Toward Behaviour-based Construction Incentivisation

Description

Many construction projects end with cost overrun, delay and defects. These undesirable outcomes are particularly worrying with mega projects. The construction industry has been seeking ways to improve project performance and inter alia, incentive schemes have been used quite extensively as one of the means to induce extra efforts from contracting organisations. In 2007, the Hong Kong Government announced the construction of ten mega projects in 2007. By 2020, seven of them had commenced. Notwithstanding these projects have all incorporated certain forms of incentive, delay, substantial cost overruns and quality issues have been reported. To further understand the use of construction incentivization (CI) in Hong Kong, pilot case studies were conducted. The following observations were collected:• Most of the CI have targets set on time, cost, quality and safety. • No clear pattern of how CI are developed. • ‘Carrots’ are used far more often than ‘sticks’. • The use of CI is far more common in public projects than private projects. • Most targets are quantitative. • Choice of CI is rather incidental. Review of literature and comments from stakeholders identified two major shortcomings of the prevailing CI arrangements. First, CI is anchored on motivation theories that are mostly related to individuals; Second, the targets are outcome based and mainly tied with developers’ goals.This outcome-based approach is useful for tasks of high programmability with outcome that can be accurately projected. However, construction tasks, especially those that need innovation, are of low programmability and hence low interim performance observability.It is often too late when problems are discovered. This study aims to improve the use of CI in fostering project performance and proposes the use of behaviour-based incentive to supplement conventional outcome-based arrangements. The terms used in this study shall have the following meanings. Project Performance (PP) means the degree of accomplishment of project goals. Conducive contracting behaviours (CCB) are characterised by their performance enabling function. Construction incentivization (CI) is a collective term that covers the range of incentive schemes that can be used in construction contracting. The disparities in risk ownership, information, expected return and power between the developer and the contractor are collectively described as equity gap (EG). Interorganizational relationship (IoR) determinants are the parameters that reflect the working relationship between the organizations. The conceptual underpinnings of the study are outlined as follow. CCB will improve PP. EG deters the practice of CCB whereas enhanced IoR induces CCB. Based on these conceptualizations, behaviour-based CI is proposed to be used to narrow EG and promote IoR so that CCB can be engendered with the ultimate aim of improving project performance. This study posits to test the validity of these conceptual underpinnings and has the following operating objectives:I. To review the use of CI in construction contracting; II. To develop the five key constructs (PP, CCB, CI, EG, IoR) of the study; III. To examine the relationship between CCB and PP; IV. To examine the effect of EG and IoR on CCB; V. To investigate the use of behaviour-based CI to engender CCB; and VI. To develop normative principles for the design, planning and implementation of behaviour-based CI. A focus group comprises senior members of the industry will provide advice and industrial link for the planned research activities. The five key constructs will first be operationalised in construction contracting context. With these, relationship frameworks respective to the objectives will be built. With data to be collected from practising construction professionals, structural equation modelling analysis will be applied to examine the hypothesised relationships within the frameworks. Importance performance map analysis will then be used to identify the key design parameters of behaviour-based CI. Guidelines on the use of these principles will also be prepared with due regard to the key design parameters. A separate focus group will be formed to provide comments to the findings and the workability of the planning principles. This study pioneers the use of behaviour-based CI to improve project performance in general and to foster innovation in particular. The set of normative principles for the design, planning and implementation of behaviour-based CI is novel.