Optimal outcome sharing with a consortium of contractors
Where a consortium of contractors is involved, there exist no guidelines in the literature on what the outcome sharing arrangement should be. The paper addresses this shortfall. It derives the optimal outcome sharing arrangement for risk-neutral and risk-averse contractors within the consortium, and...
Main Authors: | , |
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Format: | Article |
Language: | English |
Published: |
Vilnius Gediminas Technical University
2016-05-01
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Series: | Journal of Civil Engineering and Management |
Subjects: | |
Online Access: | http://journals.vgtu.lt/index.php/JCEM/article/view/1366 |
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author | S. Mahdi Hosseinian David G. Carmichael |
author_facet | S. Mahdi Hosseinian David G. Carmichael |
author_sort | S. Mahdi Hosseinian |
collection | DOAJ |
description | Where a consortium of contractors is involved, there exist no guidelines in the literature on what the outcome sharing arrangement should be. The paper addresses this shortfall. It derives the optimal outcome sharing arrangement for risk-neutral and risk-averse contractors within the consortium, and between the consortium and a risk-neutral owner. Practitioners were engaged in a designed exercise in order to validate the paper’s propositions. The paper demonstrates that, at the optimum: the proportion of outcome sharing among contractors with the same risk-attitude should reflect the levels of their contributions; the proportion of outcome sharing among contractors with the same level of contribution should be lower for contractors with higher levels of risk aversion; a consortium of risk-neutral contractors should receive or bear any favourable or adverse project outcome respectively; and the proportion of outcome sharing to a consortium of risk-averse contractors should reduce, and the fixed component of the consortium fee should increase, when the contractors become more risk-averse or the level of the project outcome uncertainty increases. The paper proposes an original solution to the optimal sharing problem in contracts with a consortium of contractors, thereby contributing to current practices in contracts management.
First published online: 14 Sep 2015 |
first_indexed | 2024-12-14T04:00:45Z |
format | Article |
id | doaj.art-6cc9d71bb7f747b79064d1282d1fdfb6 |
institution | Directory Open Access Journal |
issn | 1392-3730 1822-3605 |
language | English |
last_indexed | 2024-12-14T04:00:45Z |
publishDate | 2016-05-01 |
publisher | Vilnius Gediminas Technical University |
record_format | Article |
series | Journal of Civil Engineering and Management |
spelling | doaj.art-6cc9d71bb7f747b79064d1282d1fdfb62022-12-21T23:17:57ZengVilnius Gediminas Technical UniversityJournal of Civil Engineering and Management1392-37301822-36052016-05-0122510.3846/13923730.2014.914086Optimal outcome sharing with a consortium of contractorsS. Mahdi Hosseinian0David G. Carmichael1School of Civil and Environmental Engineering, The University of New South Wales, 2052 NSW Sydney, AustraliaSchool of Civil and Environmental Engineering, The University of New South Wales, 2052 NSW Sydney, AustraliaWhere a consortium of contractors is involved, there exist no guidelines in the literature on what the outcome sharing arrangement should be. The paper addresses this shortfall. It derives the optimal outcome sharing arrangement for risk-neutral and risk-averse contractors within the consortium, and between the consortium and a risk-neutral owner. Practitioners were engaged in a designed exercise in order to validate the paper’s propositions. The paper demonstrates that, at the optimum: the proportion of outcome sharing among contractors with the same risk-attitude should reflect the levels of their contributions; the proportion of outcome sharing among contractors with the same level of contribution should be lower for contractors with higher levels of risk aversion; a consortium of risk-neutral contractors should receive or bear any favourable or adverse project outcome respectively; and the proportion of outcome sharing to a consortium of risk-averse contractors should reduce, and the fixed component of the consortium fee should increase, when the contractors become more risk-averse or the level of the project outcome uncertainty increases. The paper proposes an original solution to the optimal sharing problem in contracts with a consortium of contractors, thereby contributing to current practices in contracts management. First published online: 14 Sep 2015http://journals.vgtu.lt/index.php/JCEM/article/view/1366outcome sharingconsortiumcontractorsrisk attitudeutility functioncontribution |
spellingShingle | S. Mahdi Hosseinian David G. Carmichael Optimal outcome sharing with a consortium of contractors Journal of Civil Engineering and Management outcome sharing consortium contractors risk attitude utility function contribution |
title | Optimal outcome sharing with a consortium of contractors |
title_full | Optimal outcome sharing with a consortium of contractors |
title_fullStr | Optimal outcome sharing with a consortium of contractors |
title_full_unstemmed | Optimal outcome sharing with a consortium of contractors |
title_short | Optimal outcome sharing with a consortium of contractors |
title_sort | optimal outcome sharing with a consortium of contractors |
topic | outcome sharing consortium contractors risk attitude utility function contribution |
url | http://journals.vgtu.lt/index.php/JCEM/article/view/1366 |
work_keys_str_mv | AT smahdihosseinian optimaloutcomesharingwithaconsortiumofcontractors AT davidgcarmichael optimaloutcomesharingwithaconsortiumofcontractors |