The utility and value of contract terms: a case study on interior contractors

Abstract

This study applied the conjoint analysis technique to appraise the utility of interior contractors' contract terms and project price conditions, the sample group comprising 112 interior contractors working in 12 shopping centers of a public company in Thailand. The results showed that the advance payment term, the period of an interim payment term, the period to make a payment term, and the project price conditions had average utility ratios (ratio of its utility to the total utility) of 28.53%, 20.24%, 20.41%, and 25.87%, respectively. These results confirmed that each of these three contract terms are as important to interior contractors as the project price condition (no price reduction by 5% of the proposed price). This study also valued the three contract terms by comparing their utility with the utility of the project price condition. The values of the terms to the interior contractor were as follows: the value of the advance payment term varied between 0.00–11.67% of the proposed price; the value of the period of the interim payment term varied between 1.25–8.33% of the proposed price; and the value of the period to make a payment term varied between 2.00–11.67% of the proposed price. The value of all three contract terms varied between 12.00–20.00% of the proposed price. The insights into the utility and value of these three contract terms from this study could aid project owners or tenants of shopping centers in project price negotiations.