Large-scale projects with digital performance-based contracting: the ultimate solution for governance control

Abstract

Large-scale projects are characterised by high task complexity, intense dynamics and uncertainties, and the involvement of numerous organisations. These characteristics provide the basis for governance problems such as conflicts of interest and information asymmetries. This study explores the impact of a transition from traditional contacting to performance-based contracting (PBC) on these challenges and the interplay between relational and contractual governance. In addition, this study explores how advanced digital technologies may help improve PBC's effect on governance. Both aims are addressed through an in-depth analysis of two case studies from large-scale German aerospace projects. The findings indicate that PBC can help enhance governance in large-scale projects by controlling the outcome and aligning goals. They also acknowledge the potential of behavioural control through advanced digital technologies that supply real-time information during service delivery. However, the supplier must be able to fully control the outcome for the approach to deliver the intended success.