The agency compensates the contractor for actual costs, based on open-book accounts and records, plus a fee. In addition, an incentive structure, similar to that described below , is establish to motivate the contractor too design and construct the project within budget.
Design bonus. If the contractor designs the project within the project budget, as indicated by comparing the forecast total project cost to the project budget, the contractor is paid a design bonus. If the forecast costs are greater than the project budget, the contractor does not receive a bonus, but likewise does not buffer any reduction in payment. If the agency elects to proceed with the project, the contractor still has the opportunity to earn incentives during the construction phaseof the project .
Construction bonus. During the construction phase, the constructor is paid actual construction costs plus a percent fee. If, at the end of construction, the total of actual costs plus the contractor's fee is less than the estimated cost(intitial target price adjusted for any additional compensation paid out during design and construction), the contractor is paid a share of the savings, as calculated using a formula set out : in the contract. Similarly, the contractor would pay a share of any cost overruns.