Dynamic Contracting

in Infrastructures

(duration: 10/2010 - 10/2014)

Project summary
Tendering is the main method in the public sector for attracting contractors to execute infrastructural projects, such as road construction. The problem is that such tenders result in long-term contracts, while circumstances may change during the building process, leading to new risks and opportunities for both parties. Also, contracts may be based on lacking or false information. Both the government agency and the contractor may have reason to over- or underestimate the actual costs or time frame. This may lead to the building project being rushed or executed sloppily with inferior materials, seriously harming social welfare.
A method for creating more dynamic contracts is thus called for, allowing for renegotiation of details during execution of the project. Dynamic Contracting in Infrastructures claimed  to find a better way for setting up rules for tendering. Among others, the project looked for a way to give contractors incentives to provide more information beforehand; and to support contractors and managers in dealing with changes. Furthermore, contractors are challenged to take into account so-called "social costs": the costs of serious traffic queues due to maintenance activities.
Project results
Besides several scientific publications, Dynamic Contrasting has resulted in the construction of a serious game for maintenance planning. It supports participants with making choices that are beneficial to the entire project and not only to individual asset managers or service providers. Also, it stimulates the cooperation between contractors mutually.
During the project the game has been played and tested several times. The researchers monitored the decions of players, concerning their own part of the project, and their efforts to obtain information about the entire process. The game has been tested by several stakeholders, including Rijkswaterstaat, the main infrastructure manager in the Netherlands. Other public and private organizations in the infrastructure sector have shown interest.  
Almende activities
From the beginning, Almende has focused on multi-agent modeling for Dynamic Contracting. Both mechanism design and game theory have been used to attempt optimization in problems where agents are self-interested and (partial) information is only privately known to each agent. This has resulted in the serious game, constructed for the maintenance process.
Another outcome of the project interesting to Almende consists of techniques for agent-based traffic simulation. An application of these techniques is foreseen in the Deal platform of daughter company Deal Services.
Principal Investigator
Joris Scharpff (Almende)
Academic Supervisor
Matthijs de Weerdt (TU Delft)

Dynamic Contracting project page at NGI



Related Topics Related Topics

Two-Phase Approach to Dynamic Contracting

PhD-candidate Joris Scharpff investigates the merits of dynamic contracting in infrastructural building and maintenance.

Modeling 'Dynamic Contracting'

Almende attracted Joris Scharpff to perform his PhD-research for the new research project "Dynamic Contracting in Infrastructures".