Mitigating Principal‑Agent Risks in Public Infrastructure Projects Through Joint Engineering‑Financial Review Procedures

Abstract

Large‑scale public‑infrastructure projects feature multi‑layered chained principal‑agent relationships among government funders, owner‑representative entities, general contractors and subcontractors. Opportunistic behavior induced by information asymmetry constitutes a core driver of project cost overruns and capital losses. Existing research over‑relies on contractual incentive‑constraint mechanisms while neglecting the governance value of joint engineering‑financial review as a non‑contractual procedural governance tool. Systematic empirical explanations for its micro‑level mechanisms, necessary conditions for effectiveness and configurational boundaries remain absent, creating notable theoretical research gaps. Based on the Engineering‑Financial Governance Nexus (EFGN) theory, this paper extends the multi‑layer principal‑agent analytical framework. Drawing on archived data from 21 large‑scale public‑infrastructure projects across Australia, North America and the European Union (single‑project investment ≥ 500 million USD (Eisenhardt, K. M., 1989); public‑funding share ≥ 30 %), this study integrates process‑tracing, Necessary‑Condition Analysis (NCA) and fsQCA configurational analysis to systematically de‑risk‑mitigation mechanisms and governance boundaries of joint‑review procedures. The study shows that joint‑review procedures suppress agent risks via three pathways: reconstruction of information symmetry, cross‑validation of multi‑dimensional evidence, and elevation of opportunity costs for opportunistic conduct. Substantive participation of financially qualified independent CPA personnel acts as the core necessary bottleneck condition for procedure effectiveness, with a bottleneck constraint effect of 0.812. Four equivalent effective configurations and two typical failure configurations are empirically identified, clarifying the core distinction between “paper‑based institutionalization” and “substantive effectiveness” of procedures. This research improves the theoretical system for multi‑layer principal‑agent governance in public infrastructure and provides quantitative evidence and practical references for procedural‑system optimization of U.S. federal infrastructure projects under the Bipartisan Infrastructure Law.