Coordinating Project Outsourcing through Bilateral Contract Negotiations

2019 ◽  
Author(s):  
Chengfan Hou ◽  
Mengshi Lu ◽  
Tianhu Deng ◽  
Zuo-Jun Max Shen
Keyword(s):  
Contract Negotiations ◽  
Bilateral Contract

Coordinating Project Outsourcing Through Bilateral Contract Negotiations

2020 ◽  
Author(s):  
Chengfan Hou ◽  
Mengshi Lu ◽  
Tianhu Deng ◽  
Zuo-Jun Max Shen
Keyword(s):  
Bargaining Power ◽  
Problem Definition ◽  
Power Structures ◽  
Bargaining Process ◽  
Bilateral Bargaining ◽  
Power Cost ◽  
Single Task ◽  
Contract Negotiations ◽  
Bilateral Contract ◽  
Payment Timing

Problem definition: Project outsourcing has been a pronounced trend in many industries but is also recognized as a major cause for project delays. We study how companies can coordinate outsourced projects with uncertain completion times through bilateral contract negotiations. Academic/practical relevance: Misaligned subcontractor incentives may result in substantial losses to both project clients and subcontractors. Coordinating subcontractors’ efforts through proper contracts is imperative to the success of project outsourcing. Most previous studies on project contracting have not addressed subcontractors’ bargaining powers or the dynamic bargaining process in negotiations. We fill in this gap by studying bilateral bargaining between the client and subcontractors, which better reflects real-world negotiations. Methodology: We model project contract negotiations as a multiunit bilateral bargaining game. We derive the conditions such that bilateral negotiations can achieve system coordination and characterize the equilibrium negotiation outcomes. We then compare the conditions and equilibria under various model settings to study their impact on project contracting. Results: Our study uncovers how the coordination of project outsourcing is impacted by the contract form, bargaining power structure, precedence network topology, payment timing, external opportunities, and negotiation protocols. For single-task projects, the widely used fixed-price (cost-plus) contract can achieve system coordination only when the subcontractor (client) possesses full bargaining power. Cost-sharing and time-based incentive contracts, which perform well for single-task projects, may not be effective for projects with parallel tasks when any subcontractor’s bargaining power is sufficiently high. Projects with serial tasks can be coordinated only under certain extreme bargaining power structures. Delaying payments always exacerbates the incentive misalignment. Managerial implications: Our analysis provides insights and guidelines to companies regarding how to select proper contract forms and payment timing schemes, based on the characteristics of the projects and subcontractors, to ensure the effectiveness of project outsourcing. Our results also highlight the importance of bargaining modeling in project contracting.

FEATURES OF RISK MANAGEMENT AFTER REALIZING PPP PROJECTS

2018 ◽  
Vol 1 (12) ◽  
pp. 179-190
Author(s):  
Mariya Zinovievivna Masik
Keyword(s):  
Risk Management ◽  
The State ◽  
Financial Risks ◽  
Contract Negotiations ◽  
The Public ◽  
Political Risks ◽  
Force Majeure ◽  
Investment Agreement ◽  
The Law ◽  
Partnership Agreement

The article is devoted to the clarification of the peculiarities of risk management during the implementation of PPP projects. The author identifies a set of risks for a private partner, business risks of PPP projects and the main risks associated with the protests of the public, as well as public and international organizations. The typical risks of PPP projects are presented, including force majeure, political risks, profitability risks, operational, construction, financial risks, and the risk of default. The world experience of sharing risks between the partners is presented. Also named are the main methods for assessing the risks of PPP projects. It has been determined that the conditions on which the parties should reach agreement in order for the contract to be concluded are essential. Risk management can be implemented within the framework of the essential conditions for the allocation of risks. However, the provisions of the law provide for the allocation of only those risks identified by the results of an analysis of the effectiveness of the PPP project. Legislation does not directly determine how risks can be allocated to the risks identified during the pre-contract negotiations (or even at a later stage), but not taken into account in the analysis of efficiency. For example, suggestions on the terms of the partnership agreement as part of the bidding proposal may include suggestions on risk management mechanisms. There are no definite and can not be fully defined possible ways of managing risks in view of their specificity for a particular project. For this purpose, it is advisable to provide for a period of familiarization with the draft tender documentation and the possibility of making changes to it based on the findings received from potential contestants. It is also advisable to foresee cases in which it is possible to review certain terms of the contract without a competition. It is substantiated that the law does not restrict the possibility of foreseeing specific terms of an agreement on the implementation of the PPP project or to conclude additional (auxiliary) contractual instruments (for example, an investment agreement). At the same time, when laying down conditions not provided for by law, it is necessary to take into account the scope of competence of the state partner. Also, in order to ensure the principle of equality of conditions, the state partner should provide such additional conditions in the tender documentation.

Accelerating Change

2018 ◽  
Author(s):  
Erin Stewart Mauldin
Keyword(s):  
Land Use ◽  
African Americans ◽  
Labor Relations ◽  
Cotton Production ◽  
Economic Independence ◽  
Contract Negotiations ◽  
Reduced Frequency ◽  
Ecological Event ◽  
Land Use Practices ◽  
Ecological Regime

Emancipation proved to be a far-reaching ecological event. Whereas the ecological regime of slavery had reinforced extensive land-use practices, the end of slavery weakened them. Freedpeople dedicated less time to erosion control and ditching and used contract negotiations and sharecropping arrangements to avoid working in a centrally directed gang. Understandably, freedpeople preferred to direct their own labor on an individual plot of land. The eventual proliferation of share-based or tenant contracts encouraged the physical reorganization of plantations. The combination of these two progressive alterations to labor relations tragically undermined African Americans’ efforts to achieve economic independence by tightening natural limits on cotton production and reducing blacks’ access to the South’s internal provisioning economy. The cessation, or even reduced frequency, of land maintenance on farms exacerbated erosion, flooding, and crops’ susceptibility to drought.

Modes of Acceptance

2018 ◽  
Author(s):  
Melvin A. Eisenberg
Keyword(s):  
Bilateral Contract

Chapter 32 concerns modes of acceptance. Most offers require acceptance by either a promise (offers for a bilateral contract) or an act (offers for a unilateral contract). In some cases an offer is ambiguous as to which mode of acceptance is required. Sometimes this ambiguity does not matter because the offeree performs an act that doubles as a promise. Often, however, cases that involve such ambiguity cannot be resolved this way. One approach to these cases is to apply the general principles of interpretation to determine which mode of acceptance is required. A different rule is embodied in Restatement Second Section 32: “In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.”

Observation of Good Faith Principle in Contract Negotiations: A Comparative Study with Emphasis on International Instruments

2013 ◽  
Vol 03 (09) ◽  
pp. 56-61
Author(s):  
Ebrahim Shoarian Sattari
Keyword(s):  
Islamic Law ◽  
German Law ◽  
Good Faith ◽  
Roman Law ◽  
Fair Dealing ◽  
Contract Negotiations ◽  
Law System ◽  
American Law ◽  
Special Stand ◽  
International Instruments

Good Faith is one of the important principles in contract law. This principle is inherited from Roman law and it has been mostly developed in civil law system. Observation of Good faith and Fair dealing in French and German law and many other countries is considered as legal obligation. Good faith, also, is of special stand In Chinese law of contract. Since Good faith is considered as important and valuable, it has been recognized in Common Law System and adopted in English and American law. Islamic law also contains numerous examples of obligations that are based on Good Faith principle. Nowadays, good faith principle has been incorporated in important international instruments such as CISG, UPICC, PECL, and DCFR and its scope has been developed. If good faith principle was being considered in fulfilling of contracts, today it also is considered as important in pre-contractual and conclusion stages of contracts. The aforementioned documents contain regulations for observing good faith in preliminary negotiations, conclusion of contract, fulfilling of contract and the interpretation thereto. The present Article is attempted to show that Good faith is important in all stages including preliminary negotiation and it should be incorporated in domestic legislations. Remedy for breach of this duty in the pre-contractual sphere should be limited only to compensation for damages.

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