Minimizing disputes arising due to information asymmetry in Sri Lankan public building projects procured under the traditional approach

Abstract

Public procurement plays a crucial role in achieving national development objectives by ensuring the effective acquisition of goods, works, and services. In Sri Lanka, most public building construction projects are procured under the traditional procurement method, where design and construction responsibilities are distinctly separated. Although this approach provides a structured framework, it often leads to significant information asymmetry (IA) among project stakeholders due to fragmented responsibilities, multiple principal–agent relationships, and limited information sharing. Such asymmetries contribute to adverse selection, moral hazard, and hold-up problems, resulting in delays, cost overruns, and quality deficiencies ultimately leading to disputes. This study aims to investigate how to minimize information asymmetric problems in public traditional procurement in relation to the building projects in Sri Lanka in order to improve the project success and support achieving the public procurement goal of best value for money and sustainability. Adopting a pragmatic research philosophy and an abductive approach, the study combines qualitative and quantitative methods. Semi-structured interviews were conducted with professionals representing clients, consultants, and contractors to validate the identified information asymmetries, causes of disputes, and mitigation measures derived from the literature review. A questionnaire survey was subsequently administered to 120 professionals involved in public building projects, with responses analyzed using the Relative Importance Index (RII) to rank the significance of identified factors. Findings indicate that key sources of information asymmetry include poor contractor evaluation, payment delay, inadequate communication, incomplete or ambiguous contract and design documentation, and limited transparency in procurement decisions. These factors commonly lead to disputes related to variations, approval delays, and disagreements over cost and time extensions. The study recommends a multi-layered approach to mitigate IA, incorporating improved pre-contract screening, detailed documentation, transparent financial processes, effective contract administration, continuous monitoring, and enhanced communication. Furthermore, adopting technologies such as Building Information Modelling (BIM) and promoting relational contracting can strengthen trust and reduce information gaps. The research contributes to the limited body of knowledge on information asymmetry in Sri Lankan public building procurement and provides practical insights for policymakers and practitioners to enhance the efficiency, transparency, and sustainability of traditional procurement systems, thereby improving overall project success.