Complexity in the Evaluation of Contract Types Employed for the Construction of Highway Projects

The procurement of public works is by definition complex in that its success depends on many varied interrelated parties (client, designer, licensing authorities, contractors, construction supervisor, users). In addition, the construction process is always technologically complex as it is comprised of numerous tasks and objectives. The choice of the most appropriate contract type (CT) regarding the method of contractor compensation is one of the most essential and complex decisions. This choice is based on the decision maker's knowledge, experience and intuition. Following an extensive literature review to determine both the seven CT's employed in the construction industry and the nine selection criteria (SC) most commonly considered when choosing between CT's, a questionnaire survey was carried out among 79 highway construction professionals who were asked to rate each CT against each selection criterion. This study presents the frequencies of the CTs scores against each criterion but the main aim of the research is to decompose the complex selection patterns relating to the participants’ choices. A correlation analysis carried out established associations among the respondents’ profiles and their resulting ratings of each CT against each SC. The results indicate that the participants’ origin, current position profile, years and type of professional experience and finally years of direct and indirect experience with each CT influence their perception of the appropriateness of each CT against each criterion and the respective scores awarded to each CT.

[1]  Wei Tong Chen,et al.  A method to determine minimum contract bids for incentive highway projects , 2003 .

[2]  T. Berends Cost plus incentive fee contracting - experiences and structuring , 2000 .

[3]  Ludovic-Alexandre Vidal,et al.  Measuring project complexity using the Analytic Hierarchy Process , 2011 .

[4]  Xianhai Meng,et al.  The impact of incentive mechanisms on project performance , 2012 .

[5]  Sidhartha S. Padhi,et al.  Centralized bid evaluation for awarding of construction projects – A case of India government , 2010 .

[6]  Wei Tong Chen,et al.  Setting maximum incentive for Incentive/Disincentive contracts for highway projects , 2004 .

[7]  Sergios Lambropoulos The use of time and cost utility for construction contract award under European Union Legislation , 2007 .

[8]  K. Manley,et al.  Motivation toward financial incentive goals on construction projects , 2011 .

[9]  David Baccarini,et al.  The concept of project complexity—a review , 1996 .

[10]  Georgios N. Aretoulis,et al.  Selection Criteria Used for the Choice of Contract Type for Major Highway Construction Projects , 2012 .

[11]  Robert E. McCormick,et al.  ECONOMIC PRINCIPLES OF CONTRACTOR COMPENSATION , 1997 .

[12]  Will Hughes,et al.  Risk under performance‐based contracting in the UK construction sector , 2007 .

[13]  P. Lam,et al.  An empirical survey of the motives and benefits of adopting guaranteed maximum price and target cost contracts in construction , 2011 .

[14]  Ralph W. Plummer,et al.  Incentive/disincentive guidelines for highway construction contracts , 1995 .

[15]  Wei-Chih Wang,et al.  Unit-price-based model for evaluating competitive bids , 2006 .

[16]  J in 't Veld,et al.  Keeping large projects under control: the importance of contract type selection , 1989 .

[17]  Petter Osmundsen,et al.  Sharing of endogenous risk in construction , 2005 .

[18]  Colin Duffield,et al.  Incentives in the Chinese construction industry , 2008 .

[19]  John F. Y. Yeung,et al.  Risk ranking and analysis in target cost contracts: Empirical evidence from the construction industry , 2011 .

[20]  Anand Paul,et al.  Simple probability models for project contracting , 2005, Eur. J. Oper. Res..

[21]  Andy P. Field,et al.  Discovering Statistics Using SPSS , 2000 .

[22]  Said Boukendour,et al.  The guaranteed maximum price contract as call option , 2001 .

[23]  J. Turner,et al.  Erim Report Series Research in Management Project Contract Management and a Theory of Organization Bibliographic Data and Classifications , 2022 .

[24]  J. G. Perry,et al.  How practitioners set share fractions in target cost contracts , 2002 .

[25]  Denise Bower,et al.  INCENTIVE MECHANISMS FOR PROJECT SUCCESS , 2002 .

[26]  Choosing contractor payment terms , 1994 .