Lingard, H; Hughes, W P and Chinyio, E (1998) The impact of contractor selection method on transaction costs: a review. Journal of Construction Procurement, 4(2), pp. 89-102. ISSN 1358-9180
Abstract
The basic premise of transaction-cost theory is that the decision to outsource, rather than to undertake work in-house, is determined by the relative costs incurred in each of these forms of economic organization. In construction the "make or buy" decision invariably leads to a contract. Reducing the costs of entering into a contractual relationship (transaction costs) raises the value of production and is therefore desirable. Commonly applied methods of contractor selection may not minimise the costs of contracting. Research evidence suggests that although competitive tendering typically results in the lowest bidder winning the contract this may not represent the lowest project cost after completion. Multi-parameter and quantitative models for contractor selection have been developed to identify the best (or least risky) among bidders. A major area in which research is still needed is in investigating the impact of different methods of contractor selection on the costs of entering into a contract and the decision to outsource.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bid evaluation, contractor selection, pre-qualification, transaction costs |
| Index terms: | project cost, competitive tendering, transaction cost, contractual relationship, evidence, bid evaluation, contractor selection, bidder, pre-qualification |
| Subjects: | economics, tendering, financial analysis, evaluation and assessment methods, contractual relationship, bidding |
| Topics: | Cost Management, Research Practice, Contract Administration, 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