Financial-Based Incentive Plan to Reduce

Construction Waste
Amirreza Mahpour 1 and Mohammad Mehdi Mortaheb, Ph.D. 2

Abstract: Construction materials wastage has always been a problem in construction projects. This study was conducted to address a long-
standing debate in the area of construction waste reduction: financially incentivizing or penalizing during construction. After a question-
naire survey, it was found that construction industry experts prefer financial-based incentive plans to levying. Accordingly, a financial-based
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incentive plan was developed based on guidelines elicited from comments of the respondents, content analysis, and plugging gaps of
previous incentive-based plans. In this plan, the stakeholders are incentivized to save money by reducing quantities of purchased materials,
wasted materials, landfilled wastes, and illegally dumped wastes. The saving is to be shared among the stakeholders. To investigate the
plan’s usefulness, the plan was applied to a real construction project through which its serviceability was confirmed. The results of this
study uncovered that incentivizing provides better results compared to penalizing in construction waste reduction. The main explanation for
this observation is that incentivizing promotes ethics, is more efficient, and is more compatible with sustainable development goals.
In addition, viability and on-site waste reduction via promoting professional ethics and motivating stakeholders are determined to be
key factors of a successful financial-based incentive plan. In summary, this paper contributes to the construction engineering and man-
agement, built environment, and sustainable construction global communities by comparing incentive-based and penalty-based construction
waste reduction schemes; providing evidence of preference for incentivizing by enumerating its advantages over penalizing; and finally,
introducing professional ethics and personal motivation as two important factors in significant construction waste reduction as well as
sustainable building materials management. This is accomplished by basing the design of a reward plan on motivating project stakeholders
and developers that is focused on detailed net benefit calculation being applicable to construction projects regardless of their type, geo-
graphic location, and kind of construction waste they generate. DOI: 10.1061/(ASCE)CO.1943-7862.0001461. © 2018 American Society
of Civil Engineers.
Author keywords: Construction materials; Construction waste; Financial incentive; Construction projects.

Introduction
The growing worldwide generation of waste is a salient problem
that requires management strategies focusing on environmental
sustainability. The construction industry is among the main contrib-
utors to this problem since it produces large amounts of construc-
tion and demolition waste. Construction and demolition waste
includes abandoned substances produced due to construction,
renovation, and demolition of civil structures (Wu et al. 2017).
Demolition waste is a proportion of construction and demolition
waste generated in demolition projects (Chen and Lu 2017).
Construction waste, which is the target of this study, refers to sur-
plus materials or damaged products engendered in the course of
construction work or used in interim on-site activities (Lu et al.
2015). Across the globe, the construction industry generates
35% of total solid waste (Llatas 2011) and 10–30% of landfilled
waste (Begum et al. 2009). In Spain, the United Kingdom,
Australia, Japan, Italy, the Netherlands, and Finland, the generation
1 managers have poor knowledge of the paramount importance
Construction Engineering and Management Group, Dept. of Civil
Engineering, Sharif Univ. of Technology, 11365-11155 Tehran, Iran
(corresponding author). E-mail: mahpour_amirreza@alum.sharif.edu
2
Assistant Professor, Dept. of Civil Engineering, Sharif Univ. of
Technology, 11365-11155 Tehran, Iran. E-mail: mortaheb@sharif.edu
Note. This manuscript was submitted on July 8, 2017; approved on
October 13, 2017; published online on March 15, 2018. Discussion per-
iod open until August 15, 2018; separate discussions must be submitted
for individual papers. This paper is part of the Journal of Construction
Engineering and Management, © ASCE, ISSN 0733-9364.
of construction waste is respectively 70, 50, 44, 36, 30, 26,
and 14% of the total waste generated (Poon et al. 2013). It is
documented that in landfilled wastes the ratio of construction
waste over demolition waste is 1∶2 (Mortaheb and Mahpour
2016a).
One critical issue caused by construction waste pertains to envi-
ronmental problems. For example, construction waste is a culprit in
global warming, asthma attacks, premature deaths, and reduction of
lung function in children (Marzouk and Azab 2014). Illegal
construction waste dumping by roadsides and open spaces has aes-
thetic ramifications. Construction waste exacerbates construction
projects’ constraints, namely resource scarcity (Ma et al. 2014;
Cha et al. 2009). Improper construction waste management causes
problems for developing (Lockrey et al. 2016; Wu et al. 2017) and
developed countries (Chen and Lu 2017). However, contractors
tend to manage cost, time, and quality rather than materials waste
(Shen and Tam 2002) wherever there is lack of inventive for/official
compulsion on stakeholders to reduce waste (Mortaheb and
Mahpour 2016b). Additionally, in developing countries, urban
of construction waste management (Mortaheb and Mahpour
2016b).
Due to the problems caused by construction waste, the need for
appropriate measures to reduce construction waste generation has
been highlighted over the past few decades. To this end, several
regulations have been devised globally. For instance, in Hong Kong
the following regulations have been put in place in order to manage
construction waste: waste disposal ordinance, green manager

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 scheme, waste reduction framework, practical note on use of re-
cycled aggregate, commissioning a pilot recycling plant to supply
recycled aggregate, circulars of waste management, and public
landfill levy scheme (Tam and Tam 2008), which are of a limiting
nature. In addition to limiting regulations, combined systems of
bonus and penalty as well as incentive-based techniques have been
successfully implemented (Tam and Tam 2008; Chen et al. 2002).
The required incentive can be provided by means of upgrading
certificates or designing financial-based incentive plans (Tam
and Tam 2008).
The research communities have worked on designing incentives
for reducing construction waste since decades ago. Hendriks
(1994) declared that issuing a certificate of using recycled aggre-
gates promotes utilizing them, especially when there are tight and
strict quality assessment criteria. Chen et al. (2002) applied a bar-
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code system to implement a group-based reward program to min-
imize construction waste generation. They also introduced an
integrated system to avoid jerrybuilding, reworking, and resched-
uling. Total money saved/wasted was the total price of materials
saved/wasted calculated based on quantities of requested materials
and returned materials to storage that were measured by a barcode
system. Furthermore, estimated quantity of normal wastage was
carefully pinpointed according to past experiences and projects’
circumstances. To test this program, two identical 34-story residen-
tial complexes in Hong Kong were studied over a 3-month period
by teams A and B. Team A did not adopt the program while Team B
did. As a corollary, Team A wasted US$ 95,890.73, whereas team B
saved US$ 90,428.83. This savings totaled US$ 186,319.56 for
Team B while the team spent US$ 19,231 on barcode system. Thus,
Team B saved US$ 71,198 net. In December 2005, Hong Kong
Government devised the Construction Waste Disposal Charging
Scheme to finance incentive plans to promote reusing and recycling
and to reduce construction waste generation (Poon et al. 2013).
They prepared this program due to the fact that noninert wastes,
wastes with unstable chemical properties (Lu et al. 2015), were
landfilled in Hong Kong and existing landfills were supposed to
be filled within a few years. Tam and Tam (2008) interviewed
20 contractors and announced the following as existing reward-
based methods in Hong Kong construction projects: (1) dividing
cost savings due to reducing quantities of purchased materials;
(2) imposing penalties (i.e., withholding payments of subcontrac-
tors not meeting required environmental standards); (3) cash
rewards or certificates for teams/individuals with the best environ-
mental performance; and (4) certifying contractors with the best
safety performance. Afterward, they designed a three-step incentive
scheme based on materials waste and purchase reduction. This re-
duction was accomplished by harnessing employees’ awareness
and appreciating their efforts to reduce avoidable construction
waste. The resultant cost savings were divided among them so that
the higher the waste reduction, the higher was the incentive fund-
ing. To verify the system, it was implemented in a local hotel
development project during three 3-month assessment periods. As
a result, wasted and purchased material quantities decreased by 23
and 11%, respectively.
Yuan (2013) investigated critical measures of effective construc-
tion waste management in China through literature review, semi-
structured interviews, a questionnaire survey, and statistical
analysis through which they identified 16 critical management
measures. After data analysis, “establishing systems of rewards
and punishments to encourage material saving” was ranked third.
Udawatta et al. (2015) adopted qualitative and quantitative research
approaches to determine means of developing waste management
practices in nonresidential buildings. For this purpose, 16 semi-
structured interviews were conducted to collect qualitative data
© ASCE 04018029-2
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about waste management solutions. Then, a questionnaire survey
was carried out to gather quantitative data about improving waste
management practices. After analyzing the data, “proposing finan-
cial incentive” was ranked thirteenth.
All in all, the reviewed studies neither compared incentivizing
and penalizing nor provided a detailed net benefit calculation for
their suggested methods. These missing subjects are investigated in
the present paper.
Determining and Filling Gaps of the Previous
Incentive Plans
Although the reviewed incentive-based plans work well to reduce
avoidable wastes, there are some unnoticed gaps. This paper iden-
tifies and fills the gaps to the best possible extent. Previous studies
do not consider illegal dumping at open spaces [solved by Eqs. (6)
and (14)], profit on selling recyclable wastes [solved by Eqs. (4)
and (10)] labors’ training cost [solved by introducing CT in
Eq. (19)], system’s openness to abuse [solved by Eq. (17)], quantity
of wasted materials during transportation, and quantity of reused
materials in other construction sites [solved by Eq. (5)]. Further-
more, in the ladder approach proposed by Tam and Tam (2008)
labors would gain 50% of reward at most. In the new plan, labors
can receive more rewards [Eqs. (21) and (22)] because they are in a
closer touch with materials than other stakeholders are and they
affect waste reduction directly. This result also complies with
the comment of a respondent, which will be explained in the next
sections.
Overview of the Research Process and
Methodology
This paper attempts to address a long-standing debate in the
area of construction waste reduction, that is whether to finan-
cially incentivize or penalize the construction firms. After a ques-
tionnaire survey, it was concluded that construction industry
experts prefer financial-based incentive plans to levying. Thus,
a financial-based incentive plan was developed based on guide-
lines elicited from comments of the respondents, content analysis,
and filling gaps of former incentive-based plans. To investigate
the effectiveness of the plan, it was applied to a real construction
project.
Questionnaire Survey
To decide which of incentivizing or penalizing is preferable to
produce less construction waste, a questionnaire survey was con-
ducted. With this purpose in mind, 17 statements comparing
financial-based incentive plans with penalty systems were formu-
lated on a Likert scale. Statement Nos. 1–4, 9–11, and 14–17 were
suggested by the experts who the authors consulted prior to design-
ing the questionnaire. These experts had at least 20 years of expe-
rience in construction industry. Other items were deduced from the
following reviewed papers:
• Item Nos. 5, 7, and 12 from the paper of Tam and Tam
(2008);
• Item Nos. 6 and 13 from the paper of Chen et al. (2002);
and
• Item No. 8 from the paper of Gangolells et al. (2014).
In this scale, Numbers 1 and 5 represented the least and most
agreement, respectively. The statements compared four aspects of
financial-based incentive plans with those of penalty systems.
J. Constr. Eng. Manage.
 These aspects were as follows: (1) professional ethics, (2) need for
legislations, (3) managerial acts, and (4) sustainability. Among
the questions, one question was open-ended, allowing respondents
to provide comments (Fig. 3). A pilot test was performed to assess
coherency, comprehensibility, and suitability of the questionnaire
as well as to calculate number of required questionnaires that were
to be filled. Four well-known construction companies founded 29,
20, 13, and 11 years ago, which have been actively involved in
nearly all types of domestic and international construction projects,
were contacted. Once they gave their consent, questionnaires were
delivered to 15 of their employees to conduct the pilot survey. The
respondents were asked to answer the questions and comment on
the questionnaire’s structure. No major revision was suggested by
these experts. Minor revisions were made after receiving all com-
ments. The response rate for the pilot survey was 100%. Based on
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Statistical Analysis of the Findings from the Survey
Table 1 lists the responses, their mean, and their standard deviation
for pilot and final survey. Table 2 lists the characteristics of the
respondents.
The arithmetic mean is a good statistic to interpret results of a
Likert scale questionnaire (Harpe 2015), which are called ordinal
data (Wadgave and Khairnar 2016; Bernstein 2005). In a Likert
scale questionnaire using 5 scale points with score 5 reflecting
the most agreement, which is a common design of Likert scale
questionnaires (Wadgave and Khairnar 2016; Hartley 2013), it
will be logical to conclude that the respondents are in favor of a
statement if the corresponding μ ≥ 4 (Harpe 2015). Therefore, con-
sidering the response distribution for Statement Nos. 1–4, 10, 11,
and 14–17 implies that experts prefer incentivizing to penalizing

Eq. (1) and choosing an error margin of 10% and confidence in-
terval of 90% that resulted in a quantity of 1.28 for a normal
variable (z), and required sample size (n) was 81:

2
 of 81) agreed that promoting professional ethics through incentives
zσ 1.28 × 0.699 2
n¼ ¼ ¼ 81
d 0.10
where σ ¼ 0.699 was the standard deviation of pilot responses
(Table 1) and d ¼ 0.10 was the error margin (Gangolells et al.
2014; Walpole et al. 1998). Considering 15 respondents in the pilot
survey, 66 other respondents were asked to participate in the sur-
vey to complete the data gathering process.
Survey Validity
To check the internal and overall consistency of the statements,
Cronbach’s alpha was calculated. Since α ¼ 0.776 > 0.700,
the favorable consistency of the statements, as well as goodness
of the scale, were approved (Ostad-Ahmad-Ghorabi and Attari
2013).
for construction waste reduction. In this regard, 91.36% of the re-
spondents (74 out of 81) believed that the best way to reduce con-
struction waste is the promotion of professional ethics (Statement
No. 1, μ ¼ 4.321, σ ¼ 0.625); 98.77% of the respondents (80 out
is easier than that through penalties (Statement No. 2, μ ¼ 4.556,
ð1Þ
σ ¼ 0.521); and 93.82% of them (76 out of 81) maintained that
incentivizing generates more motivation in stakeholders to reduce
construction waste than penalizing does (Statement No. 3,
μ ¼ 4.247, σ ¼ 0.556). Even in the case of construction projects
that the contractor has to pay the cost of materials, 86.42% of
the respondents (70 out of 81) believed that incentivizing will
be more effective than penalizing to reduce materials waste (State-
ment No. 4, μ ¼ 4.309, σ ¼ 0.696); 80.25% of the respondents
(65 out of 81) affirmed that for the sake of success, penalizing
needs more monitoring than incentivizing does (Statement No.
10, μ ¼ 4.037, σ ¼ 0.656); 95.06% of the respondents (77 out
of 81) confirmed that if a policy needs monitoring, stakeholders
will try to circumvent it, which eventually reduces the policy’s
efficiency (Statement No. 11, μ ¼ 4.210, σ ¼ 0.514); 96.30% of
the respondents (78 out of 81) stated that incentive-based plans
work better than penalizing ones to reduce national demand for
building materials (Statement No. 14, μ ¼ 4.407, σ ¼ 0.562)

Table 1. Responses’ Distribution, Mean, and Standard Deviation

Scaled responses
Pilot results Overall results
Strongly Strongly (questionnaires (questionnaires
disagree Disagree Neutral Agree agree 1–15) 1–81)
Statement Mean Standard Mean Standard
number Total Percent Total Percent Total Percent Total Percent Total Percent (μ) deviation (μ) deviation
1 0 0.00 0 0.00 7 8.64 41 50.62 33 40.74 4.400 0.490 4.321 0.625
2 0 0.00 0 0.00 1 1.23 34 41.98 46 56.79 4.600 0.490 4.556 0.521
3 0 0.00 0 0.00 5 6.17 51 62.96 25 30.86 4.067 0.442 4.247 0.556
4 0 0.00 0 0.00 11 13.58 34 41.98 36 44.44 4.133 0.618 4.309 0.696
5 11 13.58 34 41.98 36 44.44 0 0.00 0 0.00 2.667 0.699 2.309 0.696
6 0 0.00 50 61.73 30 37.04 1 1.23 0 0.00 2.267 0.573 2.395 0.513
7 0 0.00 0 0.00 17 20.99 47 58.02 17 20.99 4.200 0.653 4.000 0.648
8 3 3.70 8 9.88 51 62.96 19 23.46 0 0.00 2.867 0.618 3.062 0.691
9 0 0.00 0 0.00 12 14.81 48 59.26 21 25.93 4.133 0.618 4.111 0.629
10 0 0.00 0 0.00 16 19.75 46 56.79 19 23.46 4.200 0.653 4.037 0.656
11 0 0.00 0 0.00 4 4.94 56 69.14 21 25.93 4.267 0.442 4.210 0.514
12 0 0.00 0 0.00 13 16.05 51 62.96 17 20.99 4.067 0.573 4.049 0.607
13 0 0.00 0 0.00 15 18.52 48 59.26 18 22.22 4.200 0.653 4.037 0.637
14 0 0.00 0 0.00 3 3.70 42 51.85 36 44.45 4.533 0.499 4.407 0.562
15 0 0.00 0 0.00 3 3.70 35 43.21 43 53.09 4.533 0.499 4.494 0.569
16 0 0.00 0 0.00 12 14.81 43 53.09 26 32.10 4.200 0.653 4.173 0.663
17 0 0.00 0 0.00 10 12.35 49 60.49 22 27.16 4.200 0.542 4.148 0.611

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 Table 2. Characteristics of the Respondents Comments of the Respondents
Sum
Number of Relative To get more insight from the experts, one question of the question-
Property Subproperty respondents percent Total Percent naire was open-ended allowing respondents to write their own
Gender Male 59 72.84 81 100 ideas. The comments were analyzed and the helpful ones were
Female 22 27.16 identified. One project manager made the following comment:
Age 0–25 3 3.70 81 100
26–35 48 59.26 Financial-based incentive plan will be espoused by project
36–45 17 20.99 managers but the objective of construction waste reduction
46–55 9 11.11 should not mar other targets; i.e., high execution quality.
≥56 4 4.94 Financial-based incentive plan must be economically viable
Work 0–5 26 32.10 81 100 and cost savings should exceed costs [Eq. (7)]. In addition,
experience 6–10 24 29.63 waste thresholds should be defined in the contract prior to
(years) 11–15 12 14.81
project initiation or in the course of construction. Further-
16–20 8 9.88
21–25 4 4.94 more, for the sake of success, increasing stakeholders’ aware-
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≥26 7 8.64 ness of construction waste reduction is a significant issue

Field of Civil and environmental 62 76.54 81 100 that motivates them ethically (i.e., through financial-based in-
study engineering centive plan). Besides, the temptation to use materials less
Industrial engineering 8 9.88 than required quantity to gain more cost saving/reward saps
Architecture 8 9.88 project quality. Hence, assessment mechanisms (i.e., penaliz-
Surveying and geospatial 3 3.70 ing stakeholders in case of abuse) should be foreseen
engineering [Eq. (17)].
Degree Associate’s 2 2.48 81 100
B.Sc. 28 34.56 Moreover, several respondents contended that solutions to re-
M.Sc. 44 54.32 duce wastes in origins should be identified from project initiation
Ph.D. 7 8.64 to closure [Eq. (16)]. These points are considered when developing
the new plan.

and incentivizing is more environmentally friendly than penalizing Content Analysis

(Statement No. 15, μ ¼ 4.494, σ ¼ 0.569); 85.19% of the respond-
ents (69 out of 81) asserted that widespread application of
incentive-based plans to construction projects will save more natu-
ral resources than penalizing will (Statement No. 16, μ ¼ 4.173,
σ ¼ 0.663); and 87.65% of the respondents (71 out of 81) declared
that incentivizing is more preferred than penalizing in order to pro-
mote utilization of biodegradable materials (Statement No. 17,
μ ¼ 4.148, σ ¼ 0.611).
The respondents also approved the suggested guidelines for
construction waste reduction. In this regard, 79.01% of the re-
spondents agreed that the distribution of the incentive/penalty
should be proportional to the extent to which a stakeholder plays
a role in materials saving/wastage (Statement No. 7, μ ¼ 4.000,
σ ¼ 0.648); 81.48% of respondents (66 out of 81) expressed that
increasing stakeholders’ shares of financial reward/penalty is a per-
tinent tool for construction waste reduction (Statement No. 13,
μ ¼ 4.037, σ ¼ 0.637); 85.19% of them (69 out of 81) highlighted
the importance of setting waste thresholds for materials in construc-
tion contracts (Statement No. 9, μ ¼ 4.111, σ ¼ 0.629); and
finally, 83.95% of respondents (68 out of 81) stated that prior to
implementing an incentive-based plan, stakeholders should be
trained sufficiently.
Another statistic to analyze ordinal data is the mode (Walpole
et al. 1998). Modes of the responses to Statement Nos. 1, 2, 3, 4, 7,
9, 10, 11, 13, 14, 15, 16, and 17 are 4, 5, 4, 5, 4, 4, 4, 4, 4, 4, 5, 4,
and 4, respectively. This means that the majority of the respondents
agreed that incentivizing was superior.
With respect to the facts that (1) a Cronbach’s alpha greater than
0.700 is an indicator of a reliable survey (Ostad-Ahmad-Ghorabi
and Attari 2013; Gliem and Gliem 2003), (2) in the designed ques-
tionnaire scores greater than 3 reflect respondent agreement, (3) μ
is greater than 4 for the statements discussed above, and (4) modes
of the responses to the mentioned statements are either 4 or 5, it is
inferred that the experts prioritized financial-based incentive plans
over penalty systems.
The following are elicited from reviewed literature to design a more
serviceable financial-based incentive plan:
1. Promotion of reuse and recycle: This factor causes waste reduc-
tion. The following solutions are derived from reviewed litera-
ture to increase reusing and recycling rates in construction
projects:
• Providing waste storage containers: Reusable/recyclable
wastes must be collected in these containers (Chen et al.
2002). Regarding landfills’ limited capacity, recycling/
reusing is an essential part of a proper construction waste
management plan (Doan and Chinda 2016).
• Hiring site waste coordinator: This stakeholder should
(1) provide waste storage containers; (2) do on-site waste
collecting and sorting; (3) ensure that the site in neat and free
from reusable/recyclable wastes; (4) prevent mixed waste
generation; (5) collect wastes separately to alleviate reusing
and recycling; (6) invoice costs of waste management includ-
ing containers, wages, etc. [Gangolells et al. 2014; see
Eq. (9)]; and (7) set waste thresholds in case they are not
set in the contract.
2. Quality control and managerial tools: Task quality control is in-
cluded in the reward scheme as follows:
• Tasks qualities should be controlled/assessed according to
client’s policy.
• All stakeholders, labors, and other human resources should
be questioned if the quality of consumed materials’ quanti-
ties is less than that of billed quantities (Chen et al. 2002).
• The contractor will be fined in case of jerrybuilding
[Eq. (17)].
• The reward should be divided among stakeholders.
A ladder approach can be used to persuade labors.
Labors are more in close touch with materials than other
stakeholders and so motivating them to generate less

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 Table 3. Construction Waste Origins and Reduction Solutions
Osmani et al. (2008)
Origin Solutions suggested Stakeholders
number Origin description by the authors (L: Labor, O: Others)
1 Contractual Minimization of avoidable errors in contract documents Client (O)
Beginning of construction after contract documents completion if Contractor (O)
possible
Determining thresholds for materials wastage in contract documents Project manager (O)
2 Design Designing as simple as possible Designer (O)
Minimization of design and detailing complexity
Minimization of avoidable errors in design and construction details
Clear specification
Enhancing coordination and communication, i.e., avoiding slow
drawing revision and distribution
3 Procurement Ordering carefully and in compliance with specification Material purchaser (L)
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4 Transportation
5 On-site management
and planning
6 Material storage
7 Material handling
8 Site operation
9 Residual
10 Other (weather,
vandalism, theft)
Transporting slowly in case of damageable materials Delivery vehicle drivers (L)
Devising smooth paths for delivery vehicles to access construction sites Superintendent (L)
Protection during unloading Unloading labors (L)
Unload by means of efficient methods
Proper supervision Superintendent (L)
On-site material control
Planning for required materials
Documenting information on types and sizes of materials and
components to be used
Appropriate storage Warehouse keeper (L)
Proper storing methods
Storing materials close to point of application
Careful transportation of materials from storage to point of application Workers (L)
Handling materials adequately
Promotion of reuse or recycle Workers (L)
Being careful not to use wrong materials Project manager (O)
Avoiding use of malfunctioned equipment
Employing well-trained and certified workers
Avoiding overuse of materials Workers (L)
Collecting waste from cutting uneconomical shapes and off-cuts from Project manager (O)
cutting materials to length to reuse them or to sell them for recycling
— —

Table 4. Terminology of the Quantities of the Materials Developing the Financial-Based Incentive Plan
Description Notation
Following the findings from the questionnaire survey as well as
Quantity of material purchased MP guidelines of an efficient financial-based incentive plan extracted
Quantity of material not wasted M NW from comments of the respondents, content analysis, and previous
Quantity of material wasted MW
studies a financial-based incentive plan is developed. In a viable
Quantity of material used MU
Quantity of material unused M UnU
financial-based incentive plan, savings surpass costs (Tam and
Quantity of material reused MReu Tam 2008; Chen et al. 2002). Hence, it is necessary to identify
Quantity of material recycled M Rec the key inputs of the model including savings and costs. In order
Quantity of material reused at the same project MReu;SP to facilitate this, different quantities are identified as shown in
Quantity of material reused at the other projects MReu;OP Table 4. The relations among these quantities, which can be quan-
of the construction company tified according to Eqs. (2)–(6), are presented in Fig. 1
Quantity of material dumped at landfills ML
Quantity of material illegally dumped M ID M P ¼ M NW þ M W ð2Þ

M NW ¼ MU þ M UnU ð3Þ
construction waste is prudent [Tam and Tam 2008; see
Eqs. (20)–(23)]. M UnU ¼ M Reu þ M Rec ð4Þ
3. Regardless of all regulations and techniques, successful
construction waste management heavily relies on the coopera- M Reu ¼ M Reu;SP þ M Reu;OP ð5Þ
tion of all the people engaged with construction materials
(Gangolells et al. 2014) who are called stakeholders in this M W ¼ M L þ M ID ð6Þ
paper. Stakeholders are introduced in Table 3 [Eq. (20)].
4. Waste reduction schemes have to cover all waste origins intro- The goal is to persuade the stakeholders shown in Table 3
duced in Table 3 [Osmani et al. 2008; see Eq. (8)]. to reduce wastes in all origins through training and education.

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 where Pricei is the unit price of recyclable waste i and N is the
P
number of recyclable waste types.

Cost Saving due to Reusing Materials (P Reu )

W NW PReu will be calculated based on Eq. (11):

X
O
PReu ¼ M rReu × Pricer ð11Þ
r¼1
ID L U UnU
where Pricer = unit price of reused material r and O = number of
reused material types.

Rec Reu Landfilling Cost (C L )

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CL will be calculated under one of these conditions:

CL is a function of landfilled wastes’ mass that, in this case, will
be computed based on Eq. (12):
Reu, OP Reu, SP
X
M
CL ¼ MassjL × Landfilling Chargej ð12Þ
Fig. 1. Elements of the proposed financial-based incentive plan j¼1

where Landfilling Chargej = waste j landfilling fee (per unit

The builder trains them and informs them that if they reduce the mass); MassL = mass of landfilled waste; and M = number of
waste they will be rewarded. The task of supervising the stakehold- landfilled waste types.
ers is incumbent upon the waste coordinator. Because of waste Otherwise, CL is a function of dump cycle frequency.
reduction, some costs will be saved. However, the plan may cost If wastes are carried to landfills by W types of vehicles (pickup,
some money. The difference will be the net benefit or the reward trucks, etc.), the landfilling cost can be calculated according to
that should be divided among stakeholders: Eq. (13):
X
W
Reward ¼ Total Cost Savings − Total Costs ð7Þ CL ¼ Mj × Landfilling Chargej ð13Þ
j¼1
where positive and negative reward means bonus and penalty, re-
spectively. To calculate the savings and the costs, the required where j = vehicle type; Mj = vehicle j dump cycles number; and
parameters should be computed through Eqs. (8)–(23): Landfilling Chargej = landfilling fee per cycle.

Illegal Dumping Cost (C I D )

Total Quantity of Wasted Material (M W )
If U types of vehicles (pickup, trucks, etc.) are used to dump wastes
M W is the sum of quantities of wasted materials in 10 waste origins
illegally, then ðCID Þ will be calculated according to Eq. (14):
suggested by Osmani et al. (2008) in Table 3:
X
U
X
10 CID ¼ M j × Illegal Dumping Chargej ð14Þ
MW ¼ M Origin
W
Number
ð8Þ j¼1
Origin Number¼1
where Illegal Dumping Chargej = illegal dumping fee and
where M W = wastages during transporting reusable materials to M j = dump cycle number of vehicle type j.
other projects.
Cost of Transporting Reusable Materials to Other
Cost of Hiring Waste Coordinator (C W M ) Projects (C Reu;O P )

If CiWM is the invoiced cost by the waste coordinator for containers, This parameter can be calculated according to Eq. (15):
wages, etc. in the ith period and B is the number of periods, then X
K
CWM will be calculated based on Eq. (9): CReu;OP ¼ Transportation Costq ð15Þ
q¼1
X
B
CWM ¼ CiWM ð9Þ where Transportation Costq = transportation cost of the qth trip
i¼1 and K = total times of transporting reusable materials to other
projects.
Cost Saving due to Selling Recyclable Wastes (P Rec )
PRec will be calculated according to Eq. (10): Cost of Adopting Solutions (C Sol )
X
N The stakeholders may adopt some solutions that are suggested by
PRec ¼ M iRec × Pricei ð10Þ the authors in Table 3 to reduce waste generation in specific waste
i¼1 origins. If these solutions are used for E types of materials and cost

© ASCE 04018029-6 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2018, 144(5): 04018029

 Ci;t
Sol for origin i and material t, CSol can be calculated according to R ¼ ΔPRec − ðCU þ ΔCL þ ΔCReu;OP þ CT þ CSol þ CWM Þ
Eq. (16):
X
T
X
E X
10 þ ðΔM Reu − ΔM P − ΔMW Þi × Pricei ð19Þ
CSol ¼ Ci;t
Sol ð16Þ i¼1
t¼1 i¼1

These solutions are supposed to reduce wasted materials’ Chen et al. (2002) suggested distinguishing labors’ and other
quantities. stakeholders’ share of reward (RL and RO , respectively):

Contractor Fine in Case of Jerrybuilding (C U )
In the case of jerrybuilding, the contractor should be fined
according to Eq. (17). If the quantities used for G material types
are less than the required quantities in Y specific tasks, the contrac-
tor faces a fine of up to the total price of not using the agreed
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R ¼ R L þ RO ð20Þ
R can be divided among stakeholders using a ladder approach.
Following the experts’ suggestions, labors should receive a higher
share because they are in closer contact with materials than other
stakeholders are. Consequently, more incentives for labors will

materials plus the cost of reworks rectifying jerrybuilding, CU . Oth- persuade them more than other stakeholders (i.e., client, contrac-
erwise, no penalty is necessary tors, and designers) to reduce materials waste. This ladder approach
can be designed based on waste reduction ratio ðWRRÞ, which is

X Y X G 
defined as the sum of saved materials’ quantities (ΔM W ) over the
CU ¼ maxf0; ðM U;Required − M U;Used Þg;y × Priceg;y g sum of waste thresholds (M tW (%)) multiplied by purchased quan-
y¼1 g¼1
tities (MP ) ratio:
þ Reworks Cost ð17Þ PT
ΔMtW
WRR ¼ PT t¼1 t × 100 ð21Þ
t¼1 M W ð%Þ × M P
t

Stakeholders Training Cost (C T )

where M tW (%) is a waste threshold of material t mentioned in
The cost of stakeholder training in implementing financial-based
contract/set by the waste coordinator. The bigger the WRR, the
incentive plan should be considered. Whoever is in charge of train-
greater the waste reduction and the higher should be the reward
ing is supposed to bill the client for this service. After identifying
share. Hence, the ladder approach below is suggested:
the costs and the savings of the model, the net benefit can be
calculated according to ΔðXÞ: 8
> 0.3R 0 < WRR < 25
<
ΔðXÞ ¼ X 2 − X 1 ð18Þ RL ¼ 0.5R 25 ≤ WRR < 60 ð22Þ
>
:
where subscript 1 indicates Case 1, to which no incentive plan is 0.7R 60 ≤ WRR < 100
applied, and subscript 2 indicates Case 2, to which the financial-
based incentive plan is applied. Based on Eq. (7) and identified RO ¼ R − R L ð23Þ
inputs [Eqs. (8)–(17)], the reward amount is calculated according
to Eq. (19), where T is the number of material types used in Labors and other stakeholders are determined in Table 3. The
the project: importance of involving all stakeholders in waste reduction policies

Fig. 2. Procedures of Cases 1 and 2

© ASCE 04018029-7 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2018, 144(5): 04018029

 Table 5. Characteristics of the Studied Project
Subcharacteristic 1 Subcharacteristic 2
Characteristic (if any) (if any) Description
Location — — Ardebil, Iran
Type — — Residential
Number of stories — — 1 parking and 4 stories
Floor area — — 285 m2 (15 × 19 m)
Contract type — — Lump sum
Estimated project duration — — 9 months
Project start date — — 24 November 2015
Assessment start date — — 10 February 2016
Project progress (before the assessment) — — 29%
Dumping charges For construction waste hauled to landfill by Pickup 440,000 Rials per dump
4-wheel trucks 550,000 Rials per dump
6-wheel trucks 770,000 Rials per dump
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10-wheel trucks and so on 880,000 Rials per dump

For illegal dumping — 1,100,000 Rials per dump
Assessment finish date — — 26 May 2016
Assessment duration — — 3.5 months

Table 6. Studied Materials’ Characteristics

Unit market value
Reference Material Unit Bill of quantity Unit price (Rials) for recycling (Rials)
1 Concrete m3 298.52 890,000 0
2 Rebar kg 35,516 14,500 (average) 6,000
3 Brick Block 39,396 3,800 0
4 Tile (grade 2) m2 366.34 90,000 0

Table 7. Obtained Data from the Studied Project for Case 1

Reference Material Unit MP MW ML M ID M NW MU MUnU M Rec M Reu M Reu;SP M Reu;OP
3
1 Concrete m 320.00 21.44 0.00 21.44 298.56 298.56 0.00 0.00 0.00 0.00 0.00
2 Rebar kg 38,000.00 760.00 0.00 760.00 37,240.00 35,530.00 1,710.00 1,710.00 0.00 0.00 0.00
3 Brick Block 42,500 2,125 1,063 1,063 40,375 39,398 978 0 978 293 684
4 Tile (grade 2) m2 400.00 18.00 7.20 10.80 382.00 366.40 15.60 0.00 15.60 0.00 15.60

Table 8. Obtained Data from the Studied Project for Case 2

Reference Material Unit MP MW ML M ID M NW MU M UnU M Rec MReu M Reu;SP M Reu;OP
3
1 Concrete m 310.00 11.47 0.00 11.47 298.53 298.53 0.00 0.00 0.00 0.00 0.00
2 Rebar kg 37,000.00 185.00 0.00 185.00 36,815.00 35,520.00 1,295.00 1,295.00 0.00 0.00 0.00
3 Brick Block 40,500 608 182 425 39,893 39,407 486 0 486 194 292
4 Tile (grade 2) m2 385.00 13.48 2.70 10.78 371.53 366.52 5.01 0.00 5.01 0.00 5.01

Table 9. Materials Cost in Case 1

Material Unit P1Mp P2Mw P3Rec P4Reu CL CID CReu;OP
Concrete m3 284,800,000.00 19,081,600.00 0.00 19,081,600.00 — — —
Rebar kg 551,000,000.00 11,020,000.00 4,560,000.00 0.00 — — —
Brick Block 161,500,000.00 8,075,000.00 0.00 8,075,000.00 — — —
Tile (grade 2) m2 36,000,000.00 1,620,000.00 0.00 1,620,000.00 — — —
Sum 1,033,300,000.00 39,796,600.00 4,560,000.00 28,776,600.00 880,000.00 6,600,000.00 1,033,300.00
Hints — — — — 2 pickups 6 trucks 0.1% of PMp
Note: All costs are in Rials. 1, 2, 3, and 4: Total value of purchased, wasted, recycled and reused materials, respectively.

© ASCE 04018029-8 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2018, 144(5): 04018029

 1,000,000.00
12 man-hour
is highlighted by several scholars (e.g., Zhang et al. 2005). Fig. 2
demonstrates Cases 1 and 2 and the procedure of implementing

—
—
—
—
CT
the proposed model.

15,014,250.00
Illustration by Example

1.5% of PMp
CWM
—
—
—
—
The developed financial-based incentive plan is independent of the
type of construction project. However, to assess the applicability
and effectiveness of the proposed model, it has to be applied to
one actual construction project (Tam and Tam 2008) to obtain

0.00
CSol
quantities of parameters of Eq. (19) for both Case 1 (parameters

—
—
—
—

—
with subscript 1, when the financial-based incentive plan is not
applied to the project) and Case 2 (parameters with subscript 2,

0.00
CU
—
—
—
—

—
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when the financial-based incentive plan is applied to the project).

A form was designed and reviewed by six construction industry
experts to gather the required data for both cases. The form asked

0.1% of PMp
1,000,950.00
the builder to provide builder’s personal information; project in-

CReu;OP
formation; materials information; additional costs such as training,

—
—
—
—
adopting solutions, employing waste coordinator, transporting
reusable material to other projects; and costs of jerrybuilding
and reworks. One question was open-ended, asking the builder

3,300,000.00
for further suggestions. The selected project was a residential

3 Trucks
building project in Ardebil, Iran. In Case 1, similar to the verifi-

CID
—
—
—
—
cation of Tam and Tam (2008), the builder, based on his 32 years
of experience in constructing residential buildings, was asked to
estimate the parameters of Eq. (19) assuming that the proposed
financial-based plan would not be applied. In Case 2, the proposed

440,000.00
1 pickup
financial-based incentive plan was implemented in the project
CL
—
—
—
—
while construction and the quantities of parameters of Eq. (19)
were obtained. The form containing all the inputs of Eq. (19)
was completed and returned on 26 May 2016. Calculations were
done using Microsoft Excel. The characteristics of this project and
0.00
10,208,300.00

2,308,500.00
1,212,750.00
13,729,550.00
the studied materials are shown in Tables 5 and 6, respectively. —
PReu

The gathered data for both cases of the studied project are shown
in Tables 7 and 8. Costs of both cases are calculated according
to collected data and proposed financial-based incentive plan for-
mulation. Tables 9 and 10 illustrate calculations for Cases 1 and 2,
0.00

0.00
0.00
1,110,000.00

1,110,000.00

respectively.
—

The results of the illustrative example and calculations reveal

Table 10. Cost of the Materials and Implementation of the Model in Case 2
PRec

that owing to implemented financial-based incentive plan, the

following points were seen:
• The total cost of purchasing materials (PMp in Tables 9 and 10)
is reduced from 1033.3 million Rials (MR) to 1001 MR
10,208,300.00
2,682,500.00
2,308,500.00
1,212,750.00
16,412,050.00

(a 3.13% reduction, 1 MR ¼ 28.57 US$).

—

• The total value of wasted materials (PMw in Tables 9 and 10)

PMw

is reduced from 39.80 MR to 16.41 MR, suggesting a 58.8%

reduction.
• Cost saving due to recycling materials (PRec in Tables 9
and 10) is reduced from 4.56 MR to 1.11 MR, which is
1,000,950,000.00
275,900,000.00
536,500,000.00
153,900,000.00
34,650,000.00

a reasonable value. The only studied recyclable material

—

was rebar waste, which was reduced after financial-based in-

PMp

centive plan implementation due to excessive purchase order

reduction.
• Similarly, cost saving due to reusing materials (PReu in
Note: All costs are in Rials.

Tables 9 and 10) is reduced from 28.78 MR to 13.73 MR

because of the drop in excessive purchase order of reusable
Block
Unit
3

m2
kg
m

materials.
• The cost of landfilling (CL in Tables 9 and 10) was decreased by
half (from 0.88 MR to 0.44 MR).
Tile (grade 2)

• The cost of illegal dumping (CID in Tables 9 and 10) was

Concrete

decreased by half (from 6.60 MR to 3.30 MR).

Material

Rebar

• According to contractor estimation, the cost of reusing

Brick

Hints
Sum

materials in other projects, CReu;OP , and cost of hiring a waste

© ASCE 04018029-9 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2018, 144(5): 04018029

 coordinator, CWM , to put on-site policies into practice are as
follows:
CReu;OP ≈ 0.1% × Total Cost Of Purchasing Materials
≈ 0.1% × PMP ð24Þ
CWM ≈ 1.5% × Total Cost Of Purchasing Materials
≈ 1.5% × PMP ð25Þ
• Based on Eq. (19) as well as summarized information and
calculations in Tables 5–10, the reward equals 34.81 MR.
Furthermore, according to Eq. (21), WRR equals
PT
ΔM tW
WRR ¼ PT t¼1 × 100
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t¼1 M P × M W ð%Þ
t t
21.44 − 11.47 þ 760 − 185 þ 2125 − 608 þ 18 − 13.48
¼
320 × 6.7% þ 38000 × 2% þ 42500 × 5% þ 400 × 4.5%
¼ 72.03 ð26Þ
With respect to Eq. (22), because 60 < WRR ¼ 72.03 < 100,
then 70 and 30% of the reward will be allocated to labors
and other stakeholders, respectively.
• Since the proposed financial-based incentive plan cut excessive
purchase of reusable and recyclable materials such as rebar and
tile, the cost savings resulting from reusing and recycling
materials in Case 2 are less than Case 1.
• Results of the illustrative example guarantee that the proposed
financial-based incentive plan can be implemented successfully in
construction projects regardless of geographic location because
the design of the model is independent of the locality.
During the interviews, the builder and the waste coordinator
stated that they could feel that less material is purchased and less
waste is produced in comparison with the similar projects they pre-
viously were involved in. In addition to the implemented reward
scheme, the application of the plan engenders a powerful driving
force to focus on waste reduction. Stakeholders are motivated ac-
tively to reuse and recycle various types of construction materials.
Therefore, the assessed project shows some improvement in waste
reduction.
Results
The results of the questionnaire survey indicated that incentivizing
works better than penalizing to reduce construction waste. In this
regard, a number of factors are determined to be effective on the
success of the financial incentive-based plan including viability,
involving as many stakeholders as possible, adopting waste reduc-
tion solutions in waste origins, promoting professional ethics in
construction sites, training stakeholders sufficiently before apply-
ing the reward plan, increasing reuse and recycle rates by hiring a
waste coordinator and assigning predetermined tasks to him/her,
controlling quality through managerial tools, setting waste thresh-
olds, preventing abuses, minimizing reworks, and persuading
stakeholders by distributing net benefits purposefully (i.e., increas-
ing shares proportional to effort of each stakeholder in waste reduc-
tion based on a ladder approach). The illustrative example of this
study revealed that the developed financial-based incentive plan
saves money by reducing quantities of purchased materials, wasted
materials, landfilled wastes, and illegally dumped wastes. Finally,
the proposed financial-based incentive plan can be implemented
successfully in construction projects regardless of geographic
location, because the design of the model is independent of the
locality.
© ASCE 04018029-10
J. Constr. Eng. Manage., 2018, 144(5): 04018029
Conclusion
Construction waste generation poses environmental, social, and
economic problems for nations. To manage materials wastage,
two classes of remedial solutions exist: penalizing and incentiviz-
ing. To decide which one is preferable from the construction indus-
try experts’ point of view, a questionnaire survey was conducted
and it resulted that the latter is more desired. The reasons for this
preference (according to the conducted questionnaire survey) are
given in the following:
1. Incentivizing is a more ethical solution since:
• Promoting professional ethics through incentives is easier.
• Incentivizing generates more motivation in stakeholders to
reduce waste.
2. Incentivizing is easier to manage because:
• Penalizing needs more monitoring than incentivizing does.
• If a policy such as penalizing needs monitoring, stakeholders
will try to circumvent it, which eventually reduces the pol-
icy’s efficiency.
3. Incentivizing is more compatible with sustainable development
goals because:
• Incentive-based plans work better than penalizing ones to
reduce national demand for building materials.
• It is more environment-friendly than penalizing.
• Widespread application of incentive-based plans to construc-
tion projects will save more natural resources than penalizing
will.
• Incentivizing is more preferred than penalizing in order to
promote utilization of biodegradable materials.
Based on these results, subsequent content analysis, and plug-
ging gaps identified in existing incentive-based models, a new and
more detailed financial incentive-based plan was developed in
the present research. To test the efficiency of the plan, it was
implemented in a real construction project, which confirmed its
serviceability.
In summary, this paper contributes to the construction engineer-
ing and management, built environment, and sustainable construc-
tion global communities by comparing incentive-based and
penalty-based construction waste reduction schemes; providing
evidence of preference for incentivizing by enumerating its advan-
tages over penalizing; and finally, introducing professional ethics
and personal motivation as two important factors in significant con-
struction waste reduction as well as sustainable building materials
management. This is accomplished by basing the design of a re-
ward plan on motivating project stakeholders and developers,
which is focused on detailed net benefit calculation being appli-
cable to construction projects regardless of their type, geographic
location, and kind of construction waste they generate.
Research Limitations
The findings of this research are based on conducting a survey cov-
ering 81 samples as well as studying one residential building. Since
construction waste reduction is not a top priority for project man-
agers, surplus costs of construction waste reduction grab more at-
tention and encourage them to overlook its benefits. Therefore,
implementing the suggested plan required support from top man-
agement. In addition, before applying the developed incentive-
based plan, training was required to incentivize the stakeholders.
Furthermore, employing new stakeholder of waste coordinator
made the site more crowded. Finally, in this research, wasted
material during transporting reusable wastes to other projects
has been included in the quantity of wasted material while trans-
porting [waste origin number 4, see Eq. (8) and Table 3].
J. Constr. Eng. Manage.
 Appendix. Construction Waste Reduction Questionnaire
The questionnaire survey, presented in Fig. 3, was conducted to determine whether financial incentive or penalty would reduce construction
waste generation more effectively.
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Fig. 3. Construction waste reduction questionnaire

© ASCE 04018029-11 J. Constr. Eng. Manage.

J. Constr. Eng. Manage., 2018, 144(5): 04018029

 Data Availability Statement
All data generated or analyzed during the study are included
in the published paper. Information about the Journal’s data shar-
ing policy can be found here: http://ascelibrary.org/doi/10.1061
/%28ASCE%29CO.1943-7862.0001263.
Acknowledgments
The authors are grateful to all people who participated in the ques-
tionnaire survey and the illustrative example. They also sincerely
thank the editors and the anonymous reviewers whose comments
and suggestions improved and clarified this paper.
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