Impact of Contract Incentives and Penalties: A Journal Summary Report

This report summarizes a journal article focusing on the impact of contract incentives and penalties on project procurement. The study explores how incentives and penalties influence seller behavior and project outcomes. It examines different contract types, including fixed price, performance incentive, and reimbursable contracts, and their respective advantages and disadvantages. The research highlights the importance of aligning incentives with project goals and the potential risks of over- or under-incentivizing sellers. The analysis also delves into the effectiveness of penalties in motivating sellers and discusses the application of these concepts in real-world scenarios, such as the NASA project. The report emphasizes the need for further research to identify optimal mechanisms for implementing incentives and disincentives across various project contexts, ultimately aiming to improve project management practices and ensure successful project outcomes.

Running head: JOURNAL SUMMARY
JOURNAL SUMMARY
Name of the Student:
Name of the University:
Author’s Note:

1JOURNAL SUMMARY
Journal Summary:-
Contract incentives are the funds by which a proprietor aims to protected specific project
goals over the contracting procedure. Incentive contracting naturally involves a static price or
cost compensation contract. Upon conclusion of the contract, the incentive expense will be
measured and paid. In this article1 describes an idea about the impact of Contract Incentives and
Penalties. The study’s outcomes contain willpower that the customer setting individual long and
short term goals for the retailer can avoid safeties associated with under and over incentivizing
the retailer. According to this journal 1, the reader must be acknowledged that penalties can be
active in provoking satisfactory inspiration in retailers. Incentives must be allocated with the
goals of project management.
Project procurement management is the conception of connections with outside retailers
and dealers for the products and facilities needed to finish a project. This procedure is included
of some stage like introducing and scheduling, choosing, contract writing, observing, and
concluding and finishing. In this study, 1 delivers project procurement which determines the
maximum mutual advantages of project management. The scholars 1 of this journal collect other
researcher’s view and provide some innovative method which describes relations among contract
incentives and project procurement. The report reader can identify that Contractual settlements
typically can be considered in one of two categories, static price or budget reimbursable, and
hold output language, schedule, and budget expectations.
1 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.

2JOURNAL SUMMARY
They apply the financial incentives to the worker’s wish, which is to maximize revenues
by delivering a prospect for the vendor. This article also states that the incentives can be offered
for many of aims but are most often making accessible for early project finish, meeting or
exceeding quality. They apply the contractual fines as a technique to punish a failure to fulfil the
buyer’s least expectations as clear by the agreement. In this research paper, the writers will
define some project features or situations favorable to incentives and penalties within
agreements.
In this article 2 the scholars are describing different incentive contracts such as Fixed
Price, Performance Incentive, Reimbursable Contract and Safety Incentive. Reimbursable
Contract is the one type of contract where the contractor and customer work together to reduce
actual budgets. As the worker can exploit their revenue margin by distributing the paybacks of
reduced project charge, and the client is inspired to reduce the entire cost paid out. The
performance incentive contract is built on the suppliers’ performance estimation by the customer.
They apply it for projects where the act is of pronounced position to the consumer.
This research2 states that incentives are found valuable for projects that have described
scopes that will not be expected to modify. This report describes the NASA project where
particular necessities that must be met to achieve roughly are not favorable to contract incentives
or penalties. The report reader received the researcher conducts Qualitative interview which
supported the present literature.
The scholars3 are describing another different researcher standpoint, and every researcher
is delivering a different perspective. Some researcher stays that discovering penalties are applied
2 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.

3JOURNAL SUMMARY
more often than incentives to inspire the supplier to be practical, and as an outcome will raise
productivity to fulfil the project goals. Someone also states that applying incentives is an
alternative technique to inspire the selected to deliver their resources or facilities under cost and
on-time.
This research paper3 also generates some vital outcomes and this state that penalties
drove compulsory performance or depress objectionable behavior. This research statement
specifies that further research is required to recognize fundamental mechanisms and features that
will provide themselves more willingly to either incentives or disincentives in changeable fields.
This research method can simplify on-going observing of the retailer. It also can deliver reliable
positive support to the seller for displaying performances from which the customer profits.
3 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.