The purpose of this thesis is to determine whether the standard contract K03 can be optimised with regards to the documentation and create incentive-compatibility between the contracting parties. This is partly done through economic structures, designed to prevent opportunistic behaviour from the agent, and through dynamic contractual terms. Therefore, the primary focus of this thesis is to optimise and create incentive-compatibility in K03 between a state entity and a private contractor regarding documentation requirements in order to minimise the switching costs to a new contractor.
Through a long-term IT-contract, the state entity faces a risk for opportunistic behaviour in terms of adverse selection and moral hazard. The thesis analyses the contractual issues of adverse selection and puts forward three possible incentive structures to prevent low-quality agents from entering the IT-contract. Furthermore, punitive measures are replaced with dynamic incentive schemes, which rewards good behaviour and punishes bad behaviour. To further align incentives, this thesis implements surveillance structures to improve the quality of documentation and prevent moral hazard.
The juridical setting of IT-contracts is an area governed by no lex specialis thus, the contractual terms and their meaning will be determined through interpretation. K03 has in vague terms described the requirements of the contractor with regards to the drafting of documentation. This is not in legal or economic terms desirable, given that the contract does not present the necessary incentives for the contractor to draft the expected quality of documentation. As an aid towards the proper incentive scheme, ISO:27001’s surveillance mechanisms will be analysed and implemented in a customised way, in order to fill the gaps of the lacking documentation terms in K03.
Because of bounded rationality and transaction costs, the contract is incomplete. Consequently, the parties cannot foresee all eventualities, neither short or long term, and emerging conflicts are associated with high transaction costs and diminishing value of the contractual relationship. To mitigate transaction costs and develop relational rent, the thesis implements principles such as relation specific investments and informal governance structures. Through strategic cooperation, the parties can implement hardship and gains provisions as an acknowledgement of their bounded rationality and minimise transaction cost ex-ante.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||109|