One best practice is to include _____ incentives in DB contracts.

One best practice is to include _____ incentives in DB contracts.

• A. Explicit
• B. Implicit
• C. Shared Savings
• D. Risk

Answer: (A)

Explicit incentives are best because they turn goals into clearly defined, measurable rewards in the contract. When targets, how they’re measured, payout amounts, and timing are spelled out, everyone knows exactly what counts as success and how rewards will be earned. This clarity reduces ambiguity, aligns incentives with cost, schedule, and quality objectives, and provides an objective basis for evaluating performance. Implicit incentives lack specificity and can lead to disputes, while risk is something to allocate and manage—not a direct incentive mechanism. Even shared savings should be defined explicitly in the contract so the calculation and thresholds are clear.

Explicit incentives are best because they turn goals into clearly defined, measurable rewards in the contract. When targets, how they’re measured, payout amounts, and timing are spelled out, everyone knows exactly what counts as success and how rewards will be earned. This clarity reduces ambiguity, aligns incentives with cost, schedule, and quality objectives, and provides an objective basis for evaluating performance. Implicit incentives lack specificity and can lead to disputes, while risk is something to allocate and manage—not a direct incentive mechanism. Even shared savings should be defined explicitly in the contract so the calculation and thresholds are clear.