Comparative analysis between the EPC contract mode and the traditional mode based on the transaction cost theory

Abstract

Based on the transaction cost theory, analyses the reason of the emergence and development of EPC contract mode, establishes transaction cost model under the traditional mode and the EPC contract mode, which divides the transaction costs into three parts: the contracting cost, the cost for coordination and supervision cost, and make a comparative analysis of the transaction cost between the traditional mode and the EPC contract mode according the three parts respectively. Reach to a conclusion that in EPC contract mode, the uncertainty of EPC projects transaction cost increased and become the key factor of transaction cost controlling while the supervision cost and coordination cost reduced. So only see from the aspects of the transaction cost, EPC contract mode is not suitable for all kinds of projects, the contracting cost between the owner and the general contractor become the key factor during the decision-making process.