Toward an Equity-Based Analysis of Construction Incentivization

Abstract

Construction incentivization (CI) is a collective term that covers the range of incentive schemes that are commonly used in construction projects. Typically, either a carrot or a stick is used as the motivator for the contracting parties to commit to the attainment of certain quantitative outcome targets in regard to costs, scheduling, quality, and safety terms. The working of most CI is thus based on extrinsic motivation. It is proposed that CIs can also engender intrinsic motivation that is more enduring for performance enhancement. This study advocates that the use of CI can be extended beyond the conventional use for project performance improvement. Restoring fairness perception and bridging the equity gap (EG) are also necessary for CI planning. In this study, the equity gap in construction contracting means the disparities and asymmetry between contractual parties in terms of information, risks, power, and expected return. This study advocates that the equity gap is a minefield of opportunism, a source of dispute, and a barrier against collaboration. Thus, addressing the equity gap would provide intrinsic motivation for project performance. This study pioneers the use of CI to bridge the equity gap in construction contracting. A conceptual framework is proposed based on equity theory to analyze the functions of CI at bridging EGs and enhancing project performance. Using the data collected from 142 senior project professionals and partial least-squares structural equation modeling (PLS-SEM) analysis, the validity of the conceptual framework is statistically supported. Equitable contracting has long been recognized as one of the pillars of collaborative working. Moreover, one-sided contracts are commonly used. Prospect theory suggests that the perception of unfairness induces opportunism practices. This study addresses a practical issue of enabling the ex post alleviation of an equity gap created ex ante. It is proposed that CI can be used as a flexible tool to address the equity gap and thereby raise the intrinsic motivation to perform.