The Target Price for the work consists of the Target Cost plus the seller’s Target Profit (or ‘fixed fee’).
The Share Ratio compares the actual cost at completion with the target price and divides the benefit of underruns and the consequences of the allowed overruns between the buyer and seller.
A typical set of share ratios are 80% buyer – 20% seller for overruns and 50% – 50% for underruns. This means the seller(contractor) contributes 20% of any cost overruns (usually from its planned profit) up to the ceiling but receives 50% of any cost savings (underruns). Saving Changes...
I still have one question as the ( Benefit/cost sharing:) =80% / 20% is given in data information
and the equation is divided to the ratio ( why I have to divided to 80% ? why not 80%/20% which equal 40% ? why not divided to 40% ???
this is a math ?
Thanks in advance for your clarification.
Mansour Saving Changes...
