A Game Theory Perspective on Delivery Methods in Construction
2023
Download PDFDOI: https://doi.org/10.60164/56d3a4h7d
Authors: Zachary Schaller, John Killingsworth
Citation:
Schaller, Z., & Killingsworth, J. (2023). A Game Theory Perspective on Delivery Methods in Construction. In Lean Construction Journal pp. 21–40.
Abstract:
Question: Why is Integrated Project Delivery (IPD) a relatively underutilized procurement method in construction?
Purpose: Expose and explain a few market failures that owners/developers might be ignoring by choosing traditional methods over IPD.
Research Method: Game theoretic modeling and application of microeconomic principles. Informed by interviews with IPD participants, we model the important strategic and social advantages of IPD that complement more well-known efficiency advantages.
Findings: Our primary insight is that traditional design-bid-build projects encounter pervasive moral hazard problems and externalities that reduce the efficiency of construction and create conflict between participants. At a basic human behavior level, IPD eliminates or mitigates these issues.
Limitations: The interviews we conducted provide insight, not empirical inference. Therefore, this paper stands on its theoretical contribution and makes no boast of providing representative data or causal analysis.
Implications: Owners/developers would do well to embrace IPD given its social and strategic contributions to Lean Construction. Additional efficiencies we highlight complement the more well-known advantages, possibly tipping the scales toward IPD for a greater number of construction projects.
Value for practitioners: This paper will explain how non-integrated methods such as designbid-build create greater cost and conflict than previously realized. It suggests a path forward through (scalable) IPD that mitigates these costs.
Keywords: Integrated Project Delivery, Procurement Methods, Moral Hazard, Cooperative Methods, Circular Economy, Construction Efficiency, Lean Procurement
Paper type: Full paper