An IPD-based incentive mechanism to eliminate change orders in construction projects in China

Abstract

As in other countries where DBB (Design-Bid-Build) is used, one of the major problems in construction projects in China is cost overrun, and its main cause is change orders that occur during the construction phase. As a new mode of project delivery, IPD (Integrated Project Delivery) is considered capable of solving major problems including change orders in construction projects by involving contractors in the design phase to optimize design results and by introducing an incentive mechanism through which cost savings are shared among participants. However, the existing incentive mechanisms are difficult to adapt in China because contractors rely on change orders to obtain profit from construction projects. This research aims to establish an IPD-based incentive mechanism to eliminate change orders in construction projects in China. First, the final account statement of a completed construction project was analyzed to obtain the economic law of change orders. Second, based on this economic law, this research established an incentive mechanism composed of a compensation method for contractors, another compensation method for designers and a method for calculating their parameters. Finally, 21 completed construction projects and a new construction project were used to validate the incentive mechanism. This research provides not only an applicable IPD-based incentive mechanism to eliminate change orders in construction projects in China but also provides an approach for applying IPD in any other country where DBB is used and where the existing IPD incentive mechanisms cannot be directly applied.

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