Effectiveness Evaluation of Contract Incentives on Project Performance

Incentive plans are predetermined contract strategies designed to motivate project personnel and/or organizations to achieve prescribed project performance objectives. Incentive plans may be designed in a variety of ways and can be used singularly or in combination, allowing project sponsors to apply several different motivational strategies concurrently on a given project. This article addresses the issue of incentive effectiveness and investigates the actual influence of incentive strategies on measures of project performance. Data was collected in two phases and included capturing case study information from multiple project organizations and a subsequent detailed survey instrument that included over 90 project respondents. The findings indicate that the implementation of contract incentive strategies can have widely varied levels of effectiveness and may not actually yield the assumed benefits to overall measures of cost and schedule performance. Furthermore, some projects reported that incentives actually created unexpected or adverse consequences or lost their viability during project execution.