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Comment by hamandcheese | Hacker News Reader

> BART gets to withhold the last 5 percent payment for the $2.5 billion fleet until both sets of cars hit their maintenance targets

Is it just me or does 5% not seem like nearly a large enough percent? If I only had to hit 20% of my expected performance in exchange for 95% of my pay... I would have a lot more hobbies.

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You have to remember that of the $2.5 billion, almost all of that was spent on materials and labour building the new trains. 5% of the total cost as a performance guarantee will be a very significant, or perhaps even total part of the profit the supplier expects to make on these trains.

Most of these large capital contracts leave very little money for profit upfront. That comes from long term maintenance. If they are the lowest bidder they are probably losing money even at 95% payout.

Perhaps, but it sounds like they are set to make a killing on maintenance.

While true, once you reach a certain point, that's all water under the bridge, and the only question that remains is how motivating it is to pursue that last 5%.

I’m not sure about civil projects. I’m mildly familiar with commercial construction projects. Those have milestones and due dates built in. And if those are missed the GC doesn’t get paid until they are met. If dates are missed they can incur penalties. This is done to ensure the GC doesn’t pull resources off to another project.

I guess it would all depend on the rules or how the contract is written. Certainly taking care to have the right incentives in place is a good idea, though I'm not sure it's always practiced.

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