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Incentives are used as a means of improving performance and outcomes, such as customer satisfaction. They do not always involve money and may be focused on continuing opportunities for business, such as long term partnering arrangements.
Procurement should include provision for the use of incentives within clear policy guidelines and frameworks. Contractors can be encouraged to make specific proposals for incentivisation at the bidding stage on the basis of their intimate knowledge of work planning and processes.
It is acceptable to reward contractors where they can bring added value and they can play a big role in achieving quality work and high levels of customer satisfaction, especially where major internal works are being carried out within homes. This does not mean that contractors or suppliers get extra for doing what they are basically contracted to do, but for exceeding these targets - savings in overall budgets should not be seen as incentives to be shared if the scope or standard of work is simply reduced.
Incentives can also involve sharing savings amongst the members of the supply chain, so increasing profits to contractors and suppliers, based on pre-agreed proportions. Alternatively, savings can be used by the client to commission additional work from the partnering team, which will again increase the profitability of the supply chain.
Incentive schemes can also operate negatively by sharing the costs of unforeseen risks or problems which arrise.