Framework for Structuring Procurement Contracts

Lena Borg
Hans Lind

Abstract


The aim of this paper is to propose a new framework for structuring contract types and payment methods. Concerning procurement contracts, the first important new feature of this framework is a stepwise structure with three main steps in the contract design: (1) what will be procured—should the contract only include construction, or should it include both construction and operation/maintenance (2) who will do the detailed design of the premise and (3) how many contractors will the client use? The second important new feature of this framework is that both step 2 and step 3 include a continuum of alternatives. Concerning payment methods, the new framework is primarily based on how the specific risks of the project are shared. These frameworks can be useful for policy formulation in that they can help to avoid some problematic ways of formulating policies.


Full Text:

PDF HTML

References

References

Bejrum, H. and Grennberg, T. 2003, En väg till fungerande hus: Funktionsentreprenader, livscykelekonomi och BOT [A way towards well-functioning houses: Performance contract, life- cycle economy and BOT], Rapport no 19, KTHs Bostadsprojekt, Department of Real Estate and Construction Management, KTH Royal Institute of Technology, Stockholm, Sweden. (in Swedish)

Borg, L. 2011, Incentives and choice of construction techniques, Licentiate Thesis, Building & Real Estate Economics, Department of Real Estate and Construction Management, KTH Royal Institute of Technology, Stockholm, Sweden.

Brunes, F. and Lind, H. 2014, Explaining cost overruns in infrastructural projects: A new framework with applications to Sweden, Working Paper Series, WP201401, Department of Real Estate and Construction Management & Center for Banking and Finance (CEFIN), KTH Royal Institute of Technology, Stockholm, Sweden.

Eriksson, P E. 2010, ‘Partnering: what is it, when should it be used, and how should it be implemented?’, Construction Management and Economics, 28 (9), pp. 905-917. http://dx.doi.org/10.1080/01446190903536422

Eriksson, P E. and Hane, J. 2014, Entreprenadupphandlingar - Hur kan byggherrar främja effektivitet och innovation genom lämpliga upphandlingstrategier? [Construction Contracts - How can developers promote efficiency and innovation through appropriate procurement strategies], Uppdragsforskningsrapport 2014:4, Swedish Competition Autority, Stockholm, Sweden. (in Swedish)

Eriksson, P E. and Laan, A. 2007, ‘Procurement effects on trust and control in client-contractor relationships’, Engineering, Construction and Architectural Management, 4 (4), pp. 387-399. http://dx.doi.org/10.1108/09699980710760694

FHWA. nd, Project Delivery Methods, Handout – General guidiance, US Department of Transportation, Federal Highway Administration.

Gould, F., and Joyce, N. 2011, Construction Project Management, Third Edition, New Jersy, USA: Pearson Prentice Hall.

Leiringer, R. 2003, Public- Private Partnerships- Conditions for Innovation and Project Success. In Atkin, B., Borgbrant, J. and Josephson, P-E., (Ed.), Construction Process Improvement, Oxford: Blackwell Science Ltd.

Lind, H. and Borg, L. 2010, ‘Service-led construction: is it really the future?’, Construction Management and Economics, 28 (11), pp. 1145-1153. http://dx.doi.org/10.1080/01446193.2010.529452

Mandell, S. and Nilsson, J-E. 2010, A Comparison of Unit Price and Fixed Price Contracts for Infrastructure Construction Projects, Working Papers Series, No 2010:13, Swedish National Road & Transport Research Institute (VTI), Sweden.

Mandell, S. and Nyström, J. 2013, ‘Too Much Balance in Unbalanced Bidding’, Studies in Microeconomics, 1 (1), pp. 23-25. http://dx.doi.org/10.1177/2321022213488845

Mattsson, H-Å. and Lind, H. 2009, ‘Experience from procurement of Integrated Bridge Maintenance in Sweden’, European Journal of Transport and Infrastructure Research, 9 (2), pp 143-163.

Milgrom, P. and Roberts, J. 1992, Economics, Organization & Management, USA: Prentice-Hall, Inc.

Ng, S T. and Wong, Y M W. 2007, ‘Payment and audit mechanisms for non private-founded PPP-based infrastructure maintenance projects’, Construction Management and Economics, 25 (9), pp 915-923.

Nyström, J. 2005, ‘The definition of partnering as a Wittgenstein family-resemblance concept’, Construction Management and Economics, 23 (5), pp. 473-481. http://dx.doi.org/10.1080/01446190500040026

Nyström, J., Lind, H. and Nilsson, P-E. 2014, Degrees of freedom and innovations in DM contracting- easier said than done., Working Paper, Swedish National Road and Transport Research Institute (VTI), Sweden.

Ritz, G J. and Levy, S M. 2013, Total Construction Project Management, Second Edition, USA: McGraw-Hill Education.

Skitmore, M. and Cattell, D. 2013, ‘On being balanced in an unbalanced world’, Journal of the Operational Research Society, 64 (1), pp. 138-146.

SOU 2009:24, De statliga beställarfunktionerna och anläggningsmarknaden [The governmental purchasing functions and construction market], Available online:

http://www.sweden.gov.se/content/1/c6/12/14/50/1a7ba334.pdf (accessed on 29 April 2011) (in Swedish)

Warsame, A., Borg, L., and Lind, H. 2013, ‘How can Clients Improve the Quality of Transport Infrastructure Projects? The Role and Knowledge Management and Incentives’, The Scientific World Journal, Vol. 2013 (2013), Article ID 709423, 8 pages, http://dx.doi.org/10.1155/2013/709423

Winch, G M. (2010). Managing construction projects: an information processing approach, Second Edition, UK: Blackwell Publishing Ltd.



PDF HTML


DOI: https://doi.org/10.5130/AJCEB.v14i4.4196

Share this article: