Beg, Z A (2015) Complexity, contract design and incentive design in the construction management industry. DBA thesis, Harvard University, USA.
Abstract
In this paper I examine how one construction management company uses contract design and incentive design to respond to aspects of task complexity and relationship complexity present in its construction projects. In terms of contract design, I find that the company is unable to increase its use of cost-plus pricing when faced with technically complex projects. Instead, the company uses increased pre-execution design modification and price markups when technically complex projects are contracted with fixed-pricing. Further, I find that design modification is only margin-improving when used in projects that are both technically complex and fixed-price and that price markups are only margin-improving when projects are fixed-price. In terms of incentive design, I find that the company provides more qualitative feedback to employees and quantitatively rates employees with less centrality bias (i. e. more dispersed ratings) when employees work on fixed-price projects. Further, when employees work on fixed-price projects, they are granted greater average financial rewards, their financial rewards are relatively more based on input-behaviors (i. e. less based on output-results), and their bonuses, raises and promotions appear to be awarded with more managerial discretion (i. e. are less systematic. )
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Campbell, D |
| Uncontrolled Keywords: | bias; complexity; cost-plus; feedback; pricing |
| Index terms: | design modification, bias, complexity, complex project, cost-plus, pricing, promotion, construction project |
| Subjects: | contractual arrangements, economic analysis, management, strategic project management, production management, design changes, probability and distributions, systems engineering |
| Topics: | Research Practice, Business Strategy, Engineering Principles, Design Practice, Project Management, Human Resources, Procurement |
| Descriptive scope: | 3 PCA |
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