Abstract
It is quite often assumed that all enterprises seek continual performance. In this regard, incentives in various forms have been used as performance motivators. Typically, incentive arrangements in construction involve setting cost, schedule, and outcome performance targets. Moreover, the success of incentive schemes is not guaranteed. Many projects with incentives still end with project overruns, huge claims, and embarrassing defects. It is advocated that defective design is one of the key causes of the nonfunctioning of incentive arrangements. This study reminds us that there are certain norms to be followed in the planning of construction incentivization. The characteristics of three well-known normative principles are introduced. In addition, this study advocates that construction incentivization should also be planned to engender the commitment of the contracting parties. In this respect, managing behaviours between the parties should be one of the planning norms of construction incentivization. Empirical support is also provided.
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Acknowledgements
The development of equity gap has been quoted from the paper “Toward an Equity-Based Analysis of Construction Incentivization” of the Journal of Construction Engineering and Management. The work described in this chapter was fully supported by an HKSAR RGC project (number 11202722).
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Appendix: Data Collection Form and Descriptions
Appendix: Data Collection Form and Descriptions
No | Description | Min | Max | Mean | Std | Cronbach(α) | |
|---|---|---|---|---|---|---|---|
Part 2 | PICI | 0.896 | |||||
Q2.1 | Goal Commitment | Collaborative effort was made between two parties to set common goals for the project | 1 | 7 | 5.08 | 1.58 | 0.490 |
Q2.2 | The incentive plan includes common goals agreed by the contracting parties | 4 | 7 | 5.76 | 0.83 | ||
Q2.3 | Notable efforts have been directed to fulfil the common goals | 3 | 7 | 5.72 | 0.86 | ||
Q2.4 | Extra efforts had been used to fulfil the common goals when confronted with difficulties | 3 | 7 | 5.70 | 0.89 | ||
Q2.5 | Expectation alignment | The expected performance was achievable for project participants | 3 | 7 | 5.80 | 0.84 | 0.730 |
Q2.6 | Reasonable financial bonus was set to for expected performance | 2 | 7 | 5.46 | 1.19 | ||
Q2.7 | The performance exceeding expectation led to certain level of rewards | 1 | 7 | 5.20 | 1.34 | ||
Q2.8 | Information exchangeability | Project information was easier to access than expected under PICI | 2 | 7 | 5.01 | 1.08 | 0.612 |
Q2.9 | Project information was exchanged smoothly under PICI during the whole project | 3 | 7 | 5.40 | 0.93 | ||
Q2.10 | The project participants’ unobserved behaviours were now monitored under of PICI | 1 | 7 | 4.84 | 1.11 | ||
Q2.11 | Risk efficiency | The tender documents revealed a risk allocation pattern that was more balanced than market norm | 1 | 7 | 5.00 | 1.21 | 0.761 |
Q2.12 | The PICI enabled a risk allocation pattern more equitable than the pattern displaced in the tender documents | 2 | 7 | 5.03 | 1.17 | ||
Q2.13 | Sufficient resources were provided to promote innovation | 2 | 7 | 5.04 | 1.18 | ||
Q2.14 | Sufficient resources were provided to prevent project failure | 2 | 7 | 5.32 | 1.07 | ||
Q2.15 | Relationship investment | The spiCIrit of partnership was promoted to pursue mutual benefits for the project | 2 | 7 | 5.57 | 1.16 | 0.790 |
Q2.16 | Provisions are included in the construction incentivisation to compensate works due to unforeseen events | 2 | 7 | 5.26 | 1.21 | ||
Q2.17 | The compensation for item Q3.16 was based on the principle of deriving win–win situation | 3 | 7 | 5.57 | 1.04 | ||
Q2.18 | The CI focused more on long-term returns instead of short-term gain | 1 | 7 | 5.25 | 1.05 | ||
Part 3 | Equity Gap | 0.872 | |||||
Q3.1.1 | Information | At the bidding stage, the developer had an information advantage about the project details | 1 | 6 | 3.78 | 1.09 | 0.561 |
Q3.1.2 | At the bidding stage, the developer had an information disadvantage about the contractor’s ability | 1 | 7 | 3.76 | 1.32 | ||
Q3.1.3 | At the construction stage, the contractor had an information advantage relating to market changes | 2 | 6 | 4.13 | 1.02 | ||
Q3.1.4 | At the construction stage, the developer could not monitor comprehensively the Contractor’s behaviour relating project performance | 1 | 7 | 3.89 | 1.20 | ||
Q3.2.1 | Risk (Environmental) | Unforeseeable physical conditions | 1 | 7 | 4.23 | 1.37 | 0.792 |
Q3.2.2 | Cost fluctuation (inflation of prices) | 1 | 7 | 3.76 | 1.30 | ||
Q3.2.3 | Unforeseeable loss because of adverse climatic conditions | 1 | 7 | 3.80 | 1.27 | ||
Q3.2.4 | Risk (behaviour risk) | Unforeseeable loss because of defective design | 1 | 7 | 3.53 | 1.50 | |
Q3.2.5 | Time for payment | 1 | 6 | 3.83 | 1.10 | ||
Q3.2.6 | Time for providing information/instructions | 1 | 7 | 3.83 | 1.33 | ||
Q3.3.1 | Expected return | At the bidding stage, price competition was fully leveraged to drive down contractor’s profit | 1 | 6 | 4.12 | 1.33 | 0.859 |
Q3.3.2 | The return for one of the parties was not commensurate to his contribution in resources to the project according to the contract | 1 | 6 | 3.81 | 1.09 | ||
Q3.3.3 | At the construction stage, return for changes was not commensurate to his contribution in resources to the project | 1 | 6 | 3.90 | 1.19 | ||
Q3.4.1 | Sanction power | At the construction stage, unilateral termination by the contractor presented greater threat than the developer | 1 | 6 | 3.81 | 1.36 | 0.855 |
Q3.4.2 | Unilateral decision authority over project dispute had been the major weapon used by the developer to achieve his own goals | 1 | 6 | 3.51 | 1.39 | ||
Q3.4.3 | At the construction stage, the developer was unwilling to cooperate for events which are critical to the contractor | 1 | 6 | 3.15 | 1.28 | ||
Q3.4.4 | At the construction stage, the contractor was unwilling to cooperate for events which are critical to the developer | 1 | 6 | 3.18 | 1.18 | ||
Q3.4.5 | Bargaining power | At the bidding stage, the contractor felt more constrained and sacrificed in negotiating contract terms in relation to compensation for foreseeable losses | 1 | 7 | 4.20 | 1.26 | |
Q3.4.6 | At the construction stage, the developer felt more constrained and sacrificed in renegotiation of contract terms in relation to compensation for foreseeable losses or disputes | 1 | 6 | 3.94 | 1.29 | ||
Q3.4.7 | The developer felt being forced to settle claims below his entitlements for change of work | 1 | 6 | 3.70 | 1.13 | ||
Q3.4.8 | Making compromise was needed for the developer in view of the time pressure in switching contractor | 1 | 6 | 4.31 | 1.24 | ||
Part 4 | IOR | 0.909 | |||||
Q4.1 | Interdependency | The loss of transaction cost was unrecoverable when switching to another counterpart | 3 | 7 | 5.13 | 1.08 | 0.679 |
Q4.2 | The loss of time was unrecoverable when switching to another counterpart | 3 | 7 | 5.12 | 1.18 | ||
Q4.3 | The loss of project information and data was unrecoverable in switching to another counterpart | 1 | 7 | 4.30 | 1.15 | ||
Q4.4 | Reciprocity | Shared norms were developed between the two senior management teams | 3 | 7 | 4.96 | 1.00 | 0.762 |
Q4.5 | Project participants felt being fairly treated when putting efforts towards the attainment of the common goals | 1 | 7 | 5.05 | 1.20 | ||
Q4.6 | A no-blame culture was established between the two contracting parties | 1 | 7 | 4.48 | 1.25 | ||
Q4.7 | Trust | A good management system was established to reinforce goal achievement such as continual improvement, profit making and business expanding | 3 | 7 | 5.27 | 0.95 | 0.901 |
Q4.8 | Misunderstandings were avoided by open communication | 4 | 7 | 5.63 | 0.95 | ||
Q4.9 | Information in the contract document was explained to the affected parties | 3 | 7 | 5.35 | 1.01 | ||
Q4.10 | Project participants had a good interaction to obtain more information from the other party | 3 | 7 | 5.55 | 0.86 | ||
Q4.11 | It is believed that one of the parties had confidence to work with the other if they are honest | 4 | 7 | 5.64 | 0.75 | ||
Q4.12 | Both parties were considerate to understand the other parties’ needs and feelings at work | 2 | 7 | 5.20 | 0.98 | ||
Q4.13 | Being considerate had enhanced the working capacity of the counterpart | 3 | 7 | 5.26 | 0.99 | ||
Q4.14 | A good inter-organizational relationship was built between two parties | 3 | 7 | 5.40 | 0.98 | ||
Q4.15 | Relationship continuity | Both parties perceived that the working environment was collaborative | 3 | 7 | 5.51 | 0.96 | 0.814 |
Q4.16 | Both parties perceived those future working opportunities were likely | 3 | 7 | 5.44 | 0.98 | ||
Q4.17 | Both parties were willing to accept short-term dislocation believing that it will balance out in the long run | 3 | 7 | 5.32 | 0.96 | ||
Part 5 | Project performance | 0.897 | |||||
Q5.1 | Contractual safeguards | The contractor’s behaviour could readily be evaluated during the whole project procedure | 3 | 7 | 5.24 | 1.07 | 0.896 |
Q5.2 | Programmable tasks were achieved on each stage during the whole project procedure | 3 | 7 | 5.09 | 1.14 | ||
Q5.3 | Unexpected situations and difficulties encountered were well-handled | 2 | 7 | 5.09 | 1.10 | ||
Q5.4 | The project cost was within overall budget | 1 | 7 | 5.10 | 1.36 | ||
Q5.5 | This project achieved satisfying project quality | 3 | 7 | 5.41 | 1.10 | ||
Q5.6 | This project finished on time | 1 | 7 | 4.49 | 1.65 | ||
Q5.7 | The volume of disputes was controlled within a reasonable range | 2 | 7 | 5.25 | 1.09 | ||
Q5.8 | The amount in dispute was controlled within a reasonable range | 2 | 7 | 5.20 | 1.14 | ||
Q5.9 | Value creation | Both parties worked together to maximize mutual benefits instead of their own benefits | 1 | 7 | 5.07 | 1.24 | 0.758 |
Q5.10 | Innovations were generated by the developer in this project | 1 | 7 | 4.53 | 1.47 | ||
Q5.11 | Innovations were generated by the contractor in this project | 2 | 7 | 4.63 | 1.50 | ||
Q5.12 | There are promotions of project performance (e.g., cost-saving, shorten the construction period and quality improvements) that are beyond expectations | 1 | 7 | 4.76 | 1.42 | ||
Q5.13 | Both parties had confirmed a commitment to seek mutual benefits and cooperation in the future | 2 | 7 | 5.15 | 1.14 | ||
Valid N | 142 | ||||||
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Zhu, L., Cheung, S.O. (2023). Behavioural Considerations in Construction Incentivization Planning. In: Cheung, S.O., Zhu, L. (eds) Construction Incentivization. Digital Innovations in Architecture, Engineering and Construction. Springer, Cham. https://doi.org/10.1007/978-3-031-28959-0_4
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