Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts

This paper discusses a model based on the agency theory to analyze the optimal transfer of construction risk in public works contracts. The base assumption is that of a contract between a principal (public authority) and an agent (firm), where the payment mechanism is linear and contains an incentiv...

Descripción completa

Guardado en:

Detalles Bibliográficos
Autor principal:	Sánchez Soliño,Antonio
Lenguaje:	English
Publicado:	Escuela de Construcción Civil, Pontificia Universidad Católica de Chile 2014
Materias:	Incentives Construction Risk Public Procurement Public Works Risk Aversion
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-915X2014000100009
Etiquetas:	Agregar Etiqueta Sin Etiquetas, Sea el primero en etiquetar este registro!

id	oai:scielo:S0718-915X2014000100009
record_format	dspace
spelling	oai:scielo:S0718-915X20140001000092014-11-06Analysis of the Optimal Sharing of Construction Risk in Public Procurement ContractsSánchez Soliño,Antonio Incentives Construction Risk Public Procurement Public Works Risk Aversion This paper discusses a model based on the agency theory to analyze the optimal transfer of construction risk in public works contracts. The base assumption is that of a contract between a principal (public authority) and an agent (firm), where the payment mechanism is linear and contains an incentive mechanism to enhance the effort of the agent to reduce construction costs. A theoretical model is proposed starting from a cost function with a random component and assuming that both the public authority and the firm are risk averse. The main outcome of the paper is that the optimal transfer of construction risk will be lower when the variance of errors in cost forecast, the risk aversion of the firm and the marginal cost of public funds are larger, while the optimal transfer of construction risk will grow when the variance of errors in cost monitoring and the risk aversion of the public authority are larger.info:eu-repo/semantics/openAccessEscuela de Construcción Civil, Pontificia Universidad Católica de ChileRevista de la construcción v.13 n.1 20142014-04-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-915X2014000100009en10.4067/S0718-915X2014000100009
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Incentives Construction Risk Public Procurement Public Works Risk Aversion
spellingShingle	Incentives Construction Risk Public Procurement Public Works Risk Aversion Sánchez Soliño,Antonio Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
description	This paper discusses a model based on the agency theory to analyze the optimal transfer of construction risk in public works contracts. The base assumption is that of a contract between a principal (public authority) and an agent (firm), where the payment mechanism is linear and contains an incentive mechanism to enhance the effort of the agent to reduce construction costs. A theoretical model is proposed starting from a cost function with a random component and assuming that both the public authority and the firm are risk averse. The main outcome of the paper is that the optimal transfer of construction risk will be lower when the variance of errors in cost forecast, the risk aversion of the firm and the marginal cost of public funds are larger, while the optimal transfer of construction risk will grow when the variance of errors in cost monitoring and the risk aversion of the public authority are larger.
author	Sánchez Soliño,Antonio
author_facet	Sánchez Soliño,Antonio
author_sort	Sánchez Soliño,Antonio
title	Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
title_short	Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
title_full	Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
title_fullStr	Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
title_full_unstemmed	Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts
title_sort	analysis of the optimal sharing of construction risk in public procurement contracts
publisher	Escuela de Construcción Civil, Pontificia Universidad Católica de Chile
publishDate	2014
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-915X2014000100009
work_keys_str_mv	AT sanchezsolinoantonio analysisoftheoptimalsharingofconstructionriskinpublicprocurementcontracts
_version_	1714206267219640320

Analysis of the Optimal Sharing of Construction Risk in Public Procurement Contracts

Ejemplares similares