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example, because ofthe high price offuel, car designers may be asked by a government
to design a car that is fuel efficient without sacrificing speed and durability within a
specified period of time. If the requirements are met, the manufacturer may be
rewarded with special tax concessions by the government. Ifthere is an improvement of
the specifications, the company will get more rebates. If there are definite
specifications, "target goals" can be established. If the target goals are not met,
provision can be made for little or no incentives. The incentives are designed according
to the purchase and the performance characteristics desired by the buyer.
Delivery Incentive
This is an incentive paid when a delivery of the ordered item is made on or
before the agreed upon date.
Cost Incentive
This incentive is paid where part ofthe agreement is that ifa project is finished
at less than the target cost an additional fee or profit will be paid. Fuller reminds us that
one or all of these incentives can be part of the agreement. Also there can be a clause
that less profit will be paid ifthe performance level is below contract expectations.
WHAT To CONSIDER WHEN USING INCENTIVES
The number and structure of incentives is important. If there is more than one
incentive in an agreement emphasis must be clearly put on the most important ofthem,
otherwise the negotiator may concentrate on the less important one. Or if certain
criteria are not met, then it should be clear that no incentives would be paid.
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