Transaction Cost Economics Model For Selecting the Governance Structure of Construction Projects

Transaction costs constitute an essential part of the costs of a construction project (Rajeh et al., 2015). One of the critical factors influencing the choice of project delivery method is the transaction cost (Whittington, 2008). Transaction cost economics has meaningful solutions to reduce transaction costs. So far, it seems that no research has examined how to choose a project delivery method based on transaction cost economics criteria. Transaction cost economics examines the governance structure of institutions based on the three dimensions of specificity, uncertainty, and frequency of transactions (Williamson, 1985). This paper examines how to select the delivery method in construction projects, using the transaction cost economics approach to determine the governance structure. Three methods of traditional (design-bid-build), design-build and construction management are investigated.