How economic theories can negatively affect subcontractor selection Online publication date: Fri, 29-Jun-2018
by Todd Creasy; Yang Fan
International Journal of Business Performance Management (IJBPM), Vol. 19, No. 3, 2018
Abstract: Main-contractors and subcontractors have had improved relationships and less conflict through collaborative working arrangements (CWA) defined as organisational relational agreements or partnering. Further the selection of subcontractors by main contractors was often based on the lowest bid price - a foundational tent of transaction cost economics (TCE) which is defined as organisational transactions involving transfers of goods or services. In this paper, through qualitative analysis and review of company documents, the negative consequences these practices had on subcontractor performance, which resulted in project underperformance and employee discontent, are discussed via case study. Based on these qualitative findings, a 2 × 2 matrix of theoretical considerations was posited which indicate that the desired state for a subcontractor is one who is not affiliated with the main contractor and one who offers a wide range of pertinent services.
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