Do contractors have less incentive on completing the project on time in a lump sum contract?

Yes.  Once they are paid in full then they will start work on other jobs they have not been paid for yet and it will take hours on the phone and yelling to get the job done.

Example:  My basement stairs were not finished properly because I paid the contractor the final $200.00 before the railing/ stair treads and shelving were installed, just because I didn't want to write two checks.

End of story: it wasn't worth the time or $200.00 to sue the guy when I could just do it myself.

I also had another contractor that left the finishing work undone because he wanted me to mail him the check and I asked him to come finish the work and I'd pay him cash.  In this instance, I used the final payment to pay another company to finish.

Yes*,

No. A properly written contract Has Penalties for run over.

(*If it is with the Government.)