Transfer of Burden

Transaction Cost and the Transfer of Burden
Transaction cost is generated through interaction across boundaries, this includes the cost of acquiring and managing contracts between different players in a project. Traditional contracting exacerbates this cost by not adequately catering for the numerous risks that are mostly impossible to identify and plan for during the planning stages, thus creating room for the different project contributors to seek ways to protect themselves against undue cost escalations.
The transaction cost is not a sunk cost on the contractors or subcontractors (save for when they do not win a bid), they are usually borne by the client in the form of overall project cost plus the contractors markup; this transfer of cost is what the author terms the “Transfer of Burden”. Figure below illustrates how this cost is transferred to the client.
“Transfer of Burden” is the transfer of the cost of managing contractual interfaces between different parties in a contracting relationship up to the client as part of the ultimate cost of a contract.
This phrase was first coined in an article titled "Strategic Partnership - An Imperative for Project Management in Multiplayer Setting" also published as a project management white paper in the UK Project Management website www.projectsmart.co.uk.

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