Document Detail

Title: RR114-11 - Innovative Strategies for Contractor Compensation
Publication Date: 1/1/1998
Product Type: Research Report
Status: Reference
Pages: 326
Howard, Bell, Clemson Univ.
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Recognizing potential for improvement in contractor performance relative to owner success factors, the Construction Industry Institute formed the Contractor Compensation Research Team in 1994. This report describes results of research conducted in conjunction with the Research Team to identify innovative compensation methods that can dramatically improve engineering and construction contractors’ performance relative to facility owners’ objectives. Research methodology included a review of relevant literature in construction engineering and economics, a survey of owners and contractors to identify innovative compensation mechanisms in use, structured interviews of capital project teams to explore contract terms and their impact on performance, a national Owner/Contractor workshop, and collection and documentation of innovative strategies employed successfully by owner/contractor teams.

Fourteen case studies of successful projects are presented. Economic principles relating to construction contracting are explored, and implications to contractor compensation design developed. Thirty-one contractor compensation strategies considered effective by project teams are isolated from the case studies. Matrices are presented which characterize effectiveness of the compensation strategies for the owner project objectives encountered in the case studies. References in the matrices guide the user to examples of application of the strategies and to implementation materials in the Appendices. Conclusions and recommendations relative to owner to contractor compensation are provided.