Schedule-based construction incentives

Construction incentives can be useful devices to improve project performance. The use of schedule-based incentives is particularly attractive because it can result in substantial time and cost savings. Furthermore, the design and implementation of schedule-based incentives are relatively easy and inexpensive. They are especially applicable to projects for which timely completion is critical. Several different forms and combinations of schedule incentives are available, each having its own advantages. Schedule-based incentive targets vary from the simplistic, end-of-project types, to the more sophisticated intermediate milestones, with various combinations in between. Both bonus and bonus/penalty award schemes are used in a wide array of forms. Contractor participation in the development of schedule targets can enhance the chances for success of the incentive plan, yet such participation is not always sought by owners. Use of bonus-only schedule incentives is recommended whenever a perceived benefit from above average schedule performance exists. Bonus size should be substantial enough to capture the attention of the contractor’s upper management. Exclusive use of penalties is counterproductive.