SBM1204 Project Delivery: Contract Incentives and Penalties Analysis

This report examines the impact of contract incentives and penalties on project procurement, focusing on how they influence project management outcomes. It begins by discussing the historical context of procurement in the construction industry, highlighting the shift towards collaborative a...Read More

Running head: PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES
AND PENALTIES
PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
Name of the Student:
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1PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Article-1.................................................................................................................................2
Article-2.................................................................................................................................3
Conclusion..................................................................................................................................4
References..................................................................................................................................5

2PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
Introduction
The primary aim related to this article is to conduct a brief study about the impact of
contract related incentives as well as penalties within the procurement of project in relation to
the support belonging to methods of project management. This specific study is related to all
the details belonging to procurement of project by the proper utilization of incentives as well
as penalties. This also has the inclusion of minimizing the entire cost related to this project
along with the duration by effectively avoiding the happening of over-incentivizing as well as
under-incentivizing. The specific development of all the collaborative projects within the
entire field of construction industry that is properly visible as an approach towards a larger
focus upon the integration of the project design along with the delivery teams that is similarly
emphasized upon better collaboration. This article also has the inclusion of improving the
coordination within the team members allocated to a definite project.
Discussion
Article-1
In reference to the past few decades, procurement within the procedures related to
construction has risen as one of the primary issues within the industry as a reason of the
particular method utilized by all the clients to procure all the projects in order to determine
the nature related to the competition within the industry. This in turn, delivers an influence
upon the extent belonging to the innovation of the road infrastructure projects. However,
moving away from the traditional method of procurement has brought a significant effect
upon the procedures related to innovation in infrastructure of roads (Che Ibrahim et al.,
2017). Recently the movement towards more of a cross-discipline collaboration within the
team as well as the high integration within the teams by utilizing more of a collaboration
relation to the approaches belonging to the methods of procurement.

3PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
However, the specific influence of all the important factors driving the wheel towards
the acquirement of innovation refers to the presence of a much well-integrated team all of
which have been exhibiting the behaviors in relation to the integration of collaboration within
all the projects that shall be carried out in future. Hence, belonging to this sense, procurement
in relation to collaboration is considered to be the primary key towards the attainment of
innovation.
Article-2
Procurement of project to be specific employs related incentives along with penalties
to provision with support towards the successful management of project. State of the art has
been derived from the specific type of incentive that the contracts have been chosen along
with the comparative degree towards the advancement of all the goals related to project
management. Contractual agreements can be specifically placed within two of the major
categories namely the likes of fixed price or the reimbursable cost as well as to contain the
entire language related to the specific output, along with the schedule as well as the
expectations related to cost (Allen et al., 2015). Incentives are meant for the achieving of all
the stated objectives or might as well be the penalties for the deviations from the initial
expectations. Hence, the usage of incentives can be applied upon any one of the two classes
of contracts.
The primary objective that the buyer has is to gain the highest amount of return from
the money that has been specifically invested within the project. On the contrary, the
objective of the contractor is to increase the overall profit that shall be gained in due course
of the project. If there is the slightest deviation from the cost of the project that as originally
set to a much lower price, the contractor might indulge the feeling of getting tempt towards a

4PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
shirk. On the other hand, the client may control the expected reaction at the first instance, but
may retaliate in accordance to the lowering of costs the next time.
Conclusion
Researches carried out within the field of academic research, professional interviews
as well as the professional surveys have placed forward the indication that incentives are
considered to be the most effective procedure for the achievement of time, cost as well as
better outcomes from the performances as matter of results. For this particular procedure to
be completely successfully within a project, the definition related to the project should be
clear having the inclusion of minimal change, along with any of the alternations that could
negatively have an impact upon the timeline, the cost as well as the individual performances
of all the vendors working within the project. On the other hand, the article has been
concluded placing forward the fact that penalties have been found to drive out the required
performance or to discourage the undesired behavior from the vendors associated to the
project to be working by abiding to all the basic principles of project management as well as
the project procurement.

5PROJECT PROCUREMENT: IMPACT OF CONTRACT INCENTIVES AND PENALTIES
References
Allen, M., Herring, K., Moody, J. and Williams, C., 2015. Project procurement: Impact of
contract incentives and penalties. International Journal of Global Business, 8(2), p.1.
Che Ibrahim, C.K.I., Costello, S.B., Wilkinson, S. and Walker, D., 2017. Innovation in
alliancing for improved delivery of road infrastructure projects. International Journal of
Managing Projects in Business, 10(4), pp.700-720.