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Innovative Contract Incentives

Event Date

Jun 30, 1999

Type

Conference Presentation

Research Team

RT-114

Slides

Topic

Contractor Compensation

DOCUMENT DETAILS

Abstract

Filters & Tags

Abstract

The Contractor Compensation Research Team was established to develop breakthrough approaches to contractor compensation. Founded on the premise that traditional engineering and construction contracts perpetuate competing interests between owners and contractors, the team began with the goal to rethink contractor compensation in order to align contractor performance more closely with owner objectives. Compensation was interpreted broadly to include reward, recognition, money payment, future opportunities, expanded roles, and reduced risk. The team found innovative contracting strategies that go well beyond traditional concepts of alliances, team autonomy, and incentive contracting. No single breakthrough strategy or set of metrics, however, was applicable to all projects. The development of contractor compensation plans that lead to owner success is highly individualized to the specific project and the personalities and philosophies of project leaders that craft the contract. Timing of development of the contracting strategies, however, is not as important as establishing: (1) a trust-based relationship among project team members and (2) the willingness to develop the compensation plan jointly. These two factors are most important in establishing innovative compensation plans, but are often the largest barriers to success. The application of innovative contractor compensation strategies should not be considered an “end all” solution to project performance improvement. Such strategies instead should be considered one more important tool in a project team’s “tool kit” to be applied in conjunction with other CII best practices such as partnering, team building, team alignment, open communications, setting project objectives, and pre-project planning.

Filters & Tags

Knowledge Area

Business and Project Processes, Construction Execution, Procurement & Contracts

Project Phase

Feasibility, Concept, Detailed Scope, Detailed Design (Engineering), Procurement, Construction, Commissioning & Startup, Handover & Closeout

Project Function

Project Management, Architects & Engineering, Procurement & Contracts, Construction, External Stakeholders

Industry Group

Light Industrial, Heavy Industrial, Buildings, Infrastructure

Research Topic

Contractor Compensation

Keywords

Contractor Compensation, Project Performance, Incentives, Owner/Contractor Relationship, Compensation Plan, Breakthrough Compensation Strategies, Fee-at-risk, Cash Flow Enhancements, Upfront Payment, rt114

Related Resources

Innovative Contract Incentives

Related Resources

Concepts for Incentivizing Contractor Performance

Innovative Contractor Compensation Strategies - Instructor's Guide

Innovative Contractor Compensation Strategies - Participant Handbook

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