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Degrees of freedom in road construction

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Abstract

One policy that is believed to increase the rate of innovation and the level of productivity is to move from Design-bid-build contracts (DBB) to Design-Build contracts (DB). A common view is that the latter provides the contractor more degrees of freedom to enable innovation. This hypothesis consists of two steps, first that DB actually has more degrees of freedom and secondly that more degrees of freedom leads to more innovation. This paper focuses on the first step and is based on a review of five road construction projects – two labelled DBB and three DB. It is demonstrated that there is a gap between the textbook definition of the two types of contracts and the actual design of the examples. The degrees of freedom for the contractor are restricted in both DB and DBB contracting and no significant difference in this dimension could be established. Based on this lack of difference in the five projects, the expectation of innovation for the labelled contracts cannot be settled. Some possible rational reasons for the client to restrict the degrees of freedom are also suggested.

Suggested Citation

  • Nyström, Johan & Lind , Hans & Nilsson , Jan-Eric, 2014. "Degrees of freedom in road construction," Working papers in Transport Economics 2014:20, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    • Handle: RePEc:hhs:ctswps:2014_020
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    File URL: http://www.transportportal.se/swopec/CTS2014-20.pdf
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    References listed on IDEAS

    as
    1. Hans Lind & Lena Borg, 2010. "Service-led construction: is it really the future?," Construction Management and Economics, Taylor & Francis Journals, vol. 28(11), pages 1145-1153.
    2. Jan-Eric Nilsson, 2012. "Procurement and Contract Design in the Construction Industry: … Not One Size Fits All," International Transport Forum Discussion Papers 2012/11, OECD Publishing.
    3. Ewerhart, Christian & Fieseler, Karsten, 2003. "Procurement Auctions and Unit-Price Contracts," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 569-581, Autumn.
    4. Nilsson, Jan-Eric, 2012. "Procurement and contract design in the construction industry: … not one size fits all," Working papers in Transport Economics 2012:26, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
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    Cited by:

    1. Borg, Lena, 2015. "Good and bad innovations in the housing sector - General background and a policy proposal," Working Paper Series 15/10, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.

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    More about this item

    Keywords

    Innovation; Contracting; Design Bid Build (DBB); Design and Build (DB);
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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