The Study On Governance Mechanism Of Affiliated Operation Phenomenon In China’s Construction Contracting Market

Affiliated operation phenomenon rises in the construction market owing to theestablishment of qualification management system. With the establishment of themarket economy system, the construction industry obtains major support from thestate and develops rapidly. Market boom has also brought intensifying competitionwithin the industry. In order to ensure the healthy development of the constructionmarket, maintain a fair and orderly competition and improve the efficiency of marketcompetition, with the introduction of "Construction enterprise business managementregulations" as a symbol in1984,China began using market access system and carryout qualification management against construction companies. On this basis, theMinistry of Construction also expanded and deepened qualification management ofconstruction enterprises in the late. Qualification management system prohibitsconstruction enterprises from contracting engineering beyond the business scope oflevel of qualification or in the name of other construction enterprises in any form.However, from a law enforcement point of view, the relevant provisions have not beenwell implemented; affiliated operation of the construction field has been accepted byall parties and even becomes the mainstream of industry. Profit-driven makesenterprises or individuals compete to enter the construction industry.Constructionmarket appeared peculiar affiliated operation phenomenon.It has also brought manyproblems to the construction market.This paper is based on questionnaire survey as a research base. Firstly, this paperstarts from basic features of affiliated operation in construction market, discusses thesources, definition, legal characteristics and forms of affiliated operation, andanalyzes various risks of market participants and the construction industry due toaffiliated operation through the actual investigation. Based on the affiliated operationstatus quo and content analysis, it proposes affiliated operation is essentially arent-seeking behavior of reducing the efficiency of resource allocation and shouldbe governed timely and effectively. Secondly, the paper conducts economic analysison affiliated operation phenomenon. Affiliated operation is the result of the rationalqualification allocation as a scarce resource in the market and meets the interests andneeds of construction companies. This paper analyzes the formation mechanism ofaffiliated operation on the basis of Game Theory and discusses the result that affiliatedparties ignore the investigated risks by government and accept affiliated operation.Thirdly, this paper compares domestic construction enterprise management systemwith foreign countries’ and draw the similarities and differences, obtains significanceof construction enterprise management system in developed countries in order toreform the construction qualification management system.Combined with the contents of questionnaire survey, it proposes preliminary ideas of reform qualificationmanagement system in China,weakens qualification management system and tries toestablish a credit system so as to achieve dynamic management of constructionenterprises.Finally, due to the analysis of governance mechanism, the paper resultsthat nowadays the third-party governance is the most effective way to governaffiliated operation phenomenon in the construction contracting market in ourcountry.It can restrain the body and regulate market players to improve the efficiencyof information transfer and punish dishonesty players severely through a third partyinvolvement.Put another way, it is necessary to improve the establishment of marketcredit system.Absolutely, the government should take the responsibility to establishcredit system.With the help of governance mechanisms theory, the paper analyzesCosts and benefits of market players and Market players’ strategy selection under thethird-party credit governance.It draws conclusion that the factors of affiliatedoperation are the probability of discovery and dishonesty costs.This paper presentsthat the government should improve the establishment of construction market creditsystem and information delivery mechanisms etc. to achieve purposes of curbingaffiliated operation through a series of supporting systems increasing transparency ofthe construction market and dishonesty cost.