Collaboration through gain-and-pain-share mechanism

Abstract

This research aims to identify gain-and-pain-sharing methods to foster a collaborative environment to create win-win situations and create mutual objectives. To do so, gain-and-pain-sharing methods that can positively influence a collaborative environment are explored. This study is restricted to the Dutch construction sector because it is for Dutch implementation. Second, the research scope includes projects with high complexity because otherwise, gain-and-pain-sharing do not have effects, and most problems arise due to complexity. Lastly, the research focuses on the client side, since the client chooses the type of contract and criteria. The objective of the research is to provide clients with insight into the gain-and-pain-sharing possibilities and practical implementation steps to implement a gain-and-pain-sharing mechanism to incentivise collaboration. In the literature, different definitions of gain-and-pain sharing were identified and combined into the following definition: ‘Gain-and-pain sharing is defined as an agreement that allows the parties in a construction project to share profits or cost savings and to share losses due to errors or cost increases. Mutual benefits are achieved through gain sharing. Benefits could, for example, also be a reward for one’s delivered work, a bonus or recognition, and losses are the risks’. Based on this definition, the following gain-and-pain-sharing concepts were identified: -Bonus-malus; -Sharing of new created benefits; -Risk pot; -Target cost. The different concepts have different effects and different reasons for use as gain-and-pain sharing mechanisms. The way to deploy the mechanism depends on the choice based on the vision and strategy that the client has for the project. These two elements in turn depend on the company and project objectives, project specifications, experience with collaboration concepts, risk aversion, market conditions and one of the most important conditions, the scope certainty. It can be concluded that the gain-and-pain-sharing mechanism is deployed by different concepts for different purposes to incentivise collaboration and create mutual objectives. This coordination for the implementation of the mechanism is custom-made for each project based on a number of steps. The step-by-step plan that supports the implementation of the gain-and-pain-sharing mechanism. The case studies demonstrated that such a mechanism has been successful in those cases and is an added value for collaboration and the realisation of common goals.