how this contract type works by design. Since the target cost is negotiated rather than bid out, you lose the price discipline that competitive bidding would normally create, which is exactly why B is the correct disadvantage. Reference https//www.aacei.org/
DU
Duc Do
1 month ago
B
This topic caught me off guard because I kept confusing the disadvantages of target contracts with cost-plus contracts, but the distinction here is that the target cost is negotiated rather than competitively bid, which means you lose the pricing pressure that open bidding would normally create. Reference https//www.aacei.org/
BA
Barbara Jackson
2 months ago
B This one tripped me up on my CCP exam because I kept second-guessing whether the lack of competitive bidding was really a disadvantage compared to the other options, since A, C, and D all sound like they could be negatives depending on context, but the key thing is that with target contracts the target cost is negotiated rather than openly bid, which removes the pricing pressure that competitive bidding would normally create. Reference https//www.aacei.org/
RA
Rabia Abbasi
2 months ago
B This one tripped me up on my CCP exam because the other options all sound like they could be negatives if you overthink them, but the key is that target contracts involve negotiated targets rather than competitive bidding, which means the owner loses out on the pricing pressure that open competition would bring. Reference https//www.aacei.org/
AR
Ariel
11 months ago
A is actually a benefit, not a disadvantage!
IS
Isadora
11 months ago
Wait, how can you start without a clear scope? That sounds sketchy.
CA
Carry
11 months ago
C seems like a huge red flag to me.
FA
Fallon
12 months ago
I agree, B makes it less transparent.
MA
Magda
12 months ago
B is definitely a downside, no competitive bidding is risky.
RO
Ronnie
1 year ago
I’m a bit confused about the advantages and disadvantages. I thought the flexibility in controlling the work was a good thing, but maybe it can lead to problems too?
QU
Quentin
1 year ago
I think we had a practice question about this, and I recall that the lack of competitive bidding was highlighted as a potential drawback.
JA
Jamey
1 year ago
I’m not entirely sure, but I feel like starting work without a clear scope could lead to issues later on. That might be a disadvantage too.
SA
Samira
1 year ago
I remember discussing target contracts in class, and I think one downside is that they might not allow for competitive bidding, which could affect pricing.
FR
Francisca
1 year ago
Yep, that's what I was thinking too. The "no opportunity to competitively bid the targets" option seems to capture the main downside of using target contracting. I'll go with that one.
DA
Dana
1 year ago
Ah, I think I've got it. The lack of competitive bidding is likely the key disadvantage here. That would limit the owner's ability to get the best price and terms for the work.
SH
Sharika
1 year ago
I'm a bit unsure about this one. The options seem to cover different aspects of target contracting, but I'm not sure which one is the clear disadvantage. I'll have to review my notes and try to reason through this.
MA
Mari
1 year ago
Okay, let's see. The options mention things like competitive bidding, scope definition, and flexibility in controlling the work. I'll need to weigh those factors to determine the main downside.
NA
Nathalie
1 year ago
Hmm, this one seems tricky. I'll need to think carefully about the pros and cons of target contracting to identify the key disadvantage.
DA
Daren
1 year ago
I think I remember practicing questions about starting with general information in fraud examinations. It makes sense to gather context first.
MA
Matthew
2 years ago
Option B all the way! Competitive bidding is the way to go, unless you want to end up with the contractor's cousin getting the job.
CH
Chantell
2 years ago
True, but it's important to weigh the pros and cons before making a decision.
SO
Sol
2 years ago
But target contracts can also provide flexibility in controlling the work.
SH
Shenika
2 years ago
I agree, competitive bidding ensures fairness and transparency.
FE
Felix
2 years ago
A might sound good, but I'd rather take my time and do it right than rush through it. Slow and steady wins the race, am I right?
LE
Lenora
2 years ago
D) Flexibility in controlling the work
CH
Chery
2 years ago
I agree, taking your time can lead to better results in the long run.
BE
Berry
2 years ago
B) No opportunity to competitively bid the targets
LA
Lanie
2 years ago
A) Encourages economic and speedy completion
LA
Launa
2 years ago
But on the other hand, target contracts encourage economic and speedy completion, which can be beneficial.
WI
Willodean
2 years ago
I agree with Fausto, not being able to competitively bid can lead to higher costs.
JE
Jerilyn
2 years ago
D sounds great, but I bet the 'flexibility' comes with a hefty price tag. No thanks!
KA
Kayleigh
2 years ago
C is pretty tempting, but starting work without a clear scope? Yikes, recipe for disaster if you ask me.
FA
Fausto
2 years ago
I think the disadvantage is B) No opportunity to competitively bid the targets.
MO
Mollie
2 years ago
I think option B is the correct answer. How can you have a fair competition without bidding?
AN
Andra
2 years ago
Without competitive bidding, it can lead to potential issues with fairness and transparency in the contracting process.
LA
Laticia
2 years ago
I agree, option B is a disadvantage because there is no opportunity to competitively bid the targets.