Construction Payment Method Analysis Based On The Transaction Cost Theory

Payment methods selection is of great importance to the efficiency ofconstruction project execution, and this thesis intends to solve this problem based onthe transaction cost theory and related empirical studies.In this thesis, firstly, the transaction cost theory was introduced, andcharacteristics of transaction cost in the Construction Industry are explained. then amathematical model was introduced to analyze the characteristics of four most widelyused payment methods: lump-sum, unit-price, cost reimbursable and target cost, andtheir influence on a project's cost, schedule and quality. combined with the resultsfrom empirical studies, those key factors which are most important to the choice ofpayment methods are identified and how they affect the choice are studied. Thereupon,this thesis studied how to adjust lump-sum and unit-price payment methods, and alsoproposed guidelines for the setting up of bonus in a target cost contract. It the end,those results are summarized.This thesis adopted both the quantitative and qualitative approaches, andcombined those results from theoretical studies with those from empirical studies.This provides guidelines for the choice and setting up of payment methods in practice.