Risk/reward compensation model for civil engineering infrastructure alliance projects

Peter E.D. Love, Peter R. Davis, Robert Chevis, David J. Edwards

Research output: Contribution to journalArticlepeer-review

158 Citations (Scopus)

Abstract

A risk/reward model is described as that which aligns project participants' behaviors toward the achievement of a project's performance objectives through the use of incentives. A risk/reward model typically includes the following mechanisms: risk/reward shared percentages among nonowner participants, project cost risk/reward, noncost risk/reward, risk cap, and achievability of performance targets. This paper examines the influence of a risk/reward model on the behavior of project participants. Twenty-nine industry practitioners from eight civil infrastructure project alliances were interviewed. The interviews revealed that individual features of a risk/reward model identified had merits, but the achievability of performance targets model appeared to be the most appropriate for promoting positive behaviors within the project team. Additionally, it was found that all incentive aspects of the model examined led to positive and constructive behaviors occurring due to their perceived fairness and equity of payment structure. Participants indicated that having a commercial interest in an alliance's performance outcomes ensured collaboration and engagement throughout the project's life cycle. It is concluded that risk/reward sharing is pivotal to obtaining a successful project outcome for the procurement of civil engineering infrastructure projects when using an alliance.

Original languageEnglish
Pages (from-to)127-136
Number of pages10
JournalJournal of Construction Engineering and Management - ASCE
Volume137
Issue number2
DOIs
Publication statusPublished - Feb 2011
Externally publishedYes

Keywords

  • Alliance
  • Australia
  • Behaviors
  • Compensation
  • Project team
  • Risk/reward model

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Building and Construction
  • Industrial Relations
  • Strategy and Management

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