Bridging the Gap with Incentives

An old saying goes, “Money talks, nobody walks.” In the case of the St. Anthony Falls Bridge rebuild project in Minneapolis, the saying could go something like, “Incentives drive performance, everybody soon resumes driving.”

The Minnesota bridge project case is a powerful example showing that a collaborative, innovative—and incentivized!—approach to solving difficult problems will most often result in huge success.

By way of a little background, the St. Anthony Falls Bridge in Minneapolis, the major Interstate I-35 artery across the Mississippi River, collapsed on August 1, 2007, killing 13 people. At the time, it was expected that a bridge rebuilding project of this nature would take three years to complete. When Gov. Tim Pawlenty said he wanted the bridge rebuilt within 17 months many experts laughed, asserting that this was impossible.

As it turned out, the Governor was slightly off – it took less than 14 months to rebuild it; the 10-lane 504-foot bridge opened to traffic in September, 2008. The Minnesota Department of Transportation had set December 24, 2008 as the completion date, which was considered unrealistic at the time. It took competitive bids for the reconstruction of the bridge, and offered incentives for on-time and early completion. The team of Flatiron Constructors and Manson Construction, using a design by Figg Engineering, submitted the winning bid. The contract stipulated an incentive payment of $7 million if the bridge opened on time, with earlier opening bonuses of $2 million for every 10 days before December 24th if the bridge opened early. But if the bridge opened late, the construction team would lose $200,000 per day.

Cars were rolling across the rebuilt bridge on September 15, 2008. It was a most impressive infrastructure construction feat. By using a high degree of innovation and teamwork in construction and project management techniques, the construction team cut more than three months off the December 24 deadline, thereby earning healthy performance incentive bonuses that were expected to total $27 million. The project has received numerous awards and has been lauded as “representing the best in innovative management, accountability and timeliness.”

Jim Groton, a long-time construction lawyer and student of the construction industry, commented: “This is just another fine example of how smart people can design an incentive system for a contract that is designed to exactly match the needs and goals of a project. On the St. Anthony Falls project, by agreeing in advance what the goals of the project were, and then setting the standards by which performance and superior performance would be rewarded, the parties to the contract achieved project success and a win-win solution for everyone involved, including especially the thousands of Twin City commuters who drive over that bridge every day.”

The construction companies created an innovative, collaborative framework that enabled them to exercise the contract’s performance  incentives, but it wasn’t easy: They often worked 12-hour shifts and drilled three shafts at a time instead of one in subzero temperatures.

Whether they knew it or not they implemented a Vested Outsourcing approach to the project, especially by optimizing pricing model incentives (Rule 4) for the best cost and service tradeoff.

Whether they knew it or not the bridge constructors implemented a Vested Outsourcing approach to the project, especially by optimizing pricing model incentives (Rule 4) for the best cost and service tradeoff.

On a much smaller scale their effort was similar to the Rocky Flats closure and environmental cleanup project, a ground-breaking early instance of performance-based collaboration.

Incentives go hand-in-hand with innovation and collaboration.

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