Contract Framing Research Articles

Comparative analysis of back-to-back subcontracts in the construction and telecommunications industries

Purpose – “Back-to-back” contracts are widely used in the engineering and construction industry and are recently spreading into the telecommunication industry. In back-to-back contracts, the principals require the main contractors to assume majority of the liability in delivering a project and in turn, the main contractors try to allocate most of that liability to their subcontractors. The successful delivery of the projects hinges on how the contracts are drafted and risks are allocated between the parties involved. The purpose of this paper is to undertake a comparative analysis of “back-to-back” subcontracts in the telecommunication and construction industries. Design/methodology/approach – By examining contracting practices and texts from contract documents for the telecommunication and construction industries, this paper reveals how certain aspects of “back-to-back” contracts lose their meaning when seen out of context. Using comparative research method, this paper discusses reasons why the adoption of “back-to-back” contracts should be a matter of degree, based on the business strategy and relevance to the intended transactions rather than on the typical model of “back-to-back” contracts. Findings – Good contracting practices should be such as to enable parties negotiate the contract terms to ensure clarity and common understanding before commencing the project. Construction universally adopts back-to-back even for minor straightforward works, an approach supported by readily available industry model contracts as well as the traditional tender process (design before construction). In telecoms, back-to-back is mainly desired where the subcontractor has a major part of the scope, whereas minor subcontractor scope is considered “leverage commodity” where suppliers are engaged using in-house contract templates, often in a frame contract arrangement, to satisfy corporate strategies for supplier management and pricing. Originality/value – This paper provides value by presenting an insightful review of the nature of back-to-back contracting practices in the telecommunication and construction industries. The paper outlines advantages, disadvantages and opportunities for improving “back-to-back” contracting practices in the telecommunication and construction industries.

Special issue on main results of Call‐off Order 3 (CoO3) in SatNEx III

Special issue on main results of Call‐off Order 3 (<scp>CoO3</scp>) in <scp>SatNEx</scp> III

Legal Guide Rendered Upon Legal Matters Concerning Project Related to Electronic Commerce Proposed Frame Agreement Entered into by Commonwealth Nations (Malaysia, Singapore, Australia &amp; New Zealand)

The following is a Legal Guide addressing the following issues: i) Whether it is advisable to enter into individual contracts in relation to the electronic commerce Project with the above-stated Commonwealth countries or whether a Frame Contract is the better option, and; ii) On the issue of ‘electronic commerce’, the provisions under the respective laws as well as the risks which should be paid heed to.

Федеральный закон «О закупках товаров, работ, услуг отдельными видами юридических лиц»: рамки применения в договорных отношениях

The author offers discussion on a problem of a ratio of the concept «Рrocurement» with different types of civil contracts; in article the rent and leasing relations, contracts on charity, «frame» contracts are consistently shined. The author reasons arguments that the called contracts don’t fall within the scope of regulation of the Federal law of 18 July 2011 No. 223-FZ. The author speaks inexpediency of application of frame contracts in the Russian contractual practice. The article subject opens scientific discussion about a ratio of the civil legislation and the procurement legislation.&#x0D;

Effects of Target Timing and Contract Frame on Individual Performance

This study experimentally examines the effects of target timing and contract frame on individual performance. We study four target-based incentive contracts, categorised by when participants learn the performance target (ex ante, or before production starts, vs. ex post, or after production ends) and how the incentive contract is framed (bonus vs. penalty). The performance target in this study is determined by a peer group's average productivity. We find that performance is significantly higher for bonus-framed contracts when the performance target is revealed ex post, as opposed to ex ante. In contrast, revealing the peer-based performance target ex ante or ex post has no impact on performance for penalty-framed contracts. We also find that the ex post, bonus-framed contract significantly outperforms the other three contracts. This finding supports practitioners' claim that employers should reward (as opposed to punish) individuals based on their performance, relative to that of their peers, ex post.

Jekyll &amp; Hyde Effect of Learning to Contract: Impact of Frames &amp; Attribution on Future Transactions

Prior work expanded the role of learning in transaction cost economics (TCE), suggesting that learning to contract positively impacts subsequent transactions through the development of contracting capabilities. However, learning to contract requires evaluating exchange behaviors in the focal exchange, recognizing their cause, and adjusting future contracts to encourage or avoid this behavior in subsequent exchanges. Contract frames and group-level attribution biases systematically influence this learning process. Prevention and promotion framed contracts lead focal firm employees to adopt distinctive definitions of learning and systematically influence attributions of credit and blame in the exchange. As a result, there are two different pathways for learning to contract, one in which the focal party employees learn how to improve the exchange over time and another in which they learn to continually increase safeguards against potentially opportunistic partners and decrease their firm’s responsibility in ...

Stretch It But Don't Break It: The Hidden Risk of Contract Framing.

Recent research suggests that loss framed contracts are an effective instrument for principals to maximize the effort of their agents. Framing effects arise from defining thresholds that vary the salience of losses and gains while preserving payoff equivalence of the underlying contract. While under Prospect Theory a loss frame should lead to more effort we show that contract thresholds also exert a suggestive effect on performance that can trump the impact of loss aversion. Loss framing therefore carries a risk. As agents focus their effort choice on the expressed thresholds, poorly selected thresholds reduce effort and the principal might prefer offering a contract that does not impose a threshold at all. On the other hand, imposing demanding thresholds may push effort beyond levels predicted by Prospect Theory.

The Effect of Contract Framing on Budgetary Slack and Performance

We examine the effect of contract framing on subordinates’ propensity to create budgetary slack and subsequent performance. The contract is designed in economically equivalent penalty and bonus forms, with a reporting bonus (penalty) associated with reporting budgeted production accurately and a production bonus (penalty) associated with beating (not meeting) a budget target. By design, this contract creates a direct link between the budgeting component and the effort (performance) component. In such a setting, the effects of contract framing may lead to different behavioral responses than previously examined or predicted. We find that under bonus-framed contracts individuals create budgetary slack by underreporting their productive capabilities. Consistent with prospect theory, we find evidence that subordinates working under penalty-framed contracts over-report their capabilities. This reporting of optimistic slack is an interesting finding. The results suggest that under penalty-framed contracts subordinates are more likely to over-report their capabilities, whereas subordinates under bonus-framed contracts are more likely to under-report their capabilities. The findings demonstrate that penalty contracts impact how individuals report their capabilities, suggesting that penalty contracts may be more advantageous than bonus contracts in some settings.

On the Problem of Quality Enforcement in Centralized Public Procurement

Demand aggregation is widely recognized as a efficiency-enhancing solution in public procurement. The technique of framework agreements represents possibly the most effective solution to struck a balance between contract standardization and customization. Central purchasing organizations in many countries are progressively relying on framework agreements to aggregate demand of different public buyers. By splitting the procurement process (until the award phase) between separate entities, such an organizational model in public procurement may, however, generate low incentives to enforce quality at the contract execution stage. In this paper, we review some evidence of contract mismanagement borrowing from the experience of the National Frame Contracts awarded by Consip S.p.A. in Italy and also discuss possible remedies.

The Effects of Risk Preference and Loss Aversion on Individual Behavior under Bonus, Penalty, and Combined Contract Frames

ABSTRACT: This study examines the effects of risk preference and loss aversion on individual responses to differently framed, yet economically equivalent, incentive contracts. We extend prior research by examining contracts with combinations of bonus, penalty, and clawback incentives. Contracts framed as a combination of bonus and penalty incentives, especially those framed as a clawback, are less attractive to participants than contracts with bonus- or penalty-only incentives. Further, research suggests that individuals' contract preferences are due primarily to loss aversion. We test this conjecture with a new measure of loss aversion. Results indicate that our measure of loss aversion is well calibrated to encompass variation in loss aversion. In addition, participants' loss preferences explain a significant portion of the differences in observed behavior. Importantly, this relation is less significant for clawback contracts, indicating that other preferences may be driving individuals' strong reactions to these contract frames.

The Romance of Surrogacy1

This article seeks to demonstrate and analyze the cultural and emotional work surrogate mothers collectively engage in on the largest surrogacy support website, http://www.surromomsonline.com . Surrogate mothers’ online stories and discussions frame contract surrogacy as a “labor of love.” Women often describe their surrogacy as a “journey” of shared love; they hope for a lasting relationship with the couple they carry for. This article explores how the language of love, learned and internalized through online communication with other surrogates, creates both a cultural conceptualization of surrogacy and a ground for action. Love and altruistic giving are consistent with close interpersonal rather than market relationships; surrogates hope for a long‐term friendship with their couple. Surrogacy journeys, however, not infrequently end in disappointment; surrogates feel betrayed when couples cut ties. As a result of collective learning, surrogates’ discussions increasingly articulate the position that love, even when unreciprocated, can lead to repeated giving; love is noble and ennobling. Surrogates find appreciation and support in their online surrogacy community where they agree that giving life is a moral good. This stance has contributed to a renewed enthusiasm to bear children for others.

The influence of face-to-face communication: a principal-agent experiment

The principal-agent problem is an interesting problem involved in many everyday relationships, such as the one between company owners and their delegates. Our experiment simulates such a relationship, whereby the task of participating pairs is to negotiate labor contracts. Our aim is to find the effects of face-to-face communication and negotiation on contract framing. We argue that including pre-play communication into the principal-agent problem leads to a significant improvement of agent’s effort and results in changes of the compensation scheme. We show that incentives are not the only possibility to induce high effort. We use content analysis of the video-taped negotiations to find some characteristics of the communication process.

The Challenge of Treating (and Supervising) Patients with Borderline Pathology in a Residents' Clinic

Outpatients with borderline personality disorder (BPD) comprise up to 20% of psychiatry clinics, to which they are usually referred for treatment, not of their Axis II pathology but for comorbid Axis I conditions. The complex and intense transference and countertransference dynamics that patients with even "secondary" BPD evoke in psychotherapy treatments require careful handling and supervision. Cases can quickly lose focus, with resultant morbidity for both patient and treater alike. Little literature exists to guide supervision of psychiatry trainees treating outpatients with BPD and Axis I illness. We describe a case of a young woman with BPD with a comorbid major depressive episode (MDE) who was treated by a third-year psychiatry resident with a mixture of supportive and dynamic psychotherapy and medication management. The treatment rapidly became chaotic, with escalating levels of patient acting out and resident dissatisfaction. We outline suggestions for supervision of resident treatment of patients with comorbid or primary BPD, including importance of careful intake assessment and treatment formulation, the establishment of a clear-cut frame and/or treatment contract, and the need for contextualizing expectable transference and countertransference reactions. Last, we discuss the pros and cons of mixing psychotherapy techniques within the same treatment.

Sticks and Carrots: The Effect of Contract Frame on Effort in Incomplete Contracts

ABSTRACT In this study, we examine the effect of incentive contract framing on agent effort in an incomplete contract setting. Prior research suggests that when governed by complete incentive contracts, agents exert greater effort under penalty contracts relative to bonus contracts. However, in an incomplete contract setting, in which the incentive contract does not govern all tasks for which the agent is responsible, the agent's trust in the principal is relevant. In this setting, we predict that bonus contracts create a more trusting environment, and this effect spills over to tasks not governed by the incentive contract, such that bonus contracts elicit greater effort on these tasks as compared to penalty contracts. We develop and experimentally validate a theoretical model of the effects of contract frame on trust and effort in this incomplete contract setting. The main intuition behind the model is that the framing of an incentive contract affects the degree to which the contract terms are interpreted by the agent as a signal of mistrust. More specifically, penalty contracts engender greater distrust than do bonus contracts and, therefore, when contracts are incomplete, penalty contracts lead to lower effort on tasks not governed by the contract than do bonus contracts.

Strengthening the Level of Integrity of Public Procurement at the Execution Phase: Evidence from the Italian National Frame Contracts

The risks of integrity arising at the execution stage of public procurement processes are often overlooked. When contract award and contract management are handled by different public authorities integrity concerns about contract execution become more acute. Data from the monitoring mechanism of the National Frame Contracts awarded by Consip S.p.A. - the Italian Public Procurement Agency - show a very weak level of contract enforcement. We conduct a regression analysis to assess to what extent contract mismanagement may depend upon the intrinsic characteristics of the contracts and/or the nature of the public authority using the contract itself.

Incentives and Contract Frames

Principal-agent problems are pervasive in economic settings. CEOs and shareholders, lawyers and clients, manufacturers and retailers, lenders and borrowers are all examples of settings in which moral hazard problems might arise. Incentive contracts in both individual and team environments have been studied by economists (see Shavell (1979) and Holmstrom (1982, 1979) for seminal theoretical work, and Prendergast (1999) for a survey of empirical literature). Contracts that tie an agent's compensation to performance, such as conditional bonus schemes, have been proposed as a way to align the interests of agents and principals. Experimental literature from economics and social psychology suggests that the way choices are framed can affect decisions as well. Hence, contract frames might influence the effectiveness of incentive schemes. This comment first outlines seminal experimental work on frames and describes a recent study that relates the incentive contract literature with the experimental work on frames. Second, it discusses the experimental design and findings of Brooks, Stremitzer, and Tontrup's (2011) work on individual incentives and contract frames.

An Analysis of Extendibility and Early Termination Provisions: The Importance of Framing Duration Safeguards

We augment transaction cost economics with social cognitive psychology to show that contract framing is an important element in minimizing issues in focal exchanges and managing buyer-supplier rela...

Designing Effective Contracts: Exploring the Influence of Framing and Expectations

How a contract influences the exchange and ongoing relationship between parties is an unresolved issue. While some suggest contracts negatively or positively influence the exchange and relationship, we argue that the contract frame determines its impact. Using regulatory focus and expectancy violation theories, we argue that promotion- and prevention-framed contracts induce different emotions, behaviors, and expectations, leading to different exchange outcomes and relationships, depending on the context. By considering contract framing, we provide new research opportunities in areas that use contracts to achieve desired outcomes.

The Effect of Contract Framing on Subordinates Performance and Propensity to Create Budgetary Slack

The Effect of Contract Framing on Subordinates Performance and Propensity to Create Budgetary Slack

The Effects of Incentive Contract Frame and Relative Performance Information on Performance in a Tournament Compensation Scheme

The Effects of Incentive Contract Frame and Relative Performance Information on Performance in a Tournament Compensation Scheme