Br chner, J (1994) Precontractual investigation and risk aversion. Engineering, Construction and Architectural Management, 1(2), pp. 91-101. ISSN 0969-9988
Abstract
This paper presents an analytical framework for determining efficient levels and durations of precontractual investigation. Economic efficiency in the allocation of investigation tasks between client and tenderer is shown to depend on how closely related the technologies of investigation and construction are. Moreover, risk aversion and the interest rate affect the efficient allocation. The framework is also used as a basis for an investment analysis of the balance between client's investigation efforts and expected claims in the future. Finally, the framework is used to show how the optimal length of the investigation period can be derived from the expected cash f low associated with a project over its total life cycle, from inception to demolition. Results indicate the economic potential of tailoring risk sharing in construction procurement, according to the type of construction project and the attitudes to risk among client and contractors.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction contract; construction process; contract claim; investigation; risk allocation |
| Index terms: | construction project, construction process, interest rate, analytical framework, efficiency, investment analysis, life cycle, investigation, construction contract, construction procurement, contract claim, risk allocation, duration |
| Subjects: | building construction, project controls, payment, financial analysis, performance management, financial risk, production management, economic analysis, contractual arrangements, data analysis and analytics, contract type, data collection methods, value management |
| Topics: | Quality Management, Time Control, Contract Administration, Site Management, Research Practice, Project Management, Cost Management, Business Strategy, 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