Which fee structure adjusts payment based on performance criteria after project completion?

The incentive fee structure is designed to adjust payment based on the achievement of certain performance criteria after the project's completion. This approach aligns the interests of both the client and the contractor by rewarding performance that exceeds the agreed-upon standards or goals, such as completing the work ahead of schedule, under budget, or achieving specific quality metrics.

The incentive aspect encourages contractors to optimize their efforts and resources throughout the project, promoting efficiency and fostering innovation. For example, if a contractor finishes a project early or minimizes costs while maintaining quality, they may receive an additional payment or bonus as an incentive, which is defined upfront in the contract.

This structure is distinct from other fee types, such as flat fees, which charge a single fixed price for the entire project regardless of performance, or retainer fees, which provide a consistent payment to retain services without performance-based adjustments. Cost-plus fees involve paying for actual costs incurred plus a predetermined profit margin but do not primarily reward performance outcomes.