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In Spain contract auditing has been applied since 1988 to determine the final cost of defense procurement contracts. In this respect, the Spanish Department of Defense takes the US methodology as a reference model, and therefore it may be useful to study the degree of convergence between the two models. The main objective of this paper is to analyze the degree to which the US contract auditing model for the procurement of defense materiel has influenced the system applied in Spain. Accordingly, the comparative method is used to highlight the main features of the contract auditing models used by the Spanish and the US Departments of Defense. The results obtained show that the methodology used by Spain is not an original approach, but that there is only a low degree of convergence with the US model.

How to determine the appropriate contractual structure for an outsourcing relationship has been a major theme in the business process outsourcing (BPO) literature. Drawing on transaction cost economics, this study aims to examine how anticipated coordination and adaptation costs in a BPO relationship affect the choice of contract types. Specifically, this research categorizes contracts types (fixed-price, time and materials and hybrid contracts) based on levels of contract design comprehensiveness and flexibility to change.

The research setting is the BPO for a focal firm, involving a contractor. Data from 153 US companies are collected using a structured questionnaire on senior executives of functional areas of marketing, IT and finance. Hypotheses were tested using ordered probit model.

The results show that maturity is negatively associated with anticipated adaptation costs, while modularity and IT detachability are negatively related to anticipated coordination costs. Furthermore, adaptation costs have a direct impact on the choice, whereas the anticipated coordination costs do not have a significant direct impact on contract choice. The strength of adaptation costs' impact, however, is significantly reduced when coordination costs are high.

This study explicitly examines the role of anticipated coordination and adaptation costs in shaping the strategic choice of contract types in the BPO market. By differentiating the two types of anticipated transaction costs, this research enables a better understanding of the dynamics between transaction characteristics, anticipated transaction costs and contract types in complicated relationships such as BPO relationships.

Transaction costs arise from economic exchange rather than production activities. However, the term “transaction cost” is not consistently defined in the construction industry because the concept of transaction cost is not universally accepted by all stakeholders in construction projects. As a result, empirical studies are few and conflicting because accessing data on transaction costs is problematic, and the interpretation of the data is difficult. The purpose of this paper is to analyze the transaction costs borne by the owner in a construction project from the perspective of transaction cost economics and construction project characteristics.

A questionnaire survey was administered to construction owners. The factors that impact transaction costs were analyzed in the context of human-related issues (the owner's and the contractor's positions in the transaction), and environment-related issues (the transaction environment, and project management efficiency). Statistical analyses were conducted to compare the transaction costs incurred in the pre- vs post-contract phases of a project relative to the private vs public sector, different project delivery systems, different procurement methods, and different types of contracts.

The owners surveyed believe that transaction costs may be reduced if the owner and the contractor follow some basic guidelines (e.g. experience in similar projects, prompt payment, good relationship with project participants, no irregularities in bidding, and only few material substitutions and claims), if the project is well-run (e.g. technical competency, strong leadership, prompt decision-making, effective communication, and fair/speedy conflict management), and if the transaction environment is favorable (e.g. fair risk allocation, early contractor involvement, and complete design documents). The findings of the survey also indicate that post-contract transaction costs are much higher than pre-contract transaction costs expressed as percent of project value and that transaction costs are affected by the owner (public vs private), the procurement method, the project delivery system, and the type of contract.

The primary contribution that this research makes to the body of knowledge is a better understanding of transaction costs incurred by construction owners in the USA. The highest transaction costs are to be expected in the post-contract phase of public projects awarded on a unit price basis, but can be reduced, hence reducing overall project cost.

Within construction procurement, transaction cost economics 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. The purpose of this paper is to estimate the magnitude of transaction costs (TCs) for different procurement systems used in construction projects in New Zealand. Specifically estimating the relative values of TCs for Traditional and Design-Build delivery systems for the purpose of comparison.

This study develops a conceptual model for the relationship between procurement systems and TC. The model was operationalized and developed into a questionnaire. A cross-sectional sample approach was deployed, involving pilot and survey questionnaires, and results verification through “real world” cases. Data were sought from construction professionals in management, design and operations (i.e. project managers, architects, engineers, quantity surveyors, and procurement officers). TCs were measured using time-spent conducting procurement-related activities as a surrogate for cost. Professionals evaluate their time-spent in procurement activities using a Likert scale 1-5, comparing the Traditional and Design-Build delivery systems. Data were 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 statistical software was used for data analysis and model development.

The results suggest that procurement systems have indirect impact on TCs. The relationship between procurement system and TCs is fully mediated by costs of information, procurement, administration, and enforcement. Applying the developed models (the Traditional and Design-Build) to “real world” cases, it was found that TCs in the Traditional system amounts to 18.5 percent of the annual salary cost of a project manager (as an indicator quantum), while in the Design-Build system, it amounts to 14.5 percent of the annual salary cost of a project manager. TCs were calculated using regression equations based on factor loadings in the Traditional and Design-Build models.

This study applies new theoretical model for the link between procurement system and TCs, investigating and empirically demonstrating the influence of procurement system on TCs in construction. It also offers a new plausible explanation for the factors influencing TCs in procurement. The study emphasizes “in-house” TCs from the perspective of the professionals. 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.

This study contributes to the procurement selection in construction, by introducing a new conceptual model for the link between procurement system and TCs. It has extended the current practices for procurement selection by estimating TCs for the Traditional and Design-Build systems for comparison.

Finance and accounting (FA) offshore outsourcing is a growing trend involving a relocation of business processes to Asia but only few studies focus on understanding the issues that underlie the relocation of FA services. This paper aims to provide understanding of transaction costs economics (TCE) issues in FA offshore outsourcing using a case study of the Malaysia outsourcing industry which is growing and experiencing significant change.

This study uses a qualitative case study approach. Interviews cover several foreign firms, which are based in Malaysia and involved in FA offshore outsourcing services worldwide. Interviews also include related regulatory bodies in Malaysia.

Using TCE and management control theoretical framework, findings indicate issues and challenges faced by the firms and the need for contract management skills to mitigate the issues.

This study is limited to a broad discussion of FA offshore outsourcing, TCE and contract management but it could be a basis for future studies on specific issues of managing attrition in FA offshore outsourcing. This study contributes to prior works in TCE and FA offshore outsourcing by establishing controls to minimise costs at contact, contract and control stage. Specifically, this study emphasises contract management such as negotiating contract and using long‐term contractual arrangement.

This study not only identifies TCE issues in offshore FA outsourcing, but also provides suggestions for minimising transaction costs. For example, firms should consider the type of transaction costs involved and plan for appropriate contract management to mitigate the costs.

There is no study yet that discusses in‐depth the issues of TCE in FA offshore outsourcing especially in Malaysia and the need for contract management in mitigating such issues.

This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral necessary between bilateral partners with that required when multilateral netting occurs. Optimal margin levels balance the deadweight costs of default against the opportunity costs of holding additional margin. Once created, it may be optimal for the clearinghouse to monitor the financial condition of its members. If undertaken, monitoring will reduce the amount of margin required but need not affect the probability of default. Once created, it becomes optimal for the clearinghouse membership to expel defaulting members. This reduces the probability of default. Our empirical tests suggest that the opportunity cost of margin plays an important role in clearinghouse behavior particularly their determination of margin amounts. The relationship between volatility and margins suggests that participants face an upward-sloping opportunity cost of margin. This appears to dominate the effects that monitoring and expulsion might have on margin setting.

In this paper we assess the management costs of delivering services under alternative institutional arrangements. We develop an analytic framework based on transaction cost and public sector network theories to identify management costs public managers face in delivering services directly and via contract. Results from a survey of refuse collection managers in Ohio indicate that direct service provision carries higher management costs, though when combined with vendors’ activities, contracting carries more monitoring costs. These results suggest two important contributions to knowledge and contract management practice. First, we develop an innovative approach to assessing management costs. Second, we use our framework to determine whether there are differences in management costs under alternative institutional arrangements that managers should take into account as they approach the “make or buy” decision.

There is a growing concern of the non-balance of the final output of construction works in comparison the financial resources invested with during the course of construction projects. One propelling factor to this is the opportunistic disposition often sought out by construction contractors. This study aims to investigate the relationship between construction contractors’ opportunism and construction project transaction costs from the viewpoint of construction professionals.

Questionnaire survey was deployed in eliciting responses from construction professionals. A total of 337 questionnaires were distributed and 264 were retrieved and deemed fit for analysis. Methods of data analysis used for the study are Mean Item Score, Kruskal–Wallis H-test, Student Newman Kauls Post Hoc Test, Factor Analysis, Spearman Rank Correlation and Regression Analysis.

The study showed that the most-ranked factor influencing contractors’ opportunism that affects transaction cost is “Unclear scope of work”. Revealed from the study is the differing view of construction professionals of the effect of contractors’ opportunism on transaction costs. Equally revealed through Spearman correlation analysis is the potent effect that contractors’ opportunism has on transaction costs. Likewise, the study established that there is a discovered difference among construction professionals’ perceived effect of contractors’ opportunism on construction transaction costs.

The study establishes the nexus between construction contractors’ opportunistic disposition and construction transaction costs, which are shown to be highly correlated. The study went further to recommend that efforts should be made to ensure that issues like contract documentation should be well and appropriately carried out; roles and responsibilities of stakeholders should be well defined so as to fully keep all parties to a contract abreast with the expectations of their duties in relation to the project objectives.

The purpose of this paper is to examine the transaction costs involved in managing procurement contracts in the public sector, particularly at the lower and higher level of local governments from the clients’ perspective.

The paper uses new institutional economics, specifically the transaction cost approach. A multiple case study design was used, in which five local government authorities (LGAs) were selected from the Kigoma and Tanga regions of Tanzania. Interviews with heads of procurement management units, focus groups and secondary sources were used to collect information for lower level LGAs.

Very high information, negotiation and monitoring transaction costs were revealed at the post-contractual stage for higher levels of local government in all cases. Transaction costs were associated with institutional problems, lack of financial resources and attitudes towards accountability, transparency and competition. It was also found that lower levels of local government are faced with very high transaction costs for all procurement stages due to a lack of procurement contract management capacity among ward and village procurement project committees, low levels of support from higher level LGAs, a lack of simple Swahili-standardised documents and guidelines for lower level procurement contract management which reflect current legal issues and the lack of a legal framework for procurement at the lower level of local government. These costs are associated with poor accountability and a lack of competition, transparency and efficiency throughout public procurement chains.

There is no estimate for quantitative approaches, because it is was difficult to measure transaction costs associated with accountability, transparency and efficiency.

The paper contributes knowledge on qualitative levels of transaction costs for procurement contract management for both higher and lower levels of LGAs from the clients’ viewpoint.

This paper analyses the deregulation of the municipal audit market in Norway, in particular how organization of the service affected audit costs.

The paper uses multiple regression analysis of administrative as well as survey data of organizational structure and audit costs from 312 municipalities in Norway in 2012.

The introduction of contracting out in the municipal audit market in Norway in 2004 contributed to a reduction in audit fees eight years after the deregulation, compared to the situation four years before the deregulation. The type of audit, mixing inter-municipal co-operation and contracting private auditors, was related to lower costs.

The data does not include audit quality and are restricted to one country.

The municipalities that combined inter-municipal co-operation and contracting a private auditor achieved the lowest costs. Hence, neither pure in-house production (“make”) nor outsourcing (“buy”) but mixing several governance forms (hybrid organization) was related to low costs.

Contracting out is a core element of new public management (NPM) but has often been a contested tool in public policy. This paper provides empirical evidence on the effects of a reform of a professional service, which is relevant for many services in the public sector.

This paper contributes by filling some of the gaps in the public sector accounting and public management reform literature by studying the organization and costs of the municipal audit, specifically by including transaction costs, addressing plural governance forms in addition to pure in-house production, inter-organizational co-operation and market contracting and by studying long-term effects.