Badenfelt, U (2008) The selection of sharing ratios in target cost contracts. Engineering, Construction and Architectural Management, 15(1), pp. 54-65. ISSN 0969-9988
Abstract
Purpose - The purpose of this paper is to provide a broader understanding of target cost arrangements by empirical study of the choice of sharing ratios from the perspective of both clients and contractors. Design/methodology/ approach - Eight Swedish construction clients and eight contractors were interviewed. These interviews were followed by a case study of a large construction project with a target cost contract. The data for the case study were gathered through interviews, contract documents and non-participant observation. The impact of perceived risks on the selection process is discussed in terms of agency theory. Findings - Key factors influencing the selection of a sharing ratio included perceptions of fairness, knowledge of target cost contracts, and long-term relationships. The perceived level of risk is affected by the perceived performance risk and the perceived relational risk. Consequently, attention should be paid to the impact of long-term relationships on the design and outcome of target cost contracts since such relationships reduce the risks associated with asymmetric information, such as relational risk. Originality/value - This study identifies factors that previous research has ignored in relation to the negotiation of target cost contracts.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction industry; contracts; risk management; Sweden; target costs |
| Index terms: | construction industry, negotiation, fairness, empirical study, risk management, construction client, Sweden, target cost, case study, agency, methodology, contract document, interview, observation, large construction project |
| Subjects: | economics, research methods, organizational theory, Geography, contractual condition, conflict resolution, sociology, industry analysis, leadership, risk assessment, data collection methods, practitioner |
| Topics: | Contract Administration, Organizational Design, Cost Management, Research Practice, Geographical Context, Project Management, Risk Management, Stakeholder Management, Roles and Professions |
| Descriptive scope: | 5 PCTEA |
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