Analysis of Collusion between Contractors and Supervisors in Constructions

In order to avoid collusions between supervisors and contractors due to benefit drive and asymmetrical information in constructions, a moral hazard model with a single principal and multiple agents was set up by using regulation theory and introducing a hierarchical principal-supervisor-agent structure, for quantitative research of engineering management. The result shows that under the bidding evaluation mode with bill of quantities, the profit value of bidding contracts, the effort cost of contractors, the penalty imposed by owners on contractors, and the bribery proportion of supervisors are all positively correlated to the agent cost; but the detection probability of collusions by owners and the intensity of punishment are negatively correlated to the agent cost. In addition, owners should devise the reward and punishment mechanism according to their own capacity of punishment. When owners' capacity of punishment is lower than a certain value, they should increase the rewards to supervisors in order to encourage the efforts of contractors and supervisors and prevent the collusions to the maximum extent.