Boukendour, S and Hughes, W P (2014) Collaborative incentive contracts: Stimulating competitive behaviour without competition. Construction Management and Economics, 32(3), pp. 279-289. ISSN 01446193
Abstract
One of the major and recurring problems in designing cost incentive contracts is related to setting target cost and a risk-sharing ratio. With the standard sharing formula, contractors or alliance partners are incentivized to artificially inflate their target cost in order to maximize profit and minimize risk. Knowing that, owners attempt to pressure contractors by using various mechanisms, which are time-consuming and may jeopardize collaborative relationships afterwards. A fair risk-sharing formula is suggested that incentivizes the contractors or alliance partners to truthfully submit their target cost. The main tangible benefit is in removing suspicion and fostering trust and collaborative relationships between the contracting parties.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | alliancing; collaboration; options price; partnering; target cost |
| Index terms: | partnering, alliancing, owner, target cost, contracting party, option, profit, incentive contract, collaboration, competition |
| Subjects: | contractual arrangements, economic analysis, practitioner, market analysis, partnership management, sociology, decision analysis, management, economics |
| Topics: | Cost Management, Business Strategy, Research Practice, Risk Management, Stakeholder Management, Roles and Professions, Procurement, Organizational Design |
| Descriptive scope: | 2 PC |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here