Scandinavian Working Papers in Economics

Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin)

No 14/9: Framework for Structuring Procurement Contracts

Lena Borg () and Hans Lind ()
Additional contact information
Lena Borg: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Department of Real Estate and Construction Management , Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden
Hans Lind: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Department of Real Estate and Construction Management , Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden

Abstract: The aim of this paper is to propose a new structure for classifying contract types and payment methods. Concerning the procurement contract types the first important feature is the stepwise structure with three main steps in the contract design: (1) should the contract only include construction or both construction and operation/maintenance? (2) Who should do the detailed design of the premise? (3) How many contractors should the client use? An important new feature of the structure is that in both step 2 and step 3 there is a continuum of alternatives. Concerning the payment methods the structure is primarily based on how the project specific risks are shared.

Keywords: Procurement; Contract; Construction sector; Infrastructure projects

JEL-codes: H44; L74; R40

16 pages, October 24, 2014

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