Standard Integrated Project Delivery Agreements allow for incentive pools benefiting portions of the design and construction teams. The purpose of these incentives is to encourage collaboration and savings.
More broadly, incentives generally complement the goals of IPD. These include the elimination of waste, an increase in quality, and increased safety. It also facilitates a greater return on investment, or profit, for the IPD team. These goals are advanced by linking individual rewards (distributed incentives) to group performance.
Incentives are achieved through superior performance and successfully exceeding project benchmarks. Project teams should establish these benchmarks through carefully designed project metrics in the following areas: cost, quality, safety, schedule, reliability, and innovation. Covering these bases helps motivate superior performance in all phases by the project team. Any incentive program should also provide for continual monitoring and review of the project team’s performance. Periodic updates or performance benchmarks provide the opportunity for corrections or modifications that improve quality.
The construction manager and trade contractors participating in an incentive program typically are reimbursed on a “cost of the work, plus fixed fee” basis. The team works to preserve the project contingency and to deliver the project for less than the established target cost. Upon the project’s completion, the remaining contingency is distributed as a bonus to team members. On well-run IPD projects, trade contractors can double their profit.
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