How do contract types and incentives matter to project performance?

•How different contract types and contractual incentives matter to project performance remains unclear.•We hypothesized they might indirectly affect project performance through the realized collaboration.•The PLS-SEM analyses suggest empirical support for the hypotheses.•No differences in project performance can be directly attributed to contract types and incentives.•The real game changer lies on how a contract is played out into actual collaborative behavior.

How collaborative contracts and contractual incentives might influence project performance remains equivocal. We hypothesized that their effects on project performance are mediated by owner–contractor collaboration, measured in terms of relational attitudes (relational norms and senior management commitment) and teamworking quality (inter-team collaborative processes). Using PLS-SEM, we analyzed a sample of 113 capital projects. The results suggest that through better relational attitudes and teamworking quality, projects with a partnering/alliance contract are likely to perform better than those with lump-sum and reimbursable contracts. Likewise, the projects with incentive contracts are likely to perform better than those without incentives through better relational attitudes and teamworking quality. There were no differences in project performance directly associated with different contract types and contractual incentives. Taken together, a partnering/alliance contract and incentive contracts do not necessarily result directly into better project performance but through relational attitudes and how they play out into actual teamworking behavior.