The Transaction Cost framework of Project Delivery Methods Taking Culture, Education and Athletics Construction as Example

Public construction is the major economic investment of the country, which is also the important way for the government to provide the public goods. In the case of government failure, Public-Private-Participation not only becomes the primary strategy for public facilities construction and it also enriches the project delivery methods. However, the project delivery method only relies on the experience of the participants nowadays, and lacks of rigorous analysis and discussion.
In the situation with transparency information, the price methods could reflect the true value of the project, and the market could also guild the price. However, because of bounded rationality and opportunism, transaction becomes complex and changeable. The governance of transaction should be designed for various conditions. Therefore, project delivery method determines the way of public-private governance, and its transaction costs will also affect the decision-making.
Taking culture, education and sports facilities for example, this study applied expert interview to determine the organization and asset specificity. In the life cycle analysis, this study applied Principal Component Analysis to simplify the factors of transaction cost, and Multinomial Logit Model for the impact of decisions.
The result shows that public service delivery processes are separated and restricted because of the characteristics of organization and project. The two kind of asset specificity also limit the basic mode of project delivery, and affect the procurement behavior and organization adjustment. In life cycle, to reduce the contracting costs and bargaining costs, the government prefers the traditional way. To reducing the budget searching costs, transaction cost caused by transaction frequency and environmental changes, the government prefers BOT. To reduce the cost of time, communication costs and hold-up problems caused by asset specificity, the government tends to select the DB method. The external effects, the number of vendors, monitoring costs and technological innovation, are not clearly distinguished between the preferences.
This study is only from the standpoint of the government, without considering positions from vendors, people and society. In the future research, after comparing with varies of perspectives; then, the consideration for methods of project delivery will be complete.