Effective Financial Incentive Mechanisms: An Australian Case Study

The use of financial incentives in construction projects has been seen as a way to improve short term motivation, collaboration and reinforce long term commitment between project stakeholders. Yet, very little empirical research has been conducted into how financial incentives should be applied in the context of particular project types in order to maximise their effectiveness. The aim of this research paper is to identify the motivation drivers that influenced the effectiveness of financial incentives in an Australian Government large building project and to explain their characteristics in the project context. As part of a larger research project, this case study was undertaken to explore the perceptions of senior construction managers in response to a failed Financial Incentive Mechanism (FIM) in a relationship-based procurement environment. It was found that the strength of the financial reward on offer was not the major determinant of FIM effectiveness. Instead, a range of context dependent influences are identified and five key recommendations likely to improve the effectiveness of an FIM on similar projects are proposed.