What type of incentive should owners include in their design-build contracts as a best practice?

When considering the inclusion of incentives in design-build contracts, the use of explicit incentives is a best practice that fosters a clear understanding between the owner and the design-builder regarding desired outcomes. Explicit incentives are clearly defined within the contract, providing measurable goals and rewards for achieving specific performance metrics. This clarity is essential because it aligns the interests of both parties.

By establishing explicit incentives, owners can encourage the design-builder to deliver quality work while adhering to timelines and budgets. This contract element facilitates collaboration and innovation, as the design-builder is motivated to find cost-effective solutions that meet or exceed contractual expectations.

In contrast, while implicit incentives may float in without clear definitions, they can lead to misunderstandings or misaligned goals, making them less effective. Shared savings incentives tie rewards to cost efficiencies but may not be suitable for every project due to the complexities involved in determining cost savings. Contingency incentives usually apply in scenarios involving risk management, which may not be universally applicable across all design-build contracts. Thus, relying on explicit incentives ensures that all parties have a mutual understanding of the performance expectations and the rewards, fostering a successful partnership.