【正文】 cent were procured using open petitive tendering. The use of negotiations with single source suppliers is also mon in high tech and software, and used for defence procurement as well. This Chapter ers a framework to pare petitive tendering with negotiations and relate these award mechanisms to the payment procedures chosen in the contract. In particular, it tries to shed light on when petitive tendering with ?xed price contracts will be preferred to negotiating cost plus contracts, and when not. To put this Chapter in perspective it is worth observing that most of the economic analysis describes the procurement problem as follows. The supplier has 3 information about production costs that the procurer does not have. The procurer then has to consider clever ways to infer the suppliers costs, such as ering the supplier many potential projects to choose from, and having the supplier select the one that will be produced. In contrast, scholars and practitioners of engineering and construction management argue that the central problem in procurement is not that suppliers know so much more than procurers at the onset of the project, but that instead both procurers and suppliers share uncertainty about many important design changes that occur after the contract is signed and production begins. These changes are usually a consequence of design failures, unanticipated conditions, and changes in regulatory requirements. An illustrative example of the signi?cance of ex post adaptation is the building of the Getty Center Art Museum in Los An geles, which is a 24 acre, $1 billion dollar facility that took over 8 years to construct (see Engineering NewRecord 1994, 1997). The project design had to be changed due to site conditions that were hard to anticipate. The geology of the project included canyons, slide planes and earthquake fault lines, which posed numerous challenges for the team of architects and contractors. For instance,contractors “hit a slide” and unexpectedly moved 75,000 cubic yards of earth. More severely, in 1994 an earthquake struck. Cracks in the steel welds of the building’s frame caused the contractors to reassess the adequacy of the seismic design standards that were used. The project design had to be altered also due to the regulatory environment— 107 items had to be added to the building’s conditional use permit. These problems were very hard to predict, both for the procurer and the contractor. However, it seems reasonable that once problems arose, the contractor had superior information regarding the costs and methods to implement changes. A more recent and much more contentious example is the “big dig” in Boston, where 12,000 changes to more than 150 design and construction contracts have led to $ billion in cost overruns, much of which can be traced back to unsatisfactory design and site conditions that diered from expectations. These observations suggest that the procurement problem may indeed be primarily one of smoothing out or circumventing adaptations after the project begins rather than information revelation by the supplier before the project is selected. In this Chapter we argue that the form of contracts and award mechanisms can be tailored in a way to help mitigate this procurement problem. In particular, a trade between 4 incentives to reduce cost and incentives to facilitate changes and share information will be the key force in our arguments of contractual choice. We argue that simple projects, which we de?ne as easy to design with little uncertainty about what needs to be produced, ought to be procured using ?xedprice contracts,should be acpanied by high levels of design pleteness (to prevent the need for adaptations), and are best awarded through petitive tendering. In contrast, plex projects, which we de?ne as hard to design with large scope for surprises in the final configuration ought to be procured using costplus contracts, should be acpanied by low levels of design pleteness (implying a high chance that adaptations to the contract will be needed), and should be awarded through a negotiation with a reputable and qualified supplier. The intuition for our prescriptions stems from a tension between providing incentives to lower costs and avoiding costly and wasteful renegotiation that follows requests for changes. The strong incentives to reduce costs that are oered by ?xedprice tendered contracts will lead the parties to the transaction to dissipate valuable surplus when changes need to be renegotiated. This eciency loss will often be due to haggling over prices when there is true lockin of the current supplier who wishes to use the need for changes to his advantage. Costplus contracts, in contrast, discourage costsaving eorts but ease the process of renegotiating changes and adaptation to the contract’s original requirements. We continue to argue that the choice of payment procedures, such as ?xed price and cost plus contracts, is tied in with the followup decision that a procurer faces: whether to award a procurement contract by petitive tendering or by negotiating with a potential supplier While our research has been motivated by practices in the private sector, it oers implications for the public sector as well. In the . the public sector statutes that govern procurement, typically based on FARs, strongly favor the use of petitive bidding. For example, from 1995 to 2020, niyseven percent of public sector building construction projects in Northern California were procured using petitive petitive bidding does have the advantage of unbiased awarding of projects, it fails to res