WHAT WE NEED TO KNOW ABOUT CONSTRUCTION INCENTIVISATION?

Abstract

Construction incentivization in this study is used as a collective term that include all forms of incentive arrangements that aim to engender extra effort of the contracting parties for the improvement of project performance. It is quite often assumed that all enterprises are seeking continual performance. In this regard, incentives in various forms have been used as performance motivator. Notable examples include incentive schemes in military and aerospace developments contracts. In construction projects, incentive schemes have also been used to engender performance. Typically, incentive arrangements in construction involve setting cost, schedule, and outcome performance targets. Moreover, the success of incentive schemes is not guaranteed. It had also been found that many projects with incentives still end with project overruns, huge claims, and embarrassing defects. It is advocated that defective design is one of key causes of non-functioning of incentive arrangements. This study identified three fundamental flaws in the conventional design of incentive. First, the targets for incentives are often set unliterally by the owner. Second, only those quantifiable targets are included. Third, only the final outcomes are used to determine whether the targets have been achieved. This study offers some novel incentive planning parameters to be used for complex mega projects.