Client recommendations for financial incentives on construction projects
Engineering, Construction and Architectural Management
ISSN: 0969-9988
Article publication date: 4 May 2010
Abstract
Purpose
The paper seeks to provide recommendations for construction clients who design and implement financial incentive mechanisms (FIMs) on projects.
Design/methodology/approach
Four large Australian building projects commissioned by government clients under managing contractor contracts and completed between 2001 and 2005 were examined to explore the “drivers” that promoted motivation toward financial incentive goals. The results were triangulated across data sources, projects and stakeholder types.
Findings
FIM design should incorporate: flexibility to modify goals and measurement procedures over time; multiple goals covering different project areas; distribution of rewards across all the key organisations contributing to team performance (e.g. potentially not just the contractor, but the subcontractors and consultants) and a reward amount sufficient to be valued by potential recipients. FIM benefits are maximised through the following complementary procurement initiatives: equitable contract risk allocation; early contractor involvement in design; value‐driven tender selection; relationship workshops; and future work opportunities.
Research limitations/implications
This paper provides practical recommendations to industry and hence does not emphasise theoretical aspects.
Practical implications
The uptake of these recommendations is likely to increase the impact of FIMs on motivation and improve project and industry outcomes. Although the study focuses on government clients of building projects, all the recommendations would seem to apply equally to private‐sector clients and to non‐building projects.
Originality/value
In order to improve motivation and reward high performance, clients are increasingly using FIM in their construction contracts. Despite the rising use of financial incentives, there is a lack of comprehensive construction‐specific knowledge available to help clients maximise outcomes. The study addresses this gap in the literature.
Keywords
Citation
Rose, T. and Manley, K. (2010), "Client recommendations for financial incentives on construction projects", Engineering, Construction and Architectural Management, Vol. 17 No. 3, pp. 252-267. https://doi.org/10.1108/09699981011038051
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited