Framework for Estimating Quality-Related Incentive and Disincentive in Construction Projects

Having provisions in contracts that incentivize “better” performance has been identified as an effective means to encourage the contractor to perform better. In the construction industry, such incentive-disincentive (I/D) schemes have more widely been used for time, cost, and safety performance goals, they are conspicuous in their absence for quality-related performance. In fact, there is only limited literature available on the latter. This study presents a framework to estimate the quality I/D amounts in construction projects. The relationship between the cost of conformance and a “project defect score” has been used to estimate the I/D amount. The proposed framework for quality I/D has been validated for its effectiveness from the data of three actual recently completed projects. The findings clearly show that the proposed quality I/D scheme helped achieve a win–win situation between client and contractor. Though this study is based on data from the building industry, the proposed framework can be fine-tuned with more data and extended to other areas of construction.