Incentives can be monetary or nonmonetary. They should be positive, but include remedies, as appropriate, when performance targets or objectives are missed.
Creating an incentive strategy is much the same as crafting an acquisition strategy. There is no single, perfect, "one size fits all" approach; instead, the incentive structure should be geared to the acquisition, the characteristics of the marketplace, and the objectives the government seeks to achieve. While cost incentives are tied to a degree to contract-type decisions, there are other cost and noncost incentives for the integrated project team to consider, such as--
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- Contract length considerations (options and award term)
- Strategic supplier alliances
- Performance-based payments
- Performance incentive bonus
- Schedule incentives
- Past performance evaluation
- Agency "supplier of the year" award programs
- Competitive considerations
- Nonperformance remedies
- Value engineering change provisions
- Letters of commendation
Remember that performance incentives are negotiable.
Developing an incentive strategy is a "study unto itself," and there are some excellent guides on the subject. See Step 5 Additional Information.
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