Stephan Meijers Msc. 14th August 2014

Increasing cooperation?

Background

• Traditional contracting shown to cause adversarial relationship.

– Leads to claims during construction, increasing transaction costs.

– Austerity exacerbates this problem

• Various authors argue for cooperation; partnering

Partnering

• More cooperative relationships through:

– Aligning goals

– Integrating contractor’s expertise in design and planning

– Involving key participants early

– Creating an integrated team

– Improving communication

Partnering

• Requires significant investment in specific procurement procedures

– Regarded as inappropriate for one-off, small, less complex projects.

– Implementation not always possible due to public procurement laws.

Search for alternatives

• Municipalities experimented with immediate post contractual negotiations.

– Extra phase of negotiations between the award phase and construction of a traditionally procured project.

– Negotiations towards a ‘fixed price’.

Research Goal

• Do immediate post contractual negotiations contribute to more cooperative relationships?

Research method

• Case study of 4 municipal projects

– Three small, less complex projects

• €300 000, €500 000, €600 000.

– One more complex project

• €2 500 000

• Data was gathered using document study, centralized evaluations, and 17 qualitative interviews.

Findings: Goal alignment

• Goals are aligned by transferring design & stagnation risks

– Contractor has no interest in claiming

– Contractor doesn’t experience this as added risk

– Design errors are removed, bill of quantities recalculated.

• Fewer meetings necessary to discuss changes

Joint problem solving

• Joint risk analysis & allocation

– Better insight in project risks

– Optimization of planning and design

– Budget prepared for risks

– Reduced solution constraints

• Meetings used to solve problems rather than negotiate claims

Involvement of key participants

• Contractor becomes a part of the planning process

– Time savings

– Reducing impact on inhabitants

– Reduction of project start up time

• Selection based on quality increases this effect

– Differentiation in tenders

– Increased knowledge during negotiations.

Summary

• Immediate post contractual negotiations introduce a period of planning in which parties:

– align their goals,

– jointly solve problems before construction starts

– and integrate contractor expertise into the design and planning.

Discussion

• Condensing negotiations to a single period of time leads to remarkable changes in the interaction between client and contractor bearing a remarkable resemblance to the effects of partnering.

• Transaction costs: Resources spent at the beginning earn themselves back.

Conclusions

• Clients can take better advantage of contractor insights.

• Discussion and renegotiation are minimized.

• It stimulates joint problem solving during the negotiations and construction phases.

Conclusions

• Parties are working towards shared business goals, with adversarial relationships making way for more cooperation

• Immediate post contractual negotiations are an interesting alternative to partnering in small projects