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  • AUT Faculties
  • Faculty of Design and Creative Technologies (Te Ara Auaha)
  • School of Engineering, Computer and Mathematical Sciences - Te Kura Mātai Pūhanga, Rorohiko, Pāngarau
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Impact of procurement systems on transaction costs: a structural equation modelling methodology

Rajeh, M
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NZBERS-2014_proc_fp_Rajeh-M.pdf (1.673Mb)
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http://hdl.handle.net/10292/9069
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Abstract
Within construction procurement, Transaction cost economics (TCE) offers a mechanism to

understand ‘unseen’ costs associated with the pre and post-contract work. Pre-contract, these

include costs related to information gathering and procurement. Post-contract they include

activities of contract administration and enforcement. This paper aims to estimate transaction

costs (TCs) for different delivery systems used in construction projects in New Zealand,

specifically the Traditional and Design-Build.

This study develops a conceptual model for the relationship between project delivery systems

and TCs. The model was operationalized and developed into a questionnaire. A crosssectional

sample approach was deployed, involving pilot and survey questionnaires. Data

was sought from construction professionals in management, design and operations. TCs were

measured using professionals’ time-spent in procurement as a surrogate for cost. Using using

a Likert-Scale 1-5 in evaluation, comparing the Traditional and Design-Build systems. Data

was triangulated with ‘real world’ cases to test and explain the developed model. The test

included Validity and Reliability, Path Analysis, Regression Analysis, Factor Analysis, and

Structural Equation Modelling (SEM). The primary analytical technique used was SEM to

yield information on Goodness-of-Fit, model development and comparison, and confirmatory

strategies. SPSS Amos 21 was used for data analysis and model development.

The results suggest that project delivery systems have indirect effect on TCs. This effect is

fully mediated by the costs of information, procurement, administration, and enforcement.

Applying the developed models to ‘real world’ cases, it was found that TCs in the Traditional

systems amounts to 18.5% of the annual salary cost of a project manager, while in the Design-Build systems, it amounts to 14.5% of the annual salary cost of a project manager.

The findings have practical implications on construction business practice due to their robust

empirical nature and theoretical framework, which might enhance the performance of the

construction industry.
Keywords
Construction; Procurement systems; Structural equation modelling; Transaction costs
Date
November 14, 2014
Source
New Zealand Built Environment Research Symposium (NZBERS) held at Massey University, Auckland, published in: Proceedings of the 4th New Zealand Built Environment Research Symposium (NZBERS)
Item Type
Conference Contribution
Publisher
School of Engineering & Advanced Technology, Massey University
Publisher's Version
http://construction.massey.ac.nz/NZBERS-2014_proc_fp_Rajeh-M.pdf
Rights Statement
NOTICE: this is the author’s version of a work that was accepted for publication. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in (see Citation). The original publication is available at (see Publisher's Version).

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