TRANSACTION COSTS IN AUSTRALIAN CONSTRUCTION PROJECTS

Abstract

Construction projects involve transaction costs (TCs) both during the pre and post-contract phases. If these costs are not managed appropriately, they can lead to project cost overruns. The purpose of this study is to explore the transaction costs, their determinants and mitigation strategies in the Australian construction industry. Qualitative data were collected by conducting semi-structured interviews with professionals who have been working as contract administrators, project managers, quantity surveyors and construction managers. The data were then analysed using thematic and content analysis techniques by using NVivo software. The research identified context-specific transaction costs such as statutory charges, opportunity costs, cost of compliance, and lost-time costs. Moreover, the findings indicate that factors affecting transaction costs are interrelated; hence, each factor affects more than one type of transaction cost. It was also found that rules and regulations imposed by regulatory bodies, the type of bidding procedure used, and the use of non-integrated procurement methods increase transaction costs. Further, mitigation strategies for minimising TCs such as recruitment of qualified experts, building trust and relationships, and the use of digital technologies such as BIM, drones and point cloud were identified.