Addressing Project Complexity:the Role Of Contract

Project complexity leads to transaction risks in inter-organizational exchanges and can negatively affect performance if appropriate governance mechanisms are absent.Though the contract prevails in construction projects to address transaction risks,its role in coping with complexity-related risk has not yet been fully investigated.Given this circumstance,this paper differentiates between three types of project complexity and illustrates relational and performance risks caused by each project complexity dimension.This research also distinguishes three contractual functions and hypothesizes the effective contractual functions under each type of project complexity.Questionnaire survey is adopted in this study.The author used a total of 180 valid questionnaires from owners,main contractors,and subcontractors to test the hypotheses.Firstly,the validity and reliability of measurements were analyzed.ANOVA was hired to further verify the effectiveness of measurements.T test was also employed to examine the potential impacts of sample characteristics on the measurement results.Then,the author used sub-group analysis to test hypotheses.Empirical results show that contractual coordination can deal with risks induced by technical,organizational and environmental complexity,while the adaptation function can address environmental complexity-related risk.However,contractual control is ineffective when either technical or environmental complexity is high.This research provides new insights into project complexity management from the perspective of inter-organizational exchange governance.In other words,this research elaborates the challenges and risks brought about by project complexity,which provides a foundation for finding appropriate ways to manage project complexity.Besides,it tests the effectiveness of each contractual functions under the contexts characterized by different kinds of project complexity and helps to find the effective governance boundary conditions of each function in complex construction projects.The results of this study also provide practical guidance for construction practitioners to improve complex project performance through contract arrangement.Since the effectiveness of each contractual function in coping with different kinds of project complexity differs,project managers should tailor the most cost effective contract for different project scenarios.For example,managers in construction projects of low environmental complexity could even reduce the contingency clauses in the standard templates to achieve high efficiency in negotiating,monitoring,and enforcing them.