An alternative payment system for major 'fast track' construction projects

In the UK, construction contractors are generally reimbursed on a monthly basis reflecting the value of work done on site plus payments for agreed off site components. If the contractor is behind programme and even if he completes late he will still be reimbursed based on the value of work done calculated using the original itemized bid price. The only way clients can influence progress of the project is to claim from the contractor predetermined liquidated and ascertained damages in the event of late completion. These damages can only be charged after completion which may be a hollow compensation, most clients preferring their projects completed on time. This paper describes an alternative payment system for UM on major fast track projects in which the contractor is financially motivated to achieve satisfactory progress throughout the period together with completion on time. The system is based on the concept of predetermined percentages which are applied on a monthly basis to each major section of the project but only if the section's relevant 'milestones' have been met during the period considered. The system as described has been satisfactorily used on a major international multi contract, multi disciplined fast track construction project with individual contracts up to £100 M in value. The overall project was completed on time and within budget.