Multi-party contracts in the view of systems theory

Abstract

Due to rising demands, Construction Management as well as Real Estate Management are recently developing into increasingly complex organisation issues. In particular, these fields are characterized by a very high degree of division of work and interdisciplinarity. Numerous participants are contributing their specific capabilities and skills as well as naturally pursue their individual goals. Traditionally, these contributors are interconnected via bilateral contracts, which are well-understood and theoretically modelled using the LEN approach. Therewith, the unavoidable incompleteness of contracts is formulated and tackled via a fundamental estimation of incentives on both sides. More recent attempts to solving the challenges coming with the rising granularization of projects like Lean Construction and Agile Methods propose multi-party contracts instead, advertising the introduction of strong common goals to all participants. The paper presented here extends the LEN model to multi-party approaches in order to estimate the required share of incentives to be distributed to the individual parties allowing for interconnected objectives and therewith common-targeted activities. This situation is investigated for different scenarios of forming the overall product, in particular for cumulative contributions as well as factorial contributions to the common objective. On this background, the fundamental, i.e., system-theoretical limits of multi-party contracts are pointed out, discussed and thoroughly evaluated.