Roads contractors eye major bonuses

Highways contractors could pocket windfalls of up to 70% of project cost savings under new bonus schemes set up by the Highways Agency (HA) across its early contractor involvement agreements (ECIs).
Outlining the bonus payments at the HA's ECI seminar last week, Peter Higgins, director of PD Consult, the HA's technical advisor on ECIs, said the HA "wanted contractors to make money".
"This is a good sign for us," he said. "If contractors are making money through these bonus payments we know we are getting high-quality projects, which are being delivered on time and under budget."
Although bonus payments could run into substantial figures for contractors, the HA has set a bonus limit of 2.5% of the HA's total budget for the scheme.
The bonus payments, which will now come into affect across all ECI schemes, fall into three categories. These are:
n Design Share: this allows the contractor to make 25% of forecast savings if it comes under budget in the design phase of an ECI. Windfalls are paid to the contractor in monthly stages once construction starts on site. The share can never be minus as going over budget on the design phase would almost definitely see a scheme scrapped.
n Construction Share: this will allow the contractor to make a 20% gain share of the savings if it comes in under the agreed construction budget for the ECI scheme. This is measured and reimbursed to the contractor after the completion of the design and construction phase and when the full costs are known. However, the HA has set out strict pain percentages that contractors will have to pay if they come in over budget - as high as 50% of the budget if they come in 100% to 110% over the agreed construction budget (see box).
n Final Bonus: Contractors can take an extra 25% share of the savings if the entire scheme comes in under budget based on final out-turn costs. This is reimbursed to the contractor after the completion of construction and when the defect period has expired.