Objectives  The "cost plus 5% profit" pricing method has been adopted for ship equipment scheduled repair for many years, but it does not reflect quality and schedule of repair project, so it is unable to motivate contractors to cost-effectively improve their repair work.

  Methods  This paper chooses cost, schedule and quality as the incentive factors, and develops an incentive fee method which distinguishes between the fixed and incentive parts of the cost, with a schedule-based incentive fee to encourage the elimination of delays by Party A and a quality-based incentive fee to encourage the construction of a quality evaluation index based on the features of ship equipment scheduled repair.

  Results  The example analyses show that the contractors can thus earn reasonable profits from contracts adopting this method, Among the examples,projects with better overall performance can break the 5% profit margin limit.

  Conclusions   The method put forward in this paper can effectively motivate contractors to control their costs, improve their quality and accelerate their schedule. This is of great practical significance for perfecting the incentive fee mechanism and promoting effective ship equipment scheduled repair.