In this paper, an incentive scheme is developed within the guaranteed maximum price framework. This scheme is designed to align the contractor’s profit-maximizing behavior with the owner’s goals, motivating the contractor to use their expertise to incorporate advanced technologies and methods. The research provides guidance for project owners seeking to reduce project costs through innovations in materials and technology while leveraging contractors’ expertise in guaranteed maximum price–based delivery methods such as construction management at risk and progressive design-build. The research outcomes are particularly useful for owners who recognize the limitations of traditional guaranteed maximum price structures but are not comfortable with alternative structures such as estimated maximum price, which exposes the owner to financial risk due to a lack of a cost ceiling.
Kim et al. (Fri,) studied this question.