Reversal of bargaining power in construction projects: meaning, existence and implications

Chang, Chi Cheng; Ive, Graham J.

doi:10.1080/01446190601164113

Cited by 66 publications

(55 citation statements)

References 12 publications

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“…Since a contract cannot cover all possible contingencies,= may ask for additional payment due to inflation or other cost overruns, may threaten to deliberately file for bankruptcy, may fall behind schedule, and may either refuse to speed up or may demand extra payment due to the higher costs of overtime, and may pick out design errors and charge unreasonable rates for correcting them (Chang and Ive 2007). The uncertainty of the contractor`s behavior can be measured by the following indicators.…”

Section: Uncertainty Of the Contractor Owner`s Behaviormentioning

confidence: 99%

Transaction costs in construction projects under uncertainty

Guo

Zhang

2016

Kybernetes

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Purpose – The purpose of this paper is to find how those uncertainty factors influence transaction costs generated and to identify ways to minimize the transaction costs borne by the construction owner. Design/methodology/approach – The literature indicates that there is no consensus on a standard definition of transaction costs in the construction industry. A detailed literature review of research work on transaction costs in construction is conducted in order to identify the determinants of transaction costs in construction projects. A structural equation model is tested on data collected by means of a survey administered to construction owners. Findings – The findings indicate that the transaction costs borne by the owner can be minimized if the owner minimizes the uncertainties inherent in the construction project by making sure the engineering design is as complete as possible before bids are sought from contractors; harmonious relationships between project participants; fair risk allocation; have experience in similar type projects; and contractor selection practices that routinely detect irregular behavior. Research limitations/implications – The data used in this research are primarily based on the experiences of public owners and the markets in which they operate; a larger representation of private owners could make the conclusions more general. Another limitation of the study is that it relies on a survey of opinions rather than actual records of costs and other hard data. Practical implications – No empirical study has ever been conducted of transaction-related issues in the construction industry because of the lack of a common understanding of transaction cost. This paper provides the groundwork for such a study. Originality/value – This paper attempts to reconcile the many determinants of transaction costs in construction projects under uncertainty considered by different researchers in a multitude of research studies.

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Section: Uncertainty Of the Contractor Owner`s Behaviormentioning

confidence: 99%

Transaction costs in construction projects under uncertainty

Guo

Zhang

2016

Kybernetes

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“…Increasing this kind asset specificity will lead the contract between the general contractor and the subcontractors to a quasifirm arrangement. Through systematic analysis of project assets specificity, Chang and Graham (2007) suggest that the terms of the installment payment for work done, damage clause and the terms of the award for early completion are all responses to the hazard of the opportunism bring by the temporary and human capital asset specificity. Obviously these safeguard terms improve the level of the contract completeness.…”

Section: The Attributes and The Selection Of Construction Contractualmentioning

confidence: 99%

A Review of Contractual Governance Selection and Its Impact on Project Performance

Luo¹,

Peng²

2013

Iccrem 2013

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The definitions of the concepts about project governance are vaguely and difference. The research conclusions are also inconsistent. These differences are not conducive to the development of project contractual governance. Following the analytical framework of "transactional attributes-governance mechanism-economic efficiency" of TCE (Transaction Cost Economics), this paper discusses the existing literatures from three perspectives. The first one is the meaning and measures of contract forms. The second is that how the asset specificity, uncertainty and complexity effect the selection of the contract form. The third is that whether the contract selection can improve the project performance or save the transaction cost of the project based on TCE. In the last part of this paper, the implications for the future research are put forwarded.

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“…The first is the post-contractual reversal of bargaining power (Chang and Ive, 2007b). Suppliers of construction services typically deploy general purpose skills and equipment on projects; as a result, they are easily switched to other uses should there be a dispute with the owner and investor in the project.…”

Section: Implications Of the Information Processing Perspective For Rmentioning

confidence: 99%

Project organizing as a problem in information

Winch¹

2015

Construction Management and Economics

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One of the most influential perspectives in business and management has been the Carnegie School, represented by such luminaries as James March, Hebert Simon, Oliver Williamson and Zur Shapira. The perspective underpins much of contemporary organization theory and organizational economics. Yet there have only been limited attempts to apply it to the domain of construction economics and management. An important exception to this statement is the application of Williamson's transaction cost economics to the governance of inter-firm relations in construction, but the opportunity is presently being missed for a more thorough-going application. The aim, therefore, is to suggest what such an application might look like and why it might be useful in stimulating new lines of research enquiry. The principal tenets of the Carnegie School are examined, as well as the central role of uncertainty and bounded rationality in those tenets. The contributions to organization theory of the Carnegie School are drawn upon to conceptualize project organizing as a problem in information, and suggest a new perspective on the microfoundations for that theory.

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Reversal of bargaining power in construction projects: meaning, existence and implications

Cited by 66 publications

References 12 publications

Transaction costs in construction projects under uncertainty

Transaction costs in construction projects under uncertainty

A Review of Contractual Governance Selection and Its Impact on Project Performance

Project organizing as a problem in information

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