Evil HR Lady has an intriguing post featuring the story of a performance related bonus awarded by no less than the California Department of Transportation.
The story, featured in today's New York Times, tells of how the highway construction company owned by C. C. Myers, earned a handsome bonus for completing repairs to an interstate highway ramp in record time.
The state estimated that repairs to the 165-foot-long ramp between Interstates 80 and 580 would take 50 days and cost $5.2 million. For every day short of the June 26 deadline, it promised a $200,000 bonus, not to exceed a total of $5 million. The highest bid came in at $6.4 million. Mr. Myers's company, C. C. Myers Inc., won with the lowest bid - $867,075 - and completed the project in 17 days, winning the full $5 million.
"This ain't no $800,000 project," Mr. Myers said in an interview, adding that he hoped to realize a $2.5 million profit.
On the surface, this story seems describe a win-win scenario. Being who I am and having seen the fabled "unintended consequences" of performance bonuses rear their ugly heads a few times, however, I lean a bit toward skepticism. Particularly since the bonus appears to be rather one-dimensional in its exclusive focus on completion timeframe. Apparently others share this thought, including the head of the Massachusetts Department of Transportation who is quoted in the article as saying, "When government excessively priorities its schedule, you can end up accepting quality below that which should have been insisted upon."
The article goes on to mention other instances of incentives in highway construction in states like Oklahoma and Utah.
Nevertheless, I applaud the effort and intent, and note that local residents (who, according to the article, "are used to growing old waiting for new roads") seem pleased with the results.
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