Contractual Incentives

Stukhart, George

doi:10.1061/(asce)0733-9364(1984)110:1(34)

Cited by 35 publications

(13 citation statements)

References 5 publications

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“…Risks are perceived as the possible exposure to economic loss (Stuckhart 1984) and should be identified and analyzed before the appropriate response is determined (Broome and Perry 2002). Although the GMP/TCC procurement approach has been implemented in a number of construction projects for several years, some of the projects have been exposed to very high risks or uneven allocation of risks.…”

Section: Literature Review On the Risks Of Gmp/tccmentioning

confidence: 99%

Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Chan

Lam

et al. 2010

J. Constr. Eng. Manage.

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Over the past few decades, both the guaranteed maximum price (GMP) and target cost contracting (TCC) arrangements have been regarded as alternative integrated procurement strategies for clients to mitigate risks, minimize claims, integrate the diverse interests of a complex construction project and offer incentives to provide value-added services. However, the adoption of GMP/TCC contracts may also generate significant risks and difficulties that merit considerable attention. This paper aims to provide a concise review of the potential pitfalls of GMP/TCC scheme in general, and identifies the key risk factors and potential difficulties associated with GMP/TCC in comparison with other procurement strategies in construction in particular via an empirical survey of clients, contractors and consultants in Hong Kong. The survey data gleaned from 45 valid replies were analyzed using the mean score ranking technique, Kendall's concordance test and Spearman's rank correlation test. The survey results indicated that 'Involvement of inexperienced or claimconscious contractors in a project procured by a GMP/TCC contract' was considered to be the most significant risk factor; whilst 'Design development must keep pace with main contractor's program for tendering the domestic subcontractors' works packages' as the major difficulty in implementing GMP/TCC projects. The research findings derived from this study are particularly essential in assisting the contracting parties to mitigate the detriments brought about by potential risks or difficulties when embarking on GMP/TCC contracts. It has also generated valuable insights into developing effective recommendations for alleviating the barriers to GMP/TCC success for future construction projects.

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Section: Literature Review On the Risks Of Gmp/tccmentioning

confidence: 99%

Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Chan

Lam

et al. 2010

J. Constr. Eng. Manage.

View full text Add to dashboard Cite

show abstract

“…The evaluation intervals and the performance criteria must be established in the contract. Performance generally is measured on things that have an effect on the schedule or cost such as quality, safety, technical management, utilization of resources, productivity and responsiveness [2]. 4.…”

Section: Types Of Incentive Contractmentioning

confidence: 99%

“…One of the important aspects in I/D provisions is the definition of project completion [question (2)]. The variation between the owners and contractors regarding the criterion used to define the completion of the project is obvious.…”

Section: Contracting Milestone Settingmentioning

confidence: 99%

Incentive/disincentive contracts and its effects on industrial projects

Bubshait

2003

International Journal of Project Management

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Project delays and cost overruns are becoming major problems in many projects, especially industrial projects. The present economic situation has forced owners to establish time and cost reduction programs to control expenditure. The main objectives of this study are to study the perceptions of owners and contractors about incentive/disincentive (I/D) contracting. A questionnaire was used to gather the required data for the study. This was distributed among owners and contractor companies working in petrochemical plants, power plants, and refineries. The findings of the study support the use of I/D provisions in contracts. In addition, the use of I/D contract provisions ensure that contractors do their utmost to manage and control factors that influence labor productivity, project duration and/or project cost. #

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“…This is illustrated in Figure 4 with a symmetric 50:50 split, i.e. the share line bisects the difference between the In the case of a symmetric system, where a party's shares of cost under-runs and over-runs are equal, the cost to the owner can be expressed as (Stukhart, 1984;Al-Harbi, 1998;Broome and Perry, 2002):…”

Section: Target-cost Contract Mechanismmentioning

confidence: 99%

Conceptualizing a two‐stage target‐cost arrangement for competitive cooperation

Lahdenperä

2010

Construction Management and Economics

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The owner may involve design and construction service providers in a project at different stages of planning and design. Early involvement of the versatile know‐how of service providers places the owner at the services providers’ mercy as to pricing. Late involvement, when design is close to completion, allows using price competition to ensure reasonable pricing. Then, design usually does not involve interplay between the key parties to benefit the project. The aim of the conceptualization is to overcome the above‐mentioned problem by generating a novel type of two‐stage target‐cost contracting system which combines early selection and price containment. There the calculated tender price is based on both the owner’s estimates and the tenderers’ unit cost and overhead data while the project scope is not yet fully established. Selected service providers then develop the project and its designs in cooperation with the owner before the actual target‐cost is set. Incentives have been created to lower the target‐cost below the earlier calculated tender price. The idea is to spur actors to invest especially in the critical pre‐implementation development phase. Subsequent risk sharing is believed to increase the cooperation between parties further. The model offers a means, especially for European public owners, to enter into a cooperative relationship that is of value in the case of projects involving special challenges and a great deal of uncertainty. The European Procurement Act requires costs to be taken into account in the selection.Incentive contracts, target‐cost, early contractor involvement, public sector procurement, alliancing,

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Contractual Incentives

Cited by 35 publications

References 5 publications

Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Incentive/disincentive contracts and its effects on industrial projects

Conceptualizing a two‐stage target‐cost arrangement for competitive cooperation

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