State departments of transportation (DOTs) are tasked with overseeing the expenditure of public funds to produce a product meeting specifications at the lowest cost by a qualified contractor. They use incentives as a tool to raise the quality level of the work above the minimum. Many state DOTs include pay factors as part of their construction materials quality assurance program. However, there is concern about the adequacy of pay factors as an incentive. There remains concern that pay factors are not incentivizing quality sufficiently to achieve the desired condition and performance of assets that met or exceeded the construction quality specifications. As a result, many state DOTs have adopted disincentives to poor performance with respect to quality assurance.

State DOTs need contractors to be profitable so that they can continue to construct the needed infrastructure. Rightsizing pay factors calls for balancing two opposing positions to provide the best return to the public. While state DOTs seek the best quality project at a given cost or price, contractors are motivated by profit in which a certain quantity and quality of resources are assigned to achieve a certain quality outcome. 

The purpose of this research is to develop a guide and tool to assist state DOTs to establish effective pay factors to be applied during construction that will incentivize quality construction and improve the lifecycle performance of the asset.