Farsighted project contract management: incomplete in its entirety

Abstract

The purpose of project organization is to create a cooperative environment. Contracts are the method by which the owner creates a project organization to employ resources to achieve their development objectives. Contracts should aim to produce a cooperative organization, aligning the contractors' objectives with the owners. A three‐dimensional vector (reward, risk, safeguard), adapted from the Transaction Cost Economics literature, is used to analyse the efficacy of contract types to do this. Contracts are also unavoidably incomplete. They need to respond to unforeseen circumstance. A four‐dimensional vector (incentive intensity, adaptiveness, reliance on monitoring and control, reliance on the courts), also from the Transaction Costs Economics literature, is used to analyse the governance efficacy of contract types. The results are used to develop a contract selection strategy, depending on whether the uncertainty is controlled by the client or the contractor, the project is simple or complex, and the uncertainty is in the project's product, method of delivery or both.

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