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Aljassmi, H, Han, S and Davis, S (2014) Project Pathogens Network: New Approach to Analyzing Construction-Defects-Generation Mechanisms. Journal of Construction Engineering and Management, 140(01).

Casanovas, M d M, Armengou, J and Ramos, G (2014) Occupational Risk Index for Assessment of Risk in Construction Work by Activity. Journal of Construction Engineering and Management, 140(01).

Chang, C (2014) Principal-Agent Model of Risk Allocation in Construction Contracts and Its Critique. Journal of Construction Engineering and Management, 140(01).

Type: Journal Article
Keywords: Construction management; Contracts; Risk management; Models; Procurement; Incentives; Principal-agent theory; Contract design; Risk sharing; Contracting;
ISBN/ISSN: 0733-9364
URL: https://doi.org/10.1061/(ASCE)CO.1943-7862.0000779
Abstract:
Incentives are widely used in construction procurement to motivate the contractor to make cost-reduction efforts. How to choose the right incentive intensity is a critical decision in construction procurement. In this regard, the principal-agent theory has been highly influential in theory and practice alike. However, this research argues that this theoretical model may lead to a biased decision. To demonstrate this point, this research draws on its modeling technique to analyze a standard pain-gain sharing arrangement in construction contracts, finding that taking no account of contract breakup hazards will result in underuse of incentives. When the outturn cost also depends on the contractor’s effort, high-powered incentives can better tap into the contractor’s efficiency improvement potential. The additional profit resulting from efficiency savings can serve as a buffer for downside cost shocks with the effect of reducing the likelihood of contract breakup. This benefit will make it desirable to use incentives more intensively than what is suggested by the principal-agent theory.

Choi, S, Kim, D Y, Han, S H and Kwak, Y H (2014) Conceptual Cost-Prediction Model for Public Road Planning via Rough Set Theory and Case-Based Reasoning. Journal of Construction Engineering and Management, 140(01).

González, P, González, V, Molenaar, K and Orozco, F (2014) Analysis of Causes of Delay and Time Performance in Construction Projects. Journal of Construction Engineering and Management, 140(01).

Laryea, S and Lubbock, A (2014) Tender Pricing Environment of Subcontractors in the United Kingdom. Journal of Construction Engineering and Management, 140(01).

Ling, F Y Y, Ke, Y, Kumaraswamy, M M and Wang, S (2014) Key Relational Contracting Practices Affecting Performance of Public Construction Projects in China. Journal of Construction Engineering and Management, 140(01).

Narbaev, T and De Marco, A (2014) Combination of Growth Model and Earned Schedule to Forecast Project Cost at Completion. Journal of Construction Engineering and Management, 140(01).

Ning, Y and Ling, F Y Y (2014) Boosting Public Construction Project Outcomes through Relational Transactions. Journal of Construction Engineering and Management, 140(01).

Rosenfeld, Y (2014) Root-Cause Analysis of Construction-Cost Overruns. Journal of Construction Engineering and Management, 140(01).

Syal, M, Duah, D, Samuel, S, Mazor, M, Mo, Y and Cyr, T (2014) Information Framework for Intelligent Decision Support System for Home Energy Retrofits. Journal of Construction Engineering and Management, 140(01).

Zhang, S, Du, C, Sa, W, Wang, C and Wang, G (2014) Bayesian-Based Hybrid Simulation Approach to Project Completion Forecasting for Underground Construction. Journal of Construction Engineering and Management, 140(01).