Trust in Co-operative Contracting in Construction

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The construction industry is now facing unprecedented challenges resulting from the advances in information technology and networking through the web. Procurement paradigm of the construction industry has changed significantly in the last decade. More and more projects are requiring the contracting parties to adopt a co-operative attitude for financing, design
Pub. Date
Jun 1, 2007
248 pages
142 x 215 mm

The construction industry is infamous for its adversarial culture. Several key industry-wide reviews all pointed to the need to have a revolutionary reform in the way construction facilities

The construction industry is infamous for its adversarial culture. Several key industry-wide reviews all pointed to the need to have a revolutionary reform in the way construction facilities are procured. The situation had become more acute as the construction sector, once regarded as a local industry, is now facing unprecedented global challenges. The procurement paradigm has changed significantly, particularly in the last decade. Collaborative types of endeavor have become the norm. More and more projects are employing integrative arrangements that include finance, design, construction and operation. This changing face of procurement calls for a new mode of contracting behavior—co-operative contracting, which in its broadest sense, is requiring the contracting parties to adopt a co-operative attitude thereby maximizing the synergistic effect. Contracting behavior is typically legally regulated. Moreover, founding a legal anchor for the obligation to co-operate in common law system is discouraging. In fact, the legal profession has been swift to express reservations on the binding effect of the pledge for honestly and co-operation. Nonetheless, the relational contracting theory advocated by a group of U.S. legal scholars has provided a nice support to co-operative contracting within a civil law framework. Nevertheless, this conceptualization remains controversial ever since its first introduction in the mid-seventies. As such, relational contracting theory remains an academic pursuit as the common law system has yet to establish a general doctrine of good faith. Seemingly looking into the behavior aspects in contracting would be more fruitful. In construction, partnering is the closest delivery approach resembling co-operative contracting. Success stories have been reported, one notable pioneer project in Hong Kong is the Mass Transit Railway Tseung Kwan O extension. A case study on one of the contracts of the TKE project is used to demonstrate the importance of behavioral change in co-operative contracting, the partnering arrangement, tools as well as the lessons derived. Trust has been identified as the most critical driver for co-operative behavior. Two key questions need to be addressed. Firstly, among the various forms of trust, which form will most amenable to construction contracting. Secondly, between the contractor and the client, who is the best person to kick start the trust cycle. Trust has been a topical research area as it underpins many of our behavior. However, in engineering and construction fields, where technical skill and knowledge dominate, trust has not been accorded the level of attention that it deserves.

The construction industry is undergoing changes in moving towards a co-operative paradigm in contracting. Chapter one outlines the factors leading to the paradigm shift towards co-operative contracting. Chapter two explores the theoretical bases for co-operative contracting. Operationalizing these theoretical constructs in construction contracts is first given in Chapter three. The importance of trust in co-operative contracting is highlighted in a case study on MTRC TKE project presented in Chapter four. The effects of trust on contracting behavior are analyzed further in Chapter five. Critical trust factors in the views of contracting parties are evaluated in Chapter six. Chapter seven details a study that aimed to identify the party best in initiating a trust cycle in contracting. Lastly, the notion of good faith in the context of co-operative contracting is critically reviewed in Chapter eight. This book provides a comprehensive discussion on trust in co-operative contracting. Directed from both management and legal perspectives with findings supported by empirical researches, it is hoped that professionals, researchers and students will find the book interesting.

Sai On Cheung
City University of Hong Kong
May 2007
  • Paradigm Shift in Contracting Culture
  • Co-operative Contracting: In Search of Theoretical Anchors
  • Operationalizing Co-operation in Contracts
  • Partnering: An Exemplar of Co-operative Contracting in Construction
  • Trust: Foundation of Co-operative Contracting
  • Trust Factors in Co-operative Contracting: Views of Parties of a Partnering Dance
  • Trust Initiator: A Prisoner’s Dilemma Perspective
  • Co-operation: Good Faith and Beyond