Financial incentives, expensive problems, and slaying deadlines

Sent by Jonathan Stark on August 1st, 2016

At 3:42 am on Sunday, April 29, 2007, a tank truck carrying 8,600 gallons of gasoline overturned on a large freeway interchange in San Francisco. The intense heat from the subsequent fuel spill and fire weakened the steel structure of the roadway above, collapsing it onto the lower connector. 

Immediately after the accident, the California Department of Transportation (Caltrans) estimated that it would take months to rebuild and cost at least $10 million. 

C. C. Myers, Inc. (a contractor with a proven track record of rebuilding damaged freeways) submitted a winning bid of $876,075 to repair the damage. 

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 connector re-opened. C. C. Myers beat the deadline by over a month and earned a $5 million bonus for early completion. The entire reconstruction project was completed only 26 days after the original accident.

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Yours, 

—J

P.S. For the record, I recognize that I’m stretching the analogy a bit - an emergency highway reconstruction project isn’t the same thing as a software project. Still, there’s a lot to learn here. If you’re not sure how to apply these lessons to your biz, check out https://expensiveproblem.com

P.P.S. Hat tip to my colleague David Trejo for sharing the highway collapse story (btw, no one was injured except the driver of the gas truck who suffered only second degree burns on his hands)

 


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