A Market Mechanism for Ensuring the Efficiency of Investment and Construction Projects

Abstract

Aim . The presented study aims to formulate the methodological basis of a market mechanism for ensuring the efficiency of investment and construction projects in the context of negligible transaction costs. Tasks . The authors analyze the effect of the relationship between the subjects of an investment and construction project on its efficiency; examine the major groups of fundamental economic mechanisms for enabling integration cooperation between economic entities; describe the IPD approach as the methodological basis of a market mechanism for ensuring the efficiency of investment and construction projects; define the principles of formation of local and global maximum economic effects of investments at the stage of an investment and construction project; formulate the methodological foundations of an economic IPD partnership, which is viewed as a market mechanism for maximizing the integral effect of an investment and construction project. Methods . This study uses general scientific methods of cognition and the institutional approach, which considers the market, organizational, and government groups as the fundamental economic mechanisms for enabling integration cooperation between economic entities, to develop the economic fundamentals of the IPD approach as a methodological basis of a market mechanism for ensuring the efficiency of investment and construction projects. Results . During the implementation of investment and construction projects, the so-called mutual effects of independent entities arise when changes in the cost and/or duration of one stage of the project affect the quality of the results at another stage. The need to develop mechanisms for ensuring the integral efficiency of investment and construction projects by compensating for efficiency losses at each stage is substantiated. In the case of negligible transaction costs, the best such mechanism would be to establish voluntary agreements between the parties based on a market mechanism. In investment and construction management, IPD contracts serve as the instrument of such agreements. The authors develop a methodological basis for an economic IPD partnership by differentiating the subjects included in the IPD contract in correlation with their costs and results within the investment and construction process and by establishing the conditions for remuneration payments and internalization of "internal" externalities by types of subjects in the IPD project. Conclusions . Economic interaction modeled according to the presented methodology is meant to ensure a cognitive IPD partnership combining the knowledge, competencies, and interests of different subjects, experts and specialists, which in turn serves as one of the mechanisms for maximizing the integral effect of an investment and construction project. Having a common digital information space for the project is a modern prerequisite for a successful IPD partnership based on the presented model of economic interaction between subjects.