What does bonus-penalty clause mean?

bonus-penalty clause meaning in Law Dictionary

bonus provided for doing a project without price overruns. A penalty is charged inside quantity of any overcharges. The carrot and stick approach keeps tasks on spending plan and schedule.

bonus-penalty clause meaning in Business Dictionary

Provision in a contract which provides a plus for prompt completion without expense overruns, and recommends an equal quantity as punishment for any violation. It's a 'carrot and stick' method of keeping a project within budget and routine.