Practitioners’ Perception on the Critical Determinant of Uncertainty Factors that Influence Transaction Cost in Highway Construction Projects

Abstract

The purpose of this paper is to ascertain practitioners’ perception of the critical determinants of uncertainty factors on the transaction cost (TC) in highway construction projects. A survey questionnaire is used to collect data from the 230 practitioners of public-sector construction organizations in Pakistan to identify those factors. The partial least square structural equation modeling (PLS-SEM) is tested on the collected data. This research investigates that TC borne by the owner can be reduced when the owner minimizes inherent uncertainties. To reduce uncertainty, the owner needs to ensure a good relationship with the contracting parties, make a timely payment to the contractor, complete work scope to reduce change orders, enhancing the owner’s experience in similar projects which increase the organizational efficiency hence reduce in TC. This empirical study was conducted from an organizational perspective which helps the project owners to overcome the issues under uncertainty that influence the Transaction cost (TC) in highway construction projects in developing countries. It demonstrates that the uncertainty that causes to enhance the TC is due to the uncertainty of the owner’s behavior. This study provides a guideline for the practitioners of the public sector construction industry to bring cost efficiency under the uncertain circumstance.