Unique Features of Construction Contract Incentive Plans

The CII Contracts Task Force was chartered in 1984 with the long-term goal of increasing construction cost effectiveness through better contracting. This Task Force’s scope is the contract strategies, attitudes, and enforcement provisions adaptable by all parties, rather than the literal drafting of the contract document elements.

The Contracts Task Force has now sponsored a series of research studies examining a range of subjects pertinent to this charter. The first investigation was entitled “The Impact of Various Construction Contract Types and Clauses on Project Performance.” One of the recommendations of that report was “Owners should routinely use positive incentives to reward contractors for cost-effective project management. Use of the more innovative unilateral bonus provisions should be considered.” It went on to urge more research and delineation of the various incentive mechanisms that can be employed to improve project cost-effectiveness and the development of guidelines for their use. Such a research effort was initiated and this report presents the findings, conclusions, and recommendations of that study.