Hosseinian, S M; Andalib, M and Carmichael, D G (2022) Appropriate types of payments in construction contracts based on agency theory parameters. Journal of Construction Engineering and Management, 148(1): 04021187, ISSN 0733-9364
Abstract
Choosing between different compensation strategies is one of the major concerns of owners in construction contracts. This paper is aimed at examining the choice between behavior-based and outcome-based payment types through the views of practitioners from construction projects with variables defined by agency theory. The study adopts the analysis of data through the Delphi technique supported by factor analysis and multinomial logistic regressions to test the paper hypotheses. The paper shows that in projects with a high level of contractor risk aversion, outcome uncertainty, task programmability, and information systems, cost-plus-fee payment is more attractive than lump-sum payment. Conversely, the paper shows that in projects with a high level of goal conflict and outcome measurability, lump-sum payment is more attractive than cost-plus-fee payment. The results demonstrate the practical usefulness of agency theory in the arena of construction management. The contribution of this paper lies in providing insights into choosing an appropriate contract payment type based on agency theory parameters.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | agency theory; contract; payment |
| Index terms: | practitioner, Delphi technique, multinomial, construction project, information system, agency, payment type, strategy, construction contract, factor analysis, cost-plus, compensation, logistic regression, owner |
| Subjects: | management, production management, sociology, information systems, statistical analysis, contract type, data collection methods, dispute resolution, practitioner, economic analysis, contractual arrangements |
| Topics: | Legal Issues, Digital Applications, Business Strategy, Research Practice, Project Management, Roles and Professions, Stakeholder Management, Procurement |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here