LIST OF ABBREVIATIONS AND ACRONYMS
2.9 RELATIONSHIP QUALITY ASSESSMENT CRITERIA
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characterized by self-interest, mistrust, lack of mutual objectives, and win-lose business philosophy that results in adversarial or arms-length relationships. RQ 2 is characterized by partial win-win benefits, and trust is mainly built on the capability of each party to execute quality work; this can be seen as a transition from traditional/separated to a hybrid of separated- collaborative contracting relationship to achieve project objectives. At RQ 3, mutual objectives are achieved on a single project, partners work together collaboratively as an integrated project team, goodwill trust and win-win attitude foster the project partnering relationship. At RQ 4, objectives are aligned over a series of projects, close collaboration is achieved across the whole supply chain, high degree of trust exist between parties, and an attitude of joint problem-solving and continuous improvement is adopted. The model presented in Figure 2.1 and the matrix in Table 2.6 will be adopted in obtaining information on SMCs’ experience on public-sector Targeted Procurement projects, using a questionnaire survey.
Figure 2.1: Relationship quality model for the study
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of: Procurement (selection criteria, procurement method, form of contract), Objectives alignment (objectives alignment & benefits, continuity of work), Communication (information exchange, learning and innovation sharing, cost data transparency), Collaboration (working relationship), Risk allocation (risk sharing & allocation, balance of risk and reward), joint problem-solving (problem-solving effectiveness), and Trust (confidence in others’ behaviour).
They are discussed in subsequent sections.
2.9.1 Procurement
Procurement and by extension contracts are the foundation in building supply chain relationships (London and Henley, 2001). Procurement criterion encompasses the selection criteria, procurement method, and form of contract. Selection criteria identifies the basis for selecting the contractor for example, lowest price or multi-criteria of capability, experience, performance, cost (Fong and Choi, 2000; Meng et al., 2011). Building contractor selection process is critical for clients on construction projects (Sarkis et al., 2012). Procurement method identifies whether traditional single-stage tendering or two-stage tendering, or an integrated method is used to select the contractor. Form of contract identifies which form of contract is used. The commonly used forms of contract in the South African construction industry that satisfy the cidb requirements and are in accordance with the provisions of SANS 10403 are (cidb, 2005): FIDIC Conditions of Contracts for Construction - The Red Book, 1999 published by the International Federation of Consulting Engineers; General Conditions of Contract for Construction Works (GCC 2004) published by the South African Institution of Civil Engineering; JBCC® Principal Building Agreement (PBA) 2000 published by the Joint Building Contracts Committee; and NEC3 Engineering and Construction Contract (ECC) published by the Institution of Civil Engineers, UK.
2.9.2 Objectives alignment
Successful supply chain collaboration is ensured by common objectives and mutual benefits (Meng et al., 2011). The supply chain management concept aims to integrate the interests of all project stakeholders towards a common goal (Brown et al., 2001a; Oyegoke et al., 2009).
The objectives alignment criterion includes: objectives alignment and benefits, and continuity of work. Objectives alignment and benefits assess whether project supply chain parties are self- interested or interested in mutual objectives and win-win benefits. Short-term objectives and price-oriented approach which persists in the industry is detrimental to core capability development, and the achievement of sustainable competitive advantage in the construction
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industry (Ingirige and Sexton, 2006). Continuity of work assesses the prospect for future work for the contractor with the client or prime contractor, and under what conditions.
2.9.3 Communication
Communication is an important factor in building supply chain relationships (Jiang et al., 2011), it facilitates information exchange and learning between project supply chain parties (Meng et al., 2011). Open and honest communication improves procurement relationships as it facilitates problem-solving and enhances transparency (Ling and Tran, 2012; Wood et al., 2002). Communication criterion encompasses information exchange, learning and innovation sharing, and cost data transparency. Information exchange assesses how much information is exchanged openly and freely between the project supply chain parties. Learning and innovation sharing assesses whether learning and innovation is shared between the parties. Cost data transparency assesses how much cost data are transparent and whether open book costing is adopted. Transparency is an essential element in building trust as a means of improving relationship quality (Nijhof et al., 2009).
2.9.4 Collaboration
Collaboration reflects whether the project supply chain parties work collaboratively together and how close the parties work together (Meng et al., 2011). Embracing collaborative working concepts within the supply chain creates value in the construction process (Davis, 2008).
Collaboration criterion includes working relationship which assesses the type of working relationship that exist between the project supply chain parties, for example, confrontational, cooperation or collaborative working relationship. Collaborative working is the ability of parties to agree on mutual objectives, decision-making processes and problem resolution systems while focusing on improving their performance (Bennett and Peace, 2006). It eliminates fragmentation, duplication and distrust in the construction process (Shelbourn et al., 2007).
Despite the perceived benefits of collaborative working, Arend and Wisner (2005) highlighted two potential problems for SMEs when considering to enter into cooperative relationships with supply chain partner, they risk: becoming potential acquisition targets of larger firms when the supply chain is successful; and being bullied into a closer relationship to be easily exploited by the larger firm for example, learning its innovative methods. Indeed, large contractors typically acting as prime contractors in a collaborative network were found to gain stronger advantage where they have more bargaining power in negotiating subcontracts with many pools of smaller
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contractors (Park et al., 2011). Empirical evidence also suggest that large contractors achieve more profit gains when they associate with many smaller contractors as it allows them to select contractors with the lowest price rather than engaging a known contractor in their network (Park et al, 2011). Park et al. (2011) also reported that collaborative relationships characterised by self-interest and profit-seeking inclinations causes a mismatch between firms in such alliances due to the fundamentally dissimilar motivations of forming the collaborative venture.
2.9.5 Risk allocation
Risk allocation describes how project risk is allocated and the reward for taking on risk is given (Meng et al., 2011). Risk allocation criterion encompasses risk sharing and allocation, and balance of risk and reward. Risk sharing and allocation assesses whether the project supply chain parties are willing to share the risks or not, and whether risk is allocated to the weak party or allocated to the party who is best able to manage it. Balance of risk and reward assesses whether there is appropriate reward for the party who takes on risk.
2.9.6 Joint problem-solving
Joint problem-solving ensures collaborative working and project success (Meng et al., 2011).
Inefficient and ineffective problem-solving mechanisms contribute to poor performance in the construction industry (Emuze and Smallwood, 2014). Zenger and Folkman (2002) found that problem-solving is associated with organisational effectiveness. Cox and Blake (1991) also argued that organisations arrive at better decisions through in-depth evaluation inherent in the attributes of joint problem-solving. Joint problem-solving criterion includes problem-solving effectiveness which assesses whether problems are solved jointly at the lowest possible level as quickly as possible, and whether a learning mechanism is in place to avoid the repeat of similar problems.
2.9.7 Trust
Trust in procurement and relational exchange processes has been defined as the belief by one party that the other party whose behaviour is beyond their control will fulfil its obligation in a relationship and will not take advantage of them (Hefferman, 2004; Kwon and Suh, 2005;
Sahay, 2003). Trust has a significant influence on the relationship quality between project supply chain parties, which can be inhibited by the short-term nature of construction projects (Wong and Chen, 2004; Zuppa et al., 2016). Trust criterion includes confidence in others’
behaviour which assesses whether a party has confidence in others’ behaviour and the reliability of the received information. Small contractors were generally found to prefer
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associating with a partner they have cooperated with before (Gils and Zwart 2009; Rezgui and Miles 2010), as they experience difficulties in forging and managing trusting multi-partner collaborations (Hoffmann and Schlosser 2001). However, Alvarez and Barney (2001) argued that small contractors can build trustworthy relationships through long-term connections.