Increased cooperation through immediate post contractual negotiation
| Date | 01 March 2014 |
| Published date | 01 March 2014 |
| DOI | https://doi.org/10.1108/JOPP-14-04-2014-B005 |
| Pages | 567-583 |
| Author | Stephan J. Meijers,André G. Dorée,Hans Boes |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 14, ISSUE 4, 567-583 WINTER 2014
INCREASED COOPERATION THROUGH IMMEDIATE POST
CONTRACTUAL NEGOTIATION
Stephan J. Meijers, André G. Dorée and Hans Boes*
ABSTRACT. Traditional contracting often leads to claims during construction
by contractors, increasing transaction costs for both parties in the form of
policing and enforcement costs. Partnering is widely advocated as a
governance form to more cooperative relationships between client and
contractor. However, partnering requires a significant investment in
elaborating a specific procurement approach, and is regarded as
inappropriate for small, one-off, less complex projects. Dutch municipal
governments are searching for alternative solutions to increase cooperation
with contractors and reduce transaction costs by applying immediate post
contractual negotiations in traditionally procured projects. We studied four
such municipal projects which have shown that immediate post contractual
negotiations achieve the effects of partnering despite the initial traditional
procurement procedures. These negotiations seem to reduce the transaction
costs of traditional procurement making them particularly applicable in
smaller projects where high set up costs would not be justifiable due to their
limited size, complexity, or cost.
INTRODUCTION
Traditional contracting has been largely shown to cause
adversarial relationships between client and contractor in the
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* Stephan J. Meijers, MSc, is a professional consultant in construction
contracting. He conducted this research for his master thesis project at the
University of Twente. In his work, he aims to modernize construction
contracting and improve cooperation between public and private parties.
André G. Dorée, Ph.D., is a Professor, Construction Management
Department, University of Twente. His research focuses on issues of
procurement and contracting in construction industry. Hans Boes, MA, is an
Assistant Professor, Construction Management Department, University of
Twente. His research focuses on new procurement methods and integrated
contracts.
Copyright © 2014 by PrAcademics Press
568 MEIJERS, DORÉE & BOES
construction sector (Cheung, Ng, Wong, & Suen, 2003; Dorée, 2004;
Fulford & Standing, 2013; Zaghloul & Hartman, 2003). This leads to
claims during construction by contractors, which increase transaction
costs for both parties in the form of policing and enforcement costs.
The current climate of austerity exacerbates this problem as fewer
investments are made, margins decrease, and competition becomes
ruinous. Various authors argue that cooperative relationships should
lead to improved productivity, financial savings and create
opportunities for innovation (Cheung, et al., 2003; Fulford &
Standing, 2013; Hughes, Williams, & Ren, 2012). In literature,
partnering is widely advocated as a governance form to more
cooperative relationships between client and contractor. It does so by
aligning goals between the parties, integrating contractor’s expertise
in the design and planning of the project, involving key participants
early, creating an integrated team, and improving communication.
The partnering approach, however, requires a significant investment
in elaborating a specific procurement approach, and is therefore
regarded as inappropriate for small, one-off, less complex projects
which are of low strategic importance, as the set-up costs simply do
not justify an extensive collaborative approach (Mike Bresnen & Nick
Marshall, 2000; Eriksson, 2010). Additionally, the implementation of
partnering is not always possible due to public procurement laws,
making it particularly difficult to implement for government
institutions (Beach, Webster, & Campbell, 2005). The required
investments are leading some municipal governments in the
Netherlands to search for alternative solutions to increase
cooperation with contractors and reduce transaction costs by
applying immediate post contractual negotiations in traditionally
procured projects.
Immediate post contractual negotiations are a meeting between
the client and contractor directly after the project has been awarded
to agree on an updated contract to reach a fixed price agreement or
modify the design. In this paper we present the results of a study of
four projects in which immediate post contractual negotiations were
implemented. We evaluated the effect of these negotiations on the
accuracy of project cost estimations before construction is started,
maintaining product quality and increasing constructability, and the
occurrence of discussion and renegotiations during the construction
phase. Our results show that immediate post contractual negotiations
have a positive impact on these effects as it creates effective risk
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