Integrated Approaches in Economics of Contracting and Knowledge Management

Abstract

Knowledge management (KM) in the space sector is a particularly interesting study owing to the specific characteristics of lack of patenting and recording of information associated with security considerations, as well as the sectoral age pyramid and the obsolescence of equipment that results in significant KM transaction costs and loss of information. Coupled with the custom-made nature that is typical of space projects, the analysis in this paper focuses on contractual mechanisms that incorporate transfer of KM within and beyond a project’s life-cycle and the implications for specific types of contracts that are typically used -mostly in procurement. This leads to incentives for contractors to enhance also inter-firm transfer of knowledge and develop the management tools that will sustain virtual skills of past project teams. The paper shows that this approach can result in significant benefits for all stakeholders, despite challenges associated with potential transaction costs in contracting and lack of standards and relevant experience in usage of such mechanisms. Finally, a critique of the industry tradition of cost and performance assessments prior to end of lifetime is emerging.