Information Asymmetry on Heavy Civil Projects: Deficiency Identification by Contractors and Owners

Abstract

Although a main goal of low-bid procurement is to maximize project value, the approach can actually increase project cost and duration if construction document deficiencies are not resolved early on. This study examined in which construction phase (before or after contract execution) contractors discover document deficiencies, when owners learn of and resolve document deficiencies, and how document deficiencies affect project cost and duration. Data from 159 contractors and project owners indicate that 38% of all construction document deficiencies are discovered by the low-bid contractor before the owner has executed the contract. Conversely, owners reported learning of document deficiencies only 19% of the time before contract execution and 81% of the time after contract execution. These findings suggest a delay in communication between contractors and owners, resulting in asymmetrical information—a practice that industry professionals are aware of but that is often not openly discussed. This knowledge motivated contractors to delay reporting the deficiencies until after the contract was awarded. Furthermore, road projects and constructability concerns were found to be significantly associated with increased project costs.