Transaction cost economics applied? – consortia within process plant contracting

Abstract

An increasing development in the competition for large engineering projects overseas is the formation by engineering contractors of consortia, which this article examines through the transaction cost economics paradigm. Consortia are contract specific governance structures designed to meet the particular requirements of individual clients. Hence, such governance modes are analysed through the comparative institutional approach. This approach leads to the conclusion that a consortium is a hybrid of institutional types. The major critical conclusions suggest that consortia are viewed by industry members as efficient, but for individual reasons. Also, efficiency considerations appear to be underpinned by the authority of capitalist market relations. In combination these conclusions suggest that in the conceptual hybrid of overall ‘efficiency’ motivations for consortia design or membership are individual, being based on relative power positions of industry members.

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