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Joint risk management through transactionally efficient relational contracting

Author

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  • M. Motiar Rahman
  • Mohan Kumaraswamy

Abstract

The appropriate contracting method and the contract documents for any construction project depend on the nature of the project, but an appropriate contracting method coupled with clear and equitable contract documents do not by themselves ensure project success where people work together in the face of uncertainty and complexity with diverse interests and conflicting agendas. The attitudes of the contracting parties and the co-operative relationships among the project participants are important for successful project delivery. These are examined in the light of transaction cost economics and relational contracting (RC) principles. It is found that RC may well be a useful route towards reduced transaction costs, while also fostering co-operative relationships and better teamwork that in turn facilitate joint risk management (JRM). The usefulness of the latter is reinforced by relevant observations from a recent Hong Kong-based survey, followed by a case study in Mainland China. A basic model is conceptualized for improved project delivery via JRM. This is also seen to be reinforceable by further transactional efficiencies that can be achieved through other RC-based approaches, such as partnering or alliancing.

Suggested Citation

  • M. Motiar Rahman & Mohan Kumaraswamy, 2002. "Joint risk management through transactionally efficient relational contracting," Construction Management and Economics, Taylor & Francis Journals, vol. 20(1), pages 45-54.
  • Handle: RePEc:taf:conmgt:v:20:y:2002:i:1:p:45-54
    DOI: 10.1080/01446190110089682
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    References listed on IDEAS

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    1. Joskow, Paul L, 1985. "Vertical Integration and Long-term Contracts: The Case of Coal-burning Electric Generating Plants," Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(1), pages 33-80, Spring.
    2. Deakin, Simon & Michie, Jonathan (ed.), 1997. "Contracts, Co-operation, and Competition: Studies in Economics, Management, and Law," OUP Catalogue, Oxford University Press, number 9780198292661.
    3. repec:mes:jeciss:v:21:y:1987:i:1:p:528-530 is not listed on IDEAS
    4. repec:mes:jeciss:v:30:y:1996:i:4:p:1212-1216 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Per Erik Eriksson & Ossi Pesamaa, 2007. "Modelling procurement effects on cooperation," Construction Management and Economics, Taylor & Francis Journals, vol. 25(8), pages 893-901.
    2. van den Hurk, Martijn & Verhoest, Koen, 2017. "On the fast track? Using standard contracts in public–private partnerships for sports facilities: A case study," Sport Management Review, Elsevier, vol. 20(2), pages 226-239.
    3. M. Motiar Rahman & Mohan Kumaraswamy, 2005. "Assembling integrated project teams for joint risk management," Construction Management and Economics, Taylor & Francis Journals, vol. 23(4), pages 365-375.
    4. Arena, Marika & Arnaboldi, Michela & Azzone, Giovanni, 2010. "The organizational dynamics of Enterprise Risk Management," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 659-675, October.
    5. Tang, Wenzhe & Li, Zhuoyu & Qiang, Maoshan & Wang, Shuli & Lu, Youmei, 2013. "Risk management of hydropower development in China," Energy, Elsevier, vol. 60(C), pages 316-324.

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