The Study On The Supervision Incentive And Restraint Mechanisms Of The Lump-sum Contracting Mode

The development of the lump-sum contracting mode in China has beenunsatisfactory all the time. It is caused mainly because of the lack of trust between theowner and contractor. In the total contract, the contractor commitment the projectdesign, equipment procurement and construction, therefore the owner has very littleeffective control over both the contractor and the overall project. What’s more, there is ahuge information asymmetry between the two parties. This paper will discuss theeffective methods of reducing information asymmetry and improvement of contractor’sPerformance.Based on consignor-agent relationship in the construction projects, this paper focuson reducing information asymmetry by using the information economics theory. First ofall, implicit demand is introduced into the contract which is considered as an example ofinformation asymmetry. This paper therefore states various aspects of the informationasymmetry, such as the definition, classification and peculiarity.Then, the implicit demand is included as part of the remuneration as well asincentive system and supervision system. This paper sets up a payment function model,analyzed the relating logical relationship and provided a better scheme for the design ofthe contract. The solutions provided in this paper also decreased the asymmetricinformation and offered a better foundation for the incentive and constraint system ofthe general contracting mode mechanism.Finally, with the incentive and constraint system of the three aspects: incentivesystem, supervision and restraint system and implicit demand Identification, the generalcontractor are surely to provide a better operation with a more active attitude and a harder endeavor. The paper is aimed at maximizing the mutual benefits and meeting theinterests of the contract owner. In this way, the study of the lump-sum contracting modeis no longer an armchair strategist but a more realistic operation.