Procurement and contract design in the construction industry: … not one size fits all
AbstractThis paper considers the choice between different approaches to contract for the construction and maintenance of infrastructure projects. The need to control for user and third party costs over the life cycle of an asset is demonstrated to be a core aspect of welfare maximising contract design. The more likely it is that a certain problem in the current infrastructure could be solved by constructing assets in alternative ways, the more strongly should the tendering agency consider innovative design alternatives such as performance contracts of Public Private Partnerships. It is also demonstrated that contracts which cover both construction and subsequent maintenance must be accompanied by bonuses and penalties for remunerating or punishing the entrepreneur for delivering (or not) appropriate infrastructure quality.
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Bibliographic InfoPaper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2012:26.
Length: 25 pages
Date of creation: 22 Nov 2012
Date of revision:
Contact details of provider:
Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Web page: http://www.kth.se/abe/om_skolan/organisation/centra/cts
Infrastructure investment and maintenance; Bundling; Welfare maximisation vs. minimisation of financial costs; Risk allocation;
Find related papers by JEL classification:
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
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99029, Stanford University, Department of Economics.
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