Understanding of Target Value Design for Integrated Project Delivery with the Context of Game Theory

Abstract

Target value design (TVD) is a management method for integrated project delivery (IPD) through the collaborative efforts among different stakeholders. This study uses game theory to explain how TVD fundamentally enables each stakeholder to collaborate on initial design alignment. According to the prisoner’s dilemma, two people locked in separate jail cells tend not to cooperate even if their cooperation could bring maximum benefits to both of them because each one suspects the possibility of being betrayed by the other. In a similar way, it is easily found that each stakeholder, such as an architect/engineer or a contractor, does not make the effort to collaborate aggressively in their early alignment. For example, they traditionally prefer point-based design to set-based design because the latter can merely amount to service for free. However, if a detective interrogates two prisoners together in the same space, two prisoners can cooperate, preventing them from betraying each other. Similarly, if an owner provides a medium for communication and strongly trusts the stakeholders with a contract or an incentive, they can find optimized solutions for maximizing their value while minimizing opportunism for their own benefit. With the context of game theory, this study compares the Design-Build delivery system with IPD based on TVD in light of collaborative design alignment. Based on this comparative application, this study shows how a set of managerial target costing strategies to shift from traditionally dominant behavior to cooperative management practice. This kind of economic approach is expected to be helpful for understanding the governance of cooperation among stakeholders for IPD.