Comment by beej71

4 years ago

Yeah--improper incentives cause all kinds of problems.

Once there was an enormous tanker truck fire under an overpass in the Bay Area on a major freeway. A section of the overpass collapsed.

The state asked for bids, but the contract had an interesting feature: substantial sums would be paid for each calendar day the work was completed ahead of schedule.

One contractor underbid everyone by a substantial margin, and got to work 24-7.

Wikipedia:

A contractor with a proven track record of rebuilding damaged freeways (most notably the Santa Monica Freeway after the 1994 Northridge earthquake) well ahead of schedule, C. C. Myers, Inc., submitted a winning bid of $876,075 to repair the damage to the I-580 connector. The bid was estimated to cover only one-third of the cost of the work, but the firm counted on making up the shortfall with an incentive of $200,000 per day if the work was completed before June 27, 2007.

On the evening of Thursday, May 24, the I-580 connector re-opened, just before the busy Memorial Day weekend. The deadline to finish the project was beaten by over a month, with the contractor earning the $5 million bonus for early completion. The entire reconstruction project was completed only 26 days after the original accident.

The state offered money for early completion, and got an early completion. I don't necessary see anything wrong with that as long as quality standards were met, and the final cost wasn't outrageous.

  • Yeah, I should have clarified that I thought this was an example of incentives being correct.