10.5  The role of strategic performance measurement and incentives

The Construction Playbook recognises that portfolios and longer-term contracting 'will give the industry the certainty required and make it commercially viable for suppliers to invest in innovative new technologies and MMC'. Powerful incentives can be agreed at a strategic level under a framework alliance or term alliance and can be linked to performance of successive projects or tasks. The strongest incentive for team members is likely to be the prospect of earning additional work through:

■  The award of additional projects under a framework alliance contract

■  The issue of additional orders under a term alliance contract

■  The extension of the duration, or the expansion of the scope, of a framework alliance contract or a term alliance contract.

ESI using Supply Chain Collaboration under a framework alliance or term alliance can be linked to rewards that optimise the motivation for all parties to think long-term and act collectively where:

■  Contractors, consultants, subcontractors and suppliers are incentivised by the prospect of a continued pipeline of work

■  Clients can expect and measure continuous improvement

■  Alliance members can capture lessons learned and pass them on from project to project

■ Joint commitments to new processes are replicated and can become standard business practices.

A framework alliance contract or term alliance contract should include the success measures and targets that determine the award of work and should state who evaluates the alliance members' performance and capacity for these purposes. For example, FAC-1 and TAC-1 provide for incentives which include not only additional payments such as shared savings but also adjustment to the amounts of work awarded and extension of the agreed scope and duration of the alliance.