Using a self-selection mechanism for tendering in the construction industry : a case study of railway renewal contracts

• One of the consequences of the institutional separation of railway infrastructure from train operations in Europe is a misalignment of incentives in which the actions of one party may create costs for the other. To internalise otherwise external costs of track-works experienced by train operators and customers, it is essential to reform the way in which project contracts are tendered. This study suggests a self-selection mechanism for tendering rail infrastructure activities. Bidders may therefore submit bids based on the industry’s standard Unit Price Contract or a Fixed-Price Contract. The mechanism is designed to increase the possibility for a welfare maximising trade-off between construction and user costs. Using standard Benefit-Cost principles and parameter values, a case study where five switches are replaced provides substance to the discussion. The study provides a starting point for addressing risk in the construction industry and a blueprint for further development by professionals to fill in gaps and to test the approach under a controlled format before full-scale implementation. 

Subject headings

TEKNIK OCH TEKNOLOGIER  -- Samhällsbyggnadsteknik -- Transportteknik och logistik (hsv//swe)

ENGINEERING AND TECHNOLOGY  -- Civil Engineering -- Transport Systems and Logistics (hsv//eng)

Publication and Content Type

ref (subject category)

rap (subject category)