Understanding relationship based procurement in the construction sector

1 The motivation and context of the circumstances impacting a procurement choice.

This defines a substrate of circumstances that affects the potential degree of possible collaboration.

Emergency recovery—motivation drives a procurement solution that enables recovery from the emergency as quickly and as feasibly as possible.

Experimental—motivation drives purposeful exploration of options and the ability to learn and reflect upon experience to accumulate valuable knowledge that advances project objectives.

Competitive resource availability environment—motivation drives a sustainable response to the prevailing competitive environment. Economically buoyant times pose a challenge to POs losing key staff to other employers. In challenging economic times POs could be obliged by their governments to take advantage of their market position to force project delivery teams to accept contract conditions that may be in the PO’s short-term but not long-term interests. Both conditions impose pressures related to economic times.

Relational rationale—motivation and context drives the underlying logic of forming and developing relationships with potential project team members to further a longer-term interest. Often all parties can benefit from the relationship, perhaps due to high levels of turbulence and change that challenge a BAU approach.

Known risks—motivation can be triggered by the PO/POR assessing that a particular procurement form appears most appropriate to respond to risk sharing and responsibility that are known, assessable, and best managed by the relevant identified participant to be allocated responsibility for those risks.

Unknown risks—motivation is rooted in a context in which uncertainty requires a response of nurturing deep collaboration and trust between parties within a no-blame environment. There is a need for a psychologically safe environment where all participants can experiment with new approaches to respond to uncertainly and extreme ambiguity using teams with the capacity to rapidly evaluate consequences and outcomes and respond accordingly.

High levels would relate to the procurement choice solution being driven by the acceptance of project participants in the logic of a clear advantage being gained by adopting a focus on a supportive and collaborative approach to delivering benefits that align with the values of participants.

2. The level of joint governance structure. Having a unified way that each project delivery team party legitimizes its actions through rules, standards and norms, values, and coordination mechanisms such as organizational routines, and the way that committees, liaison, and hierarchy represent a unified or complimentary way of interacting.

This impacts the quality of explicit understanding of how teams should collaborate and communicate.

Governance structure—the structure of the entire project team defines how the level of flexibility/rigidity, power and influence, and communication symmetry directly influences the workplace culture. The way that a project’s overall leadership and management team is constituted impacts who has a voice and how they can express ideas, perspectives, and concerns.

Governance best value strategy through KRAs and KPIs—the project output and outcome is influenced by the strategy deployed to define, measure, and assess success. The way that these are developed and used impacts effective project governance.

High relates to an effectively structured, uniform, integrated, and consistent set of performance standards that apply across and within the project delivery teams. All participant organizations share a common understanding of how to organize for success and what constitutes valuable project output and outcome success.

3. The extent to which an integrated risk mitigation strategy is organized for all parties as part of the client’s proactive risk management system.

This has an impact on the quality of explicit understanding of how to collaboratively manage risk and uncertainty and potentially gain advantage from a project-wide insurance policy.

Risk mitigation actions—there are a number of ways, ranging from collective to individual, to agree upon and decide how to mitigate risk that vary according to the procurement form.

System integration—of the project is structured and managed to provide a platform that is based upon the participant’s philosophical stance about relationships between teams. Systems can be integrated to cope with risk, uncertainty, and ambiguity to respond to a need for a platform to be developed to address these three related but separate concepts.

High levels would be represented by consistent and integrated risk assessment processes being identified, assessed, and mitigated against a project-wide and broader systems-wide impact for the project or network in the case of programs of projects.

4. The level of joint communication strategy platforms such as integrated processes and Information Communication Technology (ICT) groupware including building information modeling (BIM) and other electronic forms of communication.

While BIM is more prevalent in recent years, past equivalent forms include groupware ICT, sharing drawings and plans between teams. Joint communication facilitates common communication and understanding.

Integrated communication platform—A common ICT platform, including, for example, common building information modeling (BIM) tools, can minimize the risk of poor coordination and communication and misunderstandings between participants

High levels would be characterized by well-integrated processes that are well understood by all participants and advanced communication technologies being used that seamlessly connect all project parties within a particular procurement arrangement.

5. The extent that project teams are substantially co-located within easy physical reach of each other.

Close proximity facilitates ad hoc and chance encounters to improve building relationships and facilitating common understanding.

Physical co-location—Project participants can more easily communicate and interact on problem solving, monitoring, and active collaboration when they are in within easy reach of each other. Co-location in a well-considered and conducive environment can facilitate positive interaction.

High levels would be characterized by a project-wide policy that attempts to maximize participant co-location on-site where feasible including the POR. There would also be high interaction between project leadership groups and the project management and physical delivery team members so that engagement enhances communication and mutual perspective taking.

6. The degree of authentic leadership, that is, possessing ethical principled values and consistency of action with espoused rhetoric.

This would apply across the project delivery team at every level of team leadership not only for the project lead person(s) but also the supporting design and supply chain team leaders. It speaks to the project culture.

Reflectiveness— Project participants are systems thinkers and often follow a strategic thinking approach to the situational context and know that the situational context is crucial to effective decision making.

Pragmatism—Project participants get on with the job, are politically astute, and work within constraints or find ethical and sensible ways around these constraints.

Appreciativeness—Project participants understanding the motivations and value proposition of influential stakeholders involved in the project. They are consciously engaged with their team members and exhibit signs of having high emotional intelligence.

Resilience—Project participants exhibit adaptability, versatility, flexibility, and persistence when faced with adversity. They are able to effectively learn from experience.

Wisdom—Project participants have opinions and advice that is valued, consistent, and reliable that others instinctively refer to. Their judgment abilities make their brokering advice crucial. They are perceived as having high levels of integrity based on inner strength of character, knowledge, and experience.

Spirit—Project participants demonstrate the courage and have sufficient influence and respect to effectively challenge assumptions and often offer radical alternative solutions to resolve complex and difficult situations.

Authenticity—Project participants demonstrate qualities of being approachable and trustworthy and open to ideas. They encourage and advance collaboration, discussion, and new ways of thinking.

High levels demonstrate consistency in espoused and enacted values that are genuinely principled.

7. The trust-control balance of representing and protecting the interests of project leaders with that of other genuinely relevant stakeholders while relying on the integrity, benevolence, and ability of all project team parties to “do the right thing” in terms of project performance.

It is the ability to be able to understand the value proposition of “the other” project teams and to assess their capacity to deliver the promise while establishing mechanisms to ensure transparent accountability.

Trust balance is also about trust in others to suggest improvement and to discuss sensitive (possibly political) issues.

Forms of trust—Project participants’ capacity to experiment, explore options, and take action is advanced or constrained by their leadership teams’ perceptions of how various interests are best served. These perceptions are influenced by the nature of that interest, the forms and basis of project participants’ and their leaders’ level of trust in each other, and understanding the impact of assumptions about self-interest and shared interest on trust their levels.

Safe workplace cultures—Project participants’ trust in their leaders and colleagues is often mediated by their perceived treatment in terms of working in a safe psychological, physical, and intellectual environment.

Trust relationship building—Project participants and their leadership teams engage in varying levels of effort to create a balance in trust and control in which trust with caution is tempered with blind faith.

High balance is demonstrated by innate sensibility to juggle transparency and accountability demands with the need for trust with necessary due diligence. It also demonstrates a professional understanding of the nature of project participant accountability constraints and opportunities for resolving and possible helping to resolve institutional paradoxes so that accountability is consistent with accepted responsibility.

8. Commitment to be innovative

represents the duality of being willing to be innovative within a structured mechanism to enable and empower people to be innovative.

This is closely linked to a project team participants’ capacity for learning, reflection, creativity, being ambidextrous, and the organization’s core values of supporting and rewarding questioning the status quo.

Commitment to continuous improvement—Project participants’ purpose for being innovative should be to achieve continuous improvement. The extent to which project participants can be innovative and effect continuous improvement depends upon institutional, governance, and individual motivational and enabling factors.

Testing, prototyping and experimenting—Project participants’ innovative actions are usually manifested by testing, prototyping, and experimentation within the context of having an inquiring, curious, and often skeptical mind.

High commitment levels are manifested by vision, objectives, and desire to be innovative with well-considered instruments to measure and demonstrate innovation, motivation through rewards and incentives and demonstrated high levels of existing absorptive capacity for innovation.

9. Common best-for-project mindset and culture relates to the focus being placed on value generated in delivering the project compared with objectives of delivering what was explicitly requested or demanded.

It is also about the priority of the project outcome taking precedence above all other considerations (despite inherent paradoxes). A major effort is directed at a positive and successful project outcome rather than individual teams being winners or losers.

Outcomes and performance levels—These should be assessed and judged based upon common best-for-project aligned goals.

Challenging for excellence—Project participants need to be constantly challenging their level of outcome and performance through effective collaboration towards a constructive evaluation of achieved outcomes and performance.

Value for money reporting—Project participants need to devise ways to recognize, monitor, and effectively diffuse knowledge about how their performance and workplace culture has impacted VfM on their project or program. This is not about “spin-doctoring” but about making a credible and acceptable case for recognizing achievements.

Recruiting support—Project participants need to devise ways to effectively recruit support for best-for-project values through an effective PO/POR internal and NOPs recruitment strategy, as well as enlisting support for as many members of the project delivery chain as is possible.

High best-for-project mindset levels are manifested by a genuine attitude that “we all sink or swim together” and a focus on maximizing value to the project (or network in the case of a program). Contractual arrangements will reinforce pooled gain or pain based on performance measured by KRAs and KpIs.

10. No-blame culture relates to the degree to which teams welcome taking responsible accountability for problems as they arise rather than having shirked responsibility in the hope that others take them on who may be vulnerable to being blamed for potential failure.

It is also about being “part of the solution” through being part of an overall acceptance of shared-and-several responsibility for understanding. This involves discussing problems in an unprejudiced manner, opening up one’s mind to alternative perspectives, and seeing issues from multiple perspectives.

Facilitating mechanisms for no-blame—contractual, behavioral, and organizational mechanisms that support the establishment and maintenance of a no-blame culture.

High no-blame culture is manifested by a culture of open discussion of problems and unforeseen, unanticipated, or unwanted events that may adversely impact project delivery. The purpose of a no-blame culture is to achieve wider team participation in collaboration and collective management of problems and to take responsibility and accountability for developing problem solutions. It may also be manifested by the PO taking ownership of risk elements that other participants are unable to bear rather than force them to accept accountability for such risks.

11. Consensus decision making refers to the extent to which there is total agreement on a decision made at the project strategic and project operational executive level.

High levels may require extensive time for discussion, exploration, and testing mental models, and this may be against the interest of speedy decisions and action to counter crises.

Following Langley et al.’s.

(1995) consensus decision making view, this may involve purposefully leaving the means vague while keeping the aims crystal clear and agreeing to navigate solutions by agreeing on end states rather than developing detailed plans.

Enablers of consensus—organizational, structural, as well as behavioral enablers that facilitate and support consensus decision making and action taking.

Inhibitors of consensus—organizational, structural as well as behavioral enablers that inhibit and suppress consensus decision making and action taking.

High consensus decision making is manifested by a highly egalitarian and collaborative leadership style of project team leaders. Issues and problems requiring a decision develop out of inclusive knowledge sharing and discussion of perspectives, expected intended and unintended consequences, and implications of decisions. High levels of feedback, good or bad, are sought.

12. Focus on learning and continuous improvement refers to providing a compelling projects-as-learning value proposition and the practice of transforming learning opportunities into continuous improvement.

It also implies that emphasis on learning KrAs and KPIs should not only be focused on documenting and publicizing lessons learned from projects but that project teams should value these KRAs and KPIs to be highly ranked as important project management and project outcome success factors.

Capacity to adapt to new ideas—participants need to facilitate continuous improvement by prompting learning-oriented ways of thinking and doing. Knowledge transfer, as discussed in Chapter 4 Table 4 (Walker & Lloyd-Walker, 2014b), is difficult because knowledge is sticky. People who can make the most from continuous improvement are open to the process of “unlearning” and “relearning.” Without this adaptive capacity, lessons learned become lessons ignored, and often context is not considered to wisely consider which lessons should be adopted or adapted depending on the way that the new context emerges.

A culture of skills and learning development—participants need to be developing a culture of organizational and individual learning to facilitate lessons-learned knowledge transfer and provide the environment in which this can effectively take place. This goes beyond training and development at the technical and process levels. It also entails enabling participants to perceive and understand context and situation and interconnectedness of elements into a whole so that cause and effect links can be understood to enable intelligent adaptation of lessons learned.

High focus on learning and continuous improvement is manifested by actors within collaborative arrangements and a network delivering a project being alert and aware of opportunities for improvement and being successful in grasping competitive advantage through effectively harvesting lessons learned.

13. Incentive arrangements refer to the painsharing and gainsharing agreement. This refers to how the process was instigated and how it operated. Shared accountability and a desire for innovation require a risk and reward mechanism to create an incentive to excel.

At one extreme, all profit margins may be quarantined and pooled and subsequently distributed based on a negotiated and agreed pain and gain sharing formula based on total project performance. Alternatively, profit margins may be based solely on individual team performance.

Managing tension between innovation and incentivization— participants and project owners need to manage the tension between continuous improvements that keeps raising the performance benchmark and how that is incentivized. It is important to balance providing sufficient incentive and reward for improvement while avoiding incentive targets being either too easy or too hard, as this may undermine continuous improvement. This also brings in issues about balancing innovation incentivized through a competitive dialogue approach at the front end of a project before contracts are let with achieving innovation and improvement by encouraging innovation and continuous improvement progressively throughout the project duration.

High levels of incentivization are manifested by much emphasis being placed on encouraging parties to agree to place potential profit and gain/pain in a risk/reward arrangement that is subject to a whole-of-project outcome performance. KRAs and KPIs are well developed, provide stretch and challenge, and are sophisticated in their understanding of the project context.

14. Pragmatic learning-in-action refers to the active gathering of value through teams collaborating with the strategic aim to learn and to gain competitive advantage through collective opportunities to learn and adapt.

It is about team leaders and members seeing the project as a learning experience with acceptance that both experimental success and failure require discussion and analysis. Often unexpected opportunities arise out of failed experiments through assumptions being reframed that lead to promising benefits in other contexts.

Coaching and mentoring—another form of pragmatic learning is through coaching and mentoring. This is where experience and insights are shared in a formalized manner through one-on-one interaction between project participants and “wiser” or at least more experienced people who can help their coachees/mentees to be able to contextualize learning, to refine it through dialogue, and to add value through that knowledge by sharing stories, making critical comparisons, and exploring meaning and making sense out of that learning.

High pragmatic learning-in-action is manifested by actors within a network delivering a project capitalizing on learning opportunities to achieve competitive action. This can be also assessed by the weight that these actors place on the value of experimentation as a way to see issues and solutions in a new light. Failed experiments are valued for their intellectual stimulation in discovering, for example, a better understanding of cause-effect loops.

15. Transparency and open-book processes, routines, and practices refer to project participants agreeing to be audited and fully open to scrutiny.

Actors within the project network would have confidence that they can trust those inspecting their books not to take advantage of that access and information, and those people doing the audits, due diligence, and inspections must be capable and effective enough to understand the implication of what they inspect. Total transparency and accountability is necessary where the project is undertaken on a cost-plus basis where the project owner is funding all direct, administrative and management costs.

The extent of transparency and accountability is a trade-off between the extent to which the PO plays a “hands-on” or “hands-off” role. There is a fine balance needed between expenditure on direct administrative and management costs and how processes reinforce a trust-but-verify approach.

Accountability—the extent to which project participants agree to be fully open to scrutiny allowing authorized project owner representatives to audit and inspect books, processes, and decision making rationale.

High transparency and open-book approaches to project delivery present opportunities for generating trust by clients and other parties that may access that information. It is a confronting notion that many organizations cannot face. It requires the project owner’s authorized probity auditors to have free access to their financial books. Thus, confidence in ethical and legal business conduct is necessary to accept this challenge.

16. Mutual dependence and accountability refers to collaboration in projects requiring participants to not only recognize their interdependency but also to honestly respond to a sink-or-swim-together workplace culture when communicating.

Governance systems may both support and enhance individual team responsibility and accountability, or alternatively they may inhibit approaches to cross-team collaboration.

Enhancing enablers of mutual dependency—participants seek to actively leverage processes, routines, and means to facilitate and sustain collaboration.

Countering inhibitors to mutual dependency— participants seek to actively counter processes, routines, and means that inhibit and undermine collaboration.

High mutual dependence and accountability refers to an ability and keen desire to acknowledge team interdependence and accountability in ways that builds interteam trust and commitment through actively enhancing a sink-or-swim together workplace culture and to actively counter any actions that may inhibit this culture.