The TOC is the acronym for Target Outturn Cost, which is the expected cost at completion of the alliance works. While the TOC is expressed as a number, the objective of the TOC development process is to 'provide substantially increased certainty of outcome in achieving the Owner's VfM Statement objectives at a fair price'.
Although the TOC becomes a part of the Proponent's Offer at the conclusion of the TOC development process, it is not the same as a lump sum tender price, which is a fixed price offer to undertake the work as defined in a risk allocation contract. It is a forecast of the cost at completion, against which the Actual Outturn Cost (AOC) will be measured for the purposes of assessing cost gainshare or painshare in accordance with the Commercial Framework. As an expected cost figure, it will include the expected cost impact of all risks and opportunities consistent with the scope and risk responsibilities of the alliance.
The TOC is the key financial component of the four interdependent alliance success factors introduced in the Guide:
1. integrated, collaborative team;
2. Project Solution;
3. commercial arrangements; and
4. Target Outturn Cost (TOC).
The TOC is a formal offer by the Proponent to the Owner, for providing certain services and having exposure to certain risks (shared with the Owner) based on the project deliverables and commercial arrangements set out in the PAA. It is determined using the same estimating skills and processes as traditional tendering and it will be extensively reviewed and formally approved internally by the Proponent's senior management before it is submitted to the Owner.9
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9 On the other hand, if the TOC, once adjusted by the Owner, is greater than the Business Case budget then confirmation is needed by the Owner (and normally government) to proceed with the project.