Risk of Contract Growth and Opportunistic Behavior: A Comparison of Two Megaprojects

Harald Brugaard Villmo, Tim Torvatn and Jan Terje Karlsen
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Harald Brugaard Villmo: Norwegian University of Science and Technology, Norway
Tim Torvatn: Norwegian University of Science and Technology, Norway
Jan Terje Karlsen: BI Norwegian Business School, Norway

International Journal of Risk and Contingency Management (IJRCM), 2012, vol. 1, issue 3, 59-74

Abstract: This paper explores the risk associated with contract growth and opportunistic behavior in contractors with a special focus on the management of changes and interfaces. The study compares two successful megaprojects, the Gudrun oil platform by Statoil in the North Sea and the ATLAS detector at CERN. The empirical data were obtained using in-depth interviews with key personnel at Statoil and CERN. The study makes three significant contributions to knowledge: (1) megaprojects can benefit from having a high level of staffing since management costs are relatively small compared to construction costs; (2) when part of the end design is left to contractors, the contractors are given an opening to act in an opportunistic manner, which can cause contract growth; and (3) when a high level of integration is performed in-house, companies can take an extreme cost-driven approach to contracting.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jrcm00:v:1:y:2012:i:3:p:59-74

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