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Purpose This paper aims to investigate how construction clients currently deal with procurement and to analyse how the choices made during the buying process stages affect the combination of governance mechanisms and control types in client‐contractor relationships. Design/methodology/approach Empirical data were collected through a survey of 87 Swedish construction clients. Findings Current procurement procedures establish governance forms facilitating a focus on price, through output control, and authority, through process control. Since construction transactions are mostly characterized by high complexity and customisation and long duration, the theoretical framework prescribes a focus on trust and a somewhat lower focus on price and authority. Hence, from a transaction cost perspective, construction clients focus too much on price and authority and too little on trust. Since current procedures may cause problems in all stages of the buying process, the result suggests that partnering arrangements, entailing completely different choices during the buying process, may be a suitable way to facilitate trust and cooperation through informal social control. Research limitations/implications Since the empirical results are based on data collected from only Swedish clients, international generalizations should be made cautiously. Practical implications Clients wishing to implement trust‐based collaborative relationships need to reconsider their procurement procedures entirely; joint objectives, teambuilding and other “fuzzy” techniques are not enough to transform adversarial relationships into cooperative ones. Originality/value Earlier research has focused on one or a few aspects of procurement and governance, while this paper adopts an overall process perspective, taking into account clients' procurement procedures in their entirety.
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Procurement effects on trust and
control in client-contractor
relationships
Per Erik Eriksson
Department of Business Administration and Management,
Lulea
˚University of Technology, Lulea
˚, Sweden, and
Albertus Laan
Department of Construction Management and Engineering,
University of Twente, Enschede, The Netherlands
Abstract
Purpose – This paper aims to investigate how construction clients currently deal with procurement
and to analyse how the choices made during the buying process stages affect the combination of
governance mechanisms and control types in client-contractor relationships.
Design/methodology/approach – Empirical data were collected through a survey of 87 Swedish
construction clients.
Findings Current procurement procedures establish governance forms facilitating a focus on price,
through output control, and authority, through process control. Since construction transactions are
mostly characterized by high complexity and customisation and long duration, the theoretical
framework prescribes a focus on trust and a somewhat lower focus on price and authority. Hence, from
a transaction cost perspective, construction clients focus too much on price and authority and too little
on trust. Since current procedures may cause problems in all stages of the buying process, the result
suggests that partnering arrangements, entailing completely different choices during the buying
process, may be a suitable way to facilitate trust and cooperation through informal social control.
Research limitations/implications Since the empirical results are based on data collected from
only Swedish clients, international generalizations should be made cautiously.
Practical implications – Clients wishing to implement trust-based collaborative relationships need
to reconsider their procurement procedures entirely; joint objectives, teambuilding and other “fuzzy”
techniques are not enough to transform adversarial relationships into cooperative ones.
Originality/value Earlier research has focused on one or a few aspects of procurement and
governance, while this paper adopts an overall process perspective, taking into account clients’
procurement procedures in their entirety.
Keywords Procurement, Partnership, Trust, Construction industry, Sweden
Paper type Research paper
Introduction
In many countries, the construction industry has been criticized for its incapacity for
innovation and improvement (Egan, 1998; Ericsson, 2002; Ng et al., 2002; Chan et al.,
2003). Poor productivity, cost overruns, decline in construction quality, decrease in
customer satisfaction, conflicts and late completion are problematic areas for the sector
(Egan, 1998; Yasamis et al., 2002). Root causes for these inefficiencies have over the
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0969-9988.htm
The authors greatly acknowledge assistance and comments provided by Dr TorBjo
¨rn Nilsson,
Lulea
˚University of Technology and Professor Brian Atkin, Lund University.
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effects
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Engineering, Construction and
Architectural Management
Vol. 14 No. 4, 2007
pp. 387-399
qEmerald Group Publishing Limited
0969-9988
DOI 10.1108/09699980710760694
years been directed to the industry’s fragmentation, the uniqueness of construction as a
product, the divorce between design and construction, obsolete procurement methods
(Naoum, 2003) and lack of trust and cooperation between the actors (Cheung et al.,
2003). Since the extent of trust and cooperation is affected by the procurement
procedures, this is a key improvement area (Latham, 1994; Egan, 1998) and a key factor
contributing to project success (Cheung et al., 2001).
Transaction cost economics (TCE) is a common theoretical framework when
investigating procurement and inter-organisational relationships in general (Aulakh
et al., 1996; Eriksson, 2006) and in construction (Voordijk et al., 2000; Rahman and
Kumaraswamy, 2002). According to TCE, competitive advantage results from efficient
governance of transactions (Williamson, 1985), which requires tailoring of
procurement procedures to transaction characteristics (Eriksson, 2006). Hence, it
would be interesting to investigate current construction procurement procedures from
a TCE perspective in order to analyse their fit to transaction characteristics, which
facilitates efficient governance. The purpose of this research is to investigate how
construction clients deal with procurement and utilize a TCE framework to analyse
how the choices made during the buying process affect the combination of governance
mechanisms in client-contractor relationships. After this short introduction of the
paper, a presentation of the theoretical framework follows, describing first how to
identify suitable governance forms and then how to establish them through
procurement. Then the data collection method is described (survey to Swedish
construction clients) and the empirical results are presented. The paper continues with
an analysis of how the current procurement procedures affect governance mechanisms
and project performance, and ends with conclusions.
Governance mechanisms and different types of control
TCE considers three main governance mechanisms (price, authority and trust) that are
strongly related to three different control types (output, process and social control). A
client can thus facilitate different levels of price, authority and trust in a transaction
relationship through the use of these different types of control (Eriksson, 2006). The
suitability of these mechanisms mostly depends on the levels of asset specificity and
frequency in the transaction (Williamson, 1985). Price is traditionally associated with
market relationships, suitable for standardized transactions. The price gives
information about what to be delivered and incentives to do it. The “invisible hand”
illustrates this mechanism, adjusting the transaction in relation to the prices resulting
from supply and demand (Larsson, 1993). The price mechanism is closely related to
output control (Hennart, 1993), defined as the degree to which the focal firm monitors
the results or outcomes produced by the partner (Aulakh et al., 1996). Output control is
efficient when it is possible to measure goal attainment, which mostly occurs when
asset specificity is low, and the monitoring party has limited knowledge of the
transformation process (Collin, 1993b; Das and Teng, 2001). Therefore, it is the most
proper form of control in price-based market relationships.
In a transaction governed by authority, the buyer can get the desired product from
the supplier through control of behaviour and inputs (Ha
˚kansson and Snehota, 1995).
The “visible hand” illustrates this mechanism, adjusting the transaction by giving
authoritative orders to the agent executing them (Larsson, 1993). Authority is related to
process control (Hennart, 1993), referring to the focal firm’s monitoring of the partners’
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behaviour or the means used to achieve the desired ends (Aulakh et al., 1996). It may be
realized through formal structures, contractual specifications and managerial
arrangements (Das and Teng, 2001). Increased inter-dependencies, caused by asset
specificity, make output control less efficient than process control (Gencturk and
Aulakh, 1995). Furthermore, bounded rationality and asset specificity make outputs
hard to measure (Williamson, 1996; Das and Teng, 2001). When asset specificity is
high, process control is suitable, if the client knows the appropriate action to achieve
the goal (Collin, 1993b; Das and Teng, 2001).
To obtain the advantages and synergies of cooperative relationships, the
establishment of trust is vital (Aulakh et al., 1996). In a transaction governed by
trust the parties to an exchange believe that, without the exercise of authority, they can
get what they want from each other, without fearing opportunism (Ha
˚kansson and
Snehota, 1995). Trust can be defined as positive expectations regarding the other in a
risky situation (Das and Teng, 2001). This mechanism is illustrated by the
“handshake”, adjusting the transaction in relation to agreements resulting from
negotiations between organizations (Larsson, 1993). The most proper form of control in
cooperative relationships is social control, facilitating trust and commitment (Das and
Teng, 2001). Social control may be defined as building a common organizational
culture that encourages self-control (Aulakh et al., 1996). When neither output nor
process control is appropriate, i.e. when it is not possible to measure goal attainment
and the monitoring party does not know the appropriate action to achieve the goal,
social control is most efficient (Collin, 1993b; Das and Teng, 2001).
Eriksson (2006) has developed a TCE-based procurement model that identifies six
different types of transactions, depending on their asset specificity and frequency.
Different combinations of mechanisms should coordinate each transaction type. In the
model (see Figure 1), approximate values (low, medium, and high) of the three
mechanisms are described, together constituting 100 per cent of the coordination.
The TCE-based model argues that increased levels of asset specificity (resulting
mainly from complexity and customisation) should lead to a lower focus on price and a
higher focus on trust and/or authority as governance mechanisms. Furthermore,
Figure 1.
Model for the choice of
governance mechanisms
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higher frequency and longer duration of the buyer-supplier relationship increase the
need for trust while somewhat decreasing the focus on price and authority.
Transactions of type 6 involve hierarchical production, not entailing a procurement
situation, for which reason they are outside the scope of the model.
Procurement effects on governance mechanisms
For the TCE-based model to be of practical use, it is not sufficient to know only which
combination of mechanisms is favourable for the transaction at hand; the purchaser
must also know how to obtain it. Eriksson (2006) therefore illustrates how different
causes of actions during the stages of the buying process will involve different types of
control, affecting the levels of price, authority and trust, see Table I.
Problem recognition and transaction type identification
Stage one involves the recognition of a problem and the awareness that the needs may
be filled through a purchase, resulting in a make or buy decision. Hence, the client first
has to decide which type (1-6) best fits the transaction at hand, by assessing the two
transaction characteristics of frequency and asset specificity. Then the client may
continue to the next stage in the process, specification, if the product is to be procured
from an external supplier (transaction type 1-5).
Specification
By specifying performance rather than technology (e.g. design-build contracts), output
control facilitates a high emphasis on price, while through detailed specification (e.g.
design-bid-build contracts), process control facilitates a high emphasis on authority. A
lower level of authority is obtained when the technical specification and the
characteristics of the product are developed by both client and contractor in
cooperation (e.g. design partnering). This mostly entails social control but also process
control to some extent, facilitating a high emphasis on trust, medium emphasis on
authority and low emphasis on price (Eriksson, 2006).
Buying stage Price focus through
output control
Authority focus
through process control
Trust focus through
social control
Specification Spec. by contractor Spec. by client Joint spec.
Bid invitation Open bid procedure Limited bid invitation Limited bid invitation
Bid evaluation Focus on tender price Focus on
authority-based soft
parameters
Focus on trust-based
soft parameters
Contract formalization Formal, comprehensive
contracts
Formal, comprehensive
contracts
Informal and
incomplete contracts
Type of compensation Fixed price Reimbursements Including incentives
Collaborative tools Low usage of
collaborative tools
Low usage of
collaborative tools
High usage of
collaborative tools
Performance evaluation Output control by client Process control by
client
Self-control by
contractor
Table I.
Procurement effects on
control types and
governance mechanisms
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Bid invitation
By using a large pool of potential suppliers who are often replaced, buyers facilitate
competition (Spekman, 1988; Stump, 1995) and a focus on price and short-term benefits,
which according to Anderson and Oliver (1987) is related to output control. Social
control involves investments in the partner’s socialization, enhanced by long-term
relationships and expectations of continuance (Aulakh and Gencturk, 2000). Process
control is also related to a long-term focus, since it removes incentives to sacrifice
long-term for immediate pay-offs (Anderson and Oliver, 1987). Negotiations with only
one or very few suppliers therefore indicate social and/or process control, while open
bid procedures indicate price focus through output control. Consequently, the larger
the number of bidders, the higher the emphasis on price and the lower the emphasis on
trust and authority and vice versa (Eriksson, 2006).
Bid evaluation
When focusing only on the lowest tender price, the client does not take the opportunity
to affect the characteristics of the supplier (Heide and John, 1990), indicating a
laissez-faire approach, which, according to Anderson and Oliver (1987), is related to
output control. In process control, however, the client takes most of the risk (Aulakh
and Gencturk, 2000). Then consideration of the characteristics of the supplier, such as
competence and capacity (i.e. control of inputs), becomes important (Anderson and
Oliver, 1987). Considerations regarding the collaboration and nurturing of the
relationship indicate social control (Aulakh and Gencturk, 2000). This may be
exemplified by soft parameters such as collaborative ability, reputation and earlier
experience of the supplier. Consequently, the more weight on price and the less weight
on soft parameters, the higher emphasis on price and the lower emphasis on trust and
authority, and vice versa (Eriksson, 2006).
Contract formalisation
Complete contracts are more legally binding because more specific clauses make the
contract easier to interpret and enforce (Woolthuis et al., 2005). Thus, contract
formalisation is important in price-based market relationships (Macneil, 1978),
involving output control. Even more so, process control results in formalised and
bureaucratic relationships (Aulakh and Gencturk, 2000). Through social control,
however, the parties establish an implicit sense of acceptable and deviant behaviour
(Aulakh and Gencturk, 2000), making formalisation unnecessary. Consequently, the
more formal and comprehensive the contracts are, the higher the emphasis on price and
authority, and the lower the emphasis on trust, and vice versa (Eriksson, 2006).
Type of compensation
A compensation system rewarding the supplier for his output (e.g. a fixed price for a
product delivered) indicates output control and a high emphasis on price, while
compensation for the costs of the supplier based on the time worked and the costs of
input material (reimbursement compensation) entails process control (Gencturk and
Aulakh, 1995), emphasising authority. Profit sharing (incentives) together with joint
objectives indicates social control (Das and Teng, 1998), emphasizing trust.
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Usage of collaborative tools
In some transactions (e.g. construction work) the actual production takes place within
the buying process since there is no ready-made product to buy. Because the client and
the contractor then have to interact to create the product, use of collaborative tools,
such as joint objectives, shared office building, teambuilding activities and joint
dispute resolution techniques, may be suitable (Cheung et al., 2003; Eriksson, 2006). A
larger extent and scope of such joint actions and collaborative tools will directly
facilitate trust building, through social control (Das and Teng, 1998), for which reason
they indicate closer cooperative relationships (Heide and John, 1990). Indirectly, it will
also decrease the emphasis on authority, through less need for process control, and
price, since these tools create human asset specificity, leading to switching costs for the
client. Consequently, no or low usage of collaborative tools results in increased need for
output and process control, indicating emphasis on price and authority, while high
usage indicates high emphasis on trust, through social control (Eriksson, 2006).
Performance evaluation
This deals with the fundamental evaluation of how well the procured product solved
the problem and how well the supplier performed. Monitoring of ongoing performance
enhances high emphasis on authority through process control, while inspection of the
outcome enhances high emphasis on price through output control. The more the
supplier himself is allowed to control the performance and the result, the higher the
emphasis on trust, through social control (Eriksson, 2006).
Methodology
The empirical data was collected through a survey, which was first piloted by five
respondents, resulting in only minor changes. The population investigated was 104
Swedish construction client organizations that are members of ByggherreForum, a
national construction client association. Registered contact persons were first
approached by email or telephone and asked if they or other more suitable persons in
their organizations were willing to participate in the study. Hence, it was up to the
contact person to choose the most suitable respondent, given that the survey involved
procurement and project management processes. Four people declined to participate at
this stage, due to lack of time, so a paper version of the survey was then sent out by
mail to the hundred people that had agreed to participate. These people were mostly
procurement managers, project managers or directors of the construction and facilities
department in their organizations. After two reminders, a total of 87 responses was
received, representing a response rate of 84 percent. In this paper only the empirical
data regarding different aspects of the organizations’ procurement procedures are
discussed. The respondents were asked how often they used different procurement
procedures (e.g. To what extent do you use the collaborative tools listed below during
the construction project period?). The items were measured using 7-point Likert scales
anchored by 1 ¼very seldom and 7 ¼very often. The exception to this is the items
regarding bid evaluation parameters, in which the importance of the parameters was
estimated: 1 ¼unimportant and 7 ¼very important.
Empirical results: clients’ current procurement procedures
In Table II, descriptive data are presented for all buying decision alternatives.
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In the design and specification stage, the respondents stated that the detailed design of
the construction product is mostly made by the clients and their consultants (mean
value 5.40). The specification is seldom left to be managed by the contractor (3.01) and
joint specification is seldom used (2.76).
In the bid invitation stage the usage of an open bid procedure was more common
(4.38) than limited invitation (2.90). The limited invitation construct is measured by
three items (slightly limited, strongly limited and direct negotiation), with a Cronbach
alpha (CA) of 0.65.
A principal component factor analysis (PCFA) grouped bid evaluation parameter
items into three factors/constructs (authority-based soft parameters, trust-based soft
parameters and price) with a KMO MSA ¼0.829, explaining 75.75 per cent of the total
variance, which is satisfactory. The statistical package of social science (SPSS) was
used in performing the rotation method Varimax with Kaiser Normalization. The alpha
reliability coefficient is 0.81 for the authority-based factor (supplier organization and
project staff, quality and environmental management systems, and references of
similar projects) and 0.83 for the trust-based factor (earlier experience of the supplier,
supplier’s attitudes toward change, their collaborative ability and their technical
competence). The mean values show that price (6.40) is considered more important
than authority-based (4.72) and trust-based (4.97) soft parameters; see Table III.
Regarding contract formalization, almost all respondents stated that they very often
(6.97) use standardized contracts (AB, ABT etc), established by the third party
Byggandets Kontraktkommitte
´(“The Construction Contract Committee”).
The most commonly used type of compensation is fixed price for the product
delivered (6.46). Reimbursement compensation for the obtained costs is not very
common (2.72) and compensation including incentives is seldom used (1.83). The
incentive construct consists of two items (CA ¼0.70): compensation including gain
share/pain share and bonus opportunities.
Buying stage Buyer decision Mean SD Items Alpha
Specification Spec by client/consultant 5.40 1.93 1
Spec by contractor 3.01 1.85 1
Joint specification 2.76 1.75 1
Bid invitation Open bid procedure 4.38 2.81 1
Limited bid invitation 2.90 1.55 3 0.65
Bid evaluation Tendering price 6.40 0.87 1
Authority-based soft parameters 4.72 1.28 0.81
Trust-based soft parameters 4.97 1.40 7 0.83
Contract formalization Usage of standardized contracts 6.97 0.24 1
Type of compensation Fixed price 6.46 1.01
Reimbursement 2.72 1.69 1
Including incentives/bonus 1.83 1.05 2 0.70
Collaborative tools Usage of collaborative tools 2.69 1.20 5 0.73
Performance evaluation Process control by client 5.51 1.85 1
Self-control by contractor 4.44 2.00 1
Complete output control by client 5.92 1.60 1
Random output control by client 2.56 1.75 1
Table II.
Descriptive empirical
results
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Different kinds of “collaborative tools” are not used very often (2.69) in construction
projects. The collaborative tools construct consists of five items (CA ¼0.73): joint
objectives, team building activities, joint IT-database, joint project office and an arena
for relationship discussions and dispute resolution.
Performance evaluation is mostly based on formal process (5.51) and output control
(5.92) by the client. Control during the construction process is also executed by supplier
self-control (4.44). This self-control does not, however, have much implication for the
clients’ end inspections, which are mostly very comprehensive. Limited random
inspections of the outcome are not common (2.56).
Analysis
The theoretical framework (Figure 1 and Table I) serves here as a basis for analysing
procurement decisions’ effects on governance mechanisms and project performance.
Governance mechanisms prescribed by the theoretical framework
To identify a suitable mechanism mix, the transaction characteristics (i.e. asset
specificity and frequency/duration) must be evaluated. According to Rahman and
Kumaraswamy (2002), today’s construction industry is a very high-risk, complex, and
multiparty business. The transactions are mostly parts of construction projects, which
involve many complex processes (Dubois and Gadde, 2002). Furthermore, each project
is customized and unique; standardized products are very rare. Transaction frequency
is generally low, since few clients are able to offer repeat orders for work over a long
time horizon (Cox and Thompson, 1997). However, transaction duration is very long;
projects generally last for at least a year, which increases the opportunity for
trust-building also within a single project (Kadefors, 2004).
According to Williamson (1985), the construction of plant facilities is a typical
occasional transaction involving high asset specificity, i.e. a type five transaction.
Overall, most construction projects are of that type. However, some projects are
significantly less complex than constructing a plant, for example production of small
Bid evaluation
Item mean
value
Factor 1
Authority-based
parameters
Factor 2
Trust-based
parameters
Factor 3
Price
Organization, personnel 5.14 0.856 0.219
Quality and environmental management
systems
4.24 0.799 0.156 0.128
References 4.80 0.777 0.290 20.254
Experience of supplier 4.82 0.837 0.170
Attitudes towards change 4.54 0.226 0.789 20.241
Collaborative ability 5.08 0.490 0.731 20.127
Technical competence 5.46 0.503 0.626
Tendering price 6.40 0.970
Factor eigenvalue 2.53 2.41 1.13
Percent of variance 31.58 30.08 14.09
Cronbach alpha 0.81 0.83
Factor mean values 4.72 4.97 6.40
Factor standard deviation 1.28 1.40 0.87
Table III.
Factor analysis of bid
evaluation parameters
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houses with modular construction. Such projects may be categorized as transactions of
type 3 or 4. For construction projects in general, the model prescribes medium
emphasis on authority, medium to high trust, and low to medium emphasis on price.
Procurement procedures’ effects on control and governance mechanisms
The empirical results show that the most common procurement decisions facilitate a
focus on price and/or authority in all stages of the buying process (see Table IV).
This means that the procurement procedures used by Swedish construction clients
mostly result in governance forms based on the mechanism combination of high
emphasis on price and authority and low emphasis on trust. From a control
perspective, clients almost exclusively rely on formal output and process control, while
informal social control is rare. Consequently, there are significant discrepancies
between the theoretical prescriptions and the empirical behaviours.
Procurement procedures’ effects on project performance
The high focus on price and authority together with a lack of trust may cause problems
in most of the buying process stages. Comprehensive specification made by the client
before the contractor is procured results in a divorce between design and construction.
The drawbacks of this approach are that construction planning cannot affect design
and it cannot meet the increasing need for speed and time reductions in construction
projects (Cheung et al., 2001; Dubois and Gadde, 2002). Early involvement of
contractors in specification is thus legitimate in order to integrate design and
construction planning (Akintoye et al., 2000) and shorten project duration (Cheung et al.,
2001).
Bid invitation through open bid procedures results in many hours spent on design,
planning and calculations that are never used, causing waste and non-value adding
costs (Dubois and Gadde, 2000; Ngai et al., 2002). Furthermore, it guarantees that the
actor constellations change all the time (Dubois and Gadde, 2000), which deters the
parties from making relation-specific investments. The constant replacement of actors
creates inefficiencies, since a new learning curve must be climbed by the supplier each
time (Cox and Thompson, 1997). Thus the short-term focus erodes long-term
sustainable competitive advantage (Ingirige and Sexton, 2006).
The focus on low tender price during bid evaluation causes many project delivery
problems. Contractors bid low to win the contract and then make everything in their
power to earn more money through extra work not specified in the contract. Thus,
Buyer decision Control type Governance mechanism
Specification by client/consultant Process control Authority
Open bid procedure Output control Price
Focus on tendering price Output control Price
High usage of standardized contracts Process þoutput Authority and price
Fixed price compensation Output control Price
Low usage of collaborative tools Output þprocess Price and authority
Continuous monitoring and complete end inspection
by client
Process þoutput Authority and price
Table IV.
Decisions’ effect on
governance mechanisms
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softer parameters should be more important (Latham, 1994); bid price should be an
order qualifier instead of an order winner criterion. (Yasamis et al., 2002).
Construction actors rely heavily on contract formalization through standard forms
of contracts, which are instruments seeking strict liability and attaching blame to
events that occur, encouraging non-collaborative behaviour and driving distance
between the parties (Barlow et al., 1997; Cox and Thompson, 1997). However, high
formalisation may also be a suitable complement to trust when contracts are coupled
with strong relational norms (Woolthuis et al., 2005). Hence, the common use of
standard contracts in construction is only harmful if they are used as safeguards in the
absence of relational norms.
Many projects last for several years and the design is often changed during that
time because of changes in the client’s preferences (Kadefors, 2004). Since uncertainties
in construction are high and derived from many different sources (Voordijk et al., 2000),
output-based compensation (fixed price) is inappropriate. This is because output
control through fixed prices may lead to inflexibility since the supplier may resist
adapting to changed circumstances (Aulakh and Gencturk, 2000). Reimbursement
compensation, preferably coupled with incentives, should thus create a better basis for
adaptation, suitable in complex and uncertain projects (Bajari and Tadelis, 2001).
The use of collaborative tools is normally missing in traditional projects. Such lack
of joint actions hinders integration of the actors and their activities, making them work
on arm-length distance from each other (Heide and John, 1990).
The heavy reliance on output control in performance evaluation is problematic,
since construction work is often hidden and very difficult to inspect after the
completion of the building. When outputs are hard to measure, due to bounded
rationality and asset specificity (Williamson, 1996; Das and Teng, 2001), process
control is suitable if the monitoring party knows the appropriate action to achieve the
goal (Collin, 1993b; Das and Teng, 2001). This is however not always the case. Not
every client organization has a large and highly experienced staff organization with
deep construction knowledge. In such cases social control is most efficient (Collin,
1993b; Das and Teng, 2001). Hence, self-control by the contractor seems appropriate,
increasing trust and commitment and decreasing the costs of non-value adding
client-led inspections.
In recent years, interest in collaborative approaches (e.g. partnering) has increased
among practitioners and researchers in the construction sector (Li et al., 2000).
Partnering is based on several fundamental principles, such as commitment, trust,
respect, equality and communication (Chan et al., 2003), which are applied to mitigate
the problems in the sector. A true partnering approach involves client decisions during
the buying process period (e.g. joint specification, limited bid invitation, bid evaluation
based on soft parameters, incentive-based compensation and collaborative tools)
completely different from the most common decisions presented in the empirical
results. Hence, this approach may be a suitable alternative to the traditional
procurement procedures, facilitating an emphasis on trust rather than price and
authority, as prescribed by the TCE framework. This argument is supported by
several empirical investigations, which have found significant benefits of partnering
(for example regarding quality, sustainability, dispute resolution, innovation, and also
time and cost reductions) compared to traditional procurement procedures (Barlow
et al., 1997; Egan, 1998; Chan et al., 2003; Fortune and Setiawan, 2005).
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Conclusions
This study has shown how Swedish construction clients’ current procurement
decisions establish governance forms that facilitate a focus on price through output
control, and authority through process control. Trust-breeding procedures entailing
social control are seldom used. The theoretical framework prescribes a mechanism
combination focusing on trust and with somewhat lower emphasis on price and
authority for construction transactions, due to high complexity/customization and long
duration. Hence, there are significant discrepancies between the theoretical predictions
and the empirical results. From a TCE perspective, construction clients focus too much
on price and authority and too little on trust. Since the most common decisions taken
by clients may lead to problems in all of the buying process stages, these findings give
theoretical support to the criticism arguing that the traditional procurement
procedures result in adversarial and trust-lacking relationships. From a
TCE-standpoint, the common combination of high price and authority is not
suitable for any type of transaction. Hence, changed procurement procedures are called
for. In recent years, interest in more collaborative approaches to procurement and
governance has increased. Through a change of buying behaviour, clients
implementing partnering may establish governance forms facilitating trust and
cooperation through informal social control rather than the traditional price- and
authority-based relationships, utilizing formal output and process control. From a
TCE-perspective, partnering therefore seems to be more suitable than the currently
used procurement procedures. However, it also important to mention that
trust-building arrangements do not solve all problems; some extent of price and
authority is needed to achieve efficient transactions.
References
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management in the UK construction industry”, European Journal of Purchasing & Supply
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Corresponding author
Per Erik Eriksson can be contacted at: pererik.eriksson@ltu.se
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... Em relação à estratégia, o foco é futuro, porque a gestão de projetos busca alcançar resultados de negócios de maneira eficiente para atender aos objetivos da organização e obter vantagem competitiva (Oliveira, 2018). Isso requer governança e ações alternativas para mitigar conflitos e possibilitar ganhos mútuos (Williamson, 1975;1985; -por exemplo, elaborar e assinar contratos (Eriksson & Laan, 2007). Estes contratos, geralmente, descrevem temas sobre ética, confiança, estrutura, funções, sistema e mecanismos de controle que serão adotados nos negócios entre as organizações (Müller, Turner, Andersen, Shao, & Kvalnes, 2014;Wisgickl & Puck, 2014;Chen, 2015), sendo a confluência dos interesses concorrentes das organizações temporárias (projetos) com as metas econômicas das organizações (Carter & Hodgson, 2006;Hjelmbrekke, Laedre, & Lohne, 2014;McGrath & Whitty, 2015). ...
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Os projetos são criados para atingir objetivos estratégicos. A eficácia dos projetos está no melhor uso dos recursos para produzir resultados que atendam as expectativas de suas partes interessadas. Esta pesquisa valida as influências entre engajamento das partes interessadas e eficácia dos projetos por meio da governança pela confiança, custos de agência e custos de transação. A tese é que o aumento da governança pela confiança nos gerentes de projetos e equipe de projetos melhora a eficácia dos projetos e fortalece as ações de governança pelo controle durante o ciclo de vida dos projetos, sendo que o oposto também é verdadeiro ⸺ ou seja, a redução da confiança nesses agentes prejudica as ações de controle e os resultados dos projetos. O método escolhido foi a survey. São utilizados 304 registros de respondentes de quarenta e nove países. A análise dos dados foi realizada por meio da Partial Least Squares Structural Equation Modeling e inclui avaliações de mediação, moderação, comparação de grupos com a Partial Least Squares Multi-group Analysis e verificação do mapa de prioridades com o Importance-Performance Map Analysis. O documento está no formato de artigos. O primeiro artigo é sobre a revisão da literatura para apresentar a estrutura conceitual a respeito da governança nos projetos. O segundo artigo é sobre os resultados que demonstram que o engajamento das partes interessadas é o aspecto mais importante para a eficácia dos projetos. O terceiro artigo é sobre as comparações entre tecnologia da informação e outras áreas de negócio para demonstrar que a especificidade da governança para os projetos (setor de entrega e forma de governança) atua como moderador para a eficácia dos projetos. Sob o prisma epistemológico, tem-se a contribuição do modelo conceitual. Sob o prisma metodológico, tem-se o protocolo desenvolvido para revisão sistemática e integrativa da literatura. Sob o prisma pragmático, nos projetos é mais interessante aumentar a governança pela confiança nos agentes, pois isso fortaleceria as ações de governança pelo controle.
... The control framework by Ouchi [17], which includes three control modes, i.e., market, bureaucracy, and clan (also referred to as output, process, and social control, respectively), is the most widely used within organizational control research [18,19]. Eriksson [20] and Eriksson and Laan [21] developed a procurement model for procuring contractors based on Ouchi's control framework [17], which includes different procurement stages and different alternatives linked to the three control modes within each stage. A client's procurement strategy therefore consists of a combination of (procurement-related) control modes [13,20,21]. ...
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The last decades have seen a growing interest in construction management amongst scholars, particularly, in how to apply supply chain management (SCM) strategies to improve logistics efficiency and project performance. Nevertheless, there is a lack of systematic literature reviews (SLRs) which integrate multiple quantitative methods to synthesise the literature on construction logistics and supply chain management (CLSCM) and analyse their trends during the last two decades. In this work, we concurrently deploy the rigorous six-step SLR protocol together with co-citation analysis, factor analysis, multidimensional scaling-based fuzzy k-means clustering, and keyword extraction and co-occurrence analysis to ascertain and examine clusters of CLSCM application. The results show that there are six established research clusters in CLSCM, namely, logistics and SCM for prefabricated construction, construction procurement, construction supply chain integration, green construction SCM, reverse logistics in construction and onsite construction logistics. Amongst these clusters, construction supply chain integration plays the most integral role. Informed by this ascertained knowledge structure, we explore the research trends during the period reviewed, propose a conceptual framework for CLSCM and suggest research avenues.
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Amongst different aspects of a capital construction project, procurement is found to be the most important area and represents over 80% of the contract value. The selection of an appropriate procurement strategy is an important contributor to overall project success. Within several procurement methods, Early Contractor Involvement (ECI), a relatively new strategy to procure a construction project, is becoming more popular for infrastructure projects across Australia. However, it appears that ECI has been adopted as a preferred procurement option with little research or piloting, and decisions to select ECI for a project have been mostly judgmental, and subject to biases of the decision-makers. This paper focuses on this important issue and proposes a conceptual model for selecting ECI for a construction project. Grounded Theory research methodology is employed for this study that facilitates the generation of categories and contextualises theory. Validation of the theory was ensured by carefully practicing the theoretical coding procedures through ‘open coding’, ‘axial coding’, and ‘selective coding’. The data is collected through individual interviews with experts within client organisations who held senior management level roles in their organisations and were involved in the selection process of ECI and could provide input into their experience in that area. The proposed selection model integrates the procurement selection criteria specifically related to the project characteristics, client’s objectives, and internal and external project environments with alternative selection approaches and practices. This paper also discusses the notion of social, process, and output control by using ECI.
... The objectives of involving subcontractors are better cooperation between the different parties, innovation, greater commitment and linking employee skills to production management (Maloney and Federle, 1993;Marchington et al., 1992). Integrating subcontractors into planning may have positive effects from financial (Errasti et al., 2007), schedule (Elfving et al., 2005), quality (Errasti et al., 2007) and innovation (Eriksson et al., 2007a(Eriksson et al., , 2007b viewpoints. ...
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