| Title |
A Study on Client in Building Act on Agency Theory |
| Authors |
Lee Jae-In ; Park Eon-Kon |
| Keywords |
Principal-agent ; Agency Costs ; Risk Management ; Owner ; Client ; Partnership ; Monitoring ; Inspection |
| Abstract |
This study was conducted to research in the client in the Building Act in the perspective of Law and Economics using agency theory in Information Economics. Agency problems generated from the separation of actual construction and possession (estate)?order in modern construction are connected to economic damage of the client who doesn't have enough information and technology than actual agents. Accordingly, clients should manage the risk of a construction process through monitoring and communication in order to magnify profit from construction. This risk management, however, demand monitoring expenditure, bonding expenditure and residual loss of the client. In spite of the costs, the risk management is inevitable, because the improvement of construction process directly succeeds to the profit maximization. Buildings can be not only private property, but also public property. Thus, solving the agency problems magnifies clients' private profit, and maximize public profit by prohibiting a free ride or moral laxity. Finally, solving the agency problems offer a motive to a person and the public together. Moreover, the cooperation of both sides can be a foundation to materialize fairness without the conflict between private profit and public profit.
Under this background, this paper limited construction process within the narrow sense of design (step 1) - construction (step 2) and the results are drawn as below. First, the expansion of assistant systems for a client to prevent client's adverse selection (step 1). Second, the intensification of public watch over permitting process (step 1). Third, public watch over construction (step 2). Fourth, the introduction of the insurance of specialists Fifth, the introduction of new model for a client. Sixth, the enactment of moral regulation for independent specialists. |