Profitable Partnering in Construction Procurement

Stephen Ogunlana

• Publisher: Routledge
• Year: 2003
• eBook ISBN: 9781135804596
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture General

Profitable Partnering in Construction Procurement is a compilation of papers presented at the CIB W92 Symposium held in Chaing Mai, Thailand in January 1999. This volume, drawing on contributions from leading experts in construction contract procurement from 22 countries, addresses the issues of culture within organisations and national cultures and their impact on procurement, performance and profitability.
Substantial coverage is given to private finance projects, privatised infrastructure projects, contractor selection and prequalification, decision support systems for procurement, management of design, contracts and contract documents, sustainable construction and the performance of procurement systems.
Profitable Partnering in Construction Procurement is a reference for construction professionals and researchers, contract administrators and lawyers wishing to gain an understanding of the complex issues of harmony and profit in construction procurement.

1.

Partnering

PARTNERING: THE PROPAGANDA OF CORPORATISM?
S.D.GREEN
Department of Construction Management & Engineering, The University of Reading, Whiteknights, PO Box 219, Reading, RG6 6AW, UK. [email protected]

Abstract

A critical perspective on partnering is developed with reference to current concerns regarding the increasingly corporatist nature of global capitalism. Partnering is advocated by many leading clients as a means of improving customer responsiveness and ensuring continuous improvement. The seductive rhetoric of partnering too often serves only to disguise the crude exercise of buying power. In the UK, the four largest supermarket chains are all leading advocates of partnering. Ironically, all are currently under investigation by the Office of Fair Trading for failing to pass on savings to their customers. It is suggested that the doctrine of customer responsiveness ultimately owes more to corporatist propaganda than to a coherent management policy. The buying power of the industry’s major clients continually discourages dissent to the partnering ideal. Construction companies which do not appear similarly committed risk being denied access to a substantial proportion of the UK market. The increasing influence of industry on the construction research agenda also discourages academics from challenging the legitimacy of partnering discourse. There is an urgent need for research which is independent of commercial vested interests.

Keywords: Continuous improvement, corporatism, critical theory, customer responsiveness, partnering, technocratic totalitarianism.

Introduction

In common with many other countries, partnering has received widespread endorsement in the UK construction industry (DETR, 1998; Bennett and Jayes, 1995; Bennett and Jayes, 1998; Construction Industry Board, 1997). The adoption of partnering supposedly improves customer-responsiveness and ensures continuous improvement. To date, there has been an almost total absence of any counter-argument. The purpose of this paper is to overcome this deficiency by developing a critical perspective on partnering. The discussion draws from the traditional of critical theory to challenge the legitimacy of commonly accepted practices as advocated and imposed by powerful vested interests. The intention is to encourage critical debate within the international academic community and to demonstrate the need for research which is independent of commercial vested interests.

The broad context is provided by current concerns that modern society is increasingly characterised by the ideology of ‘corporatism’. In the knowledge that such concerns may be perceived as overly political, it is important initially to assert the author’s commitment to a market-based economy subject to appropriate regulation. Given that the adopted political position is so moderate, the arguments presented should not be dismissed on the basis of being ‘radical’. Indeed, it will be contended that it is the propaganda of partnering that has become dangerously radical by replacing the central tenets of a regulated market economy with an ideology uncomfortably close to naked corporatism. Also of concern is the way in which the assumptions of partnering are potentially in conflict with long-established notions of pluralism and the associated commitment to the principles of humanism.

Corporatism

The ideology of corporatism is often linked with the fascism of Mussolini’s Italy. It is based on the belief that business and labour share the same interests (Heywood, 1992). Different interest groups are therefore seen to be bound together by duty and mutual obligations. In essence, a corporatist society is one where interest groups triumph over individuals. Examples of such interest groups include not only corporations, but also owners’ associations, trade unions and professional associations. The logic of corporatism dictates that such groups are not in conflict with each other, but seek non-confrontational relationships. Whilst usually associated with past dictators such as Mussolini, Peron and Salazar, corporatism is also evident in the industrial West in the form of neo-corporatism. This describes the tendency of governments to govern in consultation with economic interests such as business and trade unions (Heywood, 1992). Such neo-corporatist tendencies are even more observable in heavily institutionalised Asian economies such as Japan, Korea and Singapore.

Any advance of corporatism is inevitably at the expense of democracy, in that the interests of groups are given preference over the interests of individuals. Whilst today’s neo-corporatists do not like to be confused with the unpleasant dictators of the past, there is a convincing argument that humanism is increasingly in retreat in the face of corporate vested interests (Saul, 1997). With the collapse of communism there is now a danger that capitalism runs unchecked. Unfortunately, for those who adhere to the humanist tradition, there is no historical evidence that capitalism automatically results in democracy (Wood, 1995). The various checks and balances against unbridled capitalism achieved since the Industrial Revolution were hard fought for gains which were only attained as a result of prolonged political and social protest. The current concern is that these gains are being lost as Western society becomes increasingly corporatist. The trend is accentuated by the global nature of modern business. Many corporations play-off one government against another, re-deploying their production facilities to best commercial advantage (Greider, 1996). The economic muscle of such corporations often outweighs that of democratically elected governments. Many important checks and balances against the excesses of capitalism are currently being dismantled in the cause of ‘de-regulation’. This interpretation of current economic trends is in direct conflict with the propaganda of the free marketplace and the assumption that commerce inevitably leads to democracy. It also provides a radically different starting point for a critique of partnering in construction.

Partnering: defining characteristics

There are numerous definitions of partnering which are currently in circulation. One of the most comprehensive is that offered by the Construction Industry Institute (1989):

“A long term commitment between two or more organisations for the purposes of achieving specific business objectives by maximising the effectiveness of each participant’s resources. This requires changing traditional relationships to a shared culture without regard to organisational boundaries. The relationship is based on trust, dedication to common goals, and on an understanding of each others individual expectations and values. Expected benefits include improved efficiency and cost effectiveness, increased opportunity for innovations, and the continuous improvements of quality products and services.”

From this point of view, partnering is primarily concerned with ‘maximising effectiveness’, thereby reflecting the purpose of countless other management improvement techniques. Emphasis is also given to ‘culture’ and the need to base relationships on trust and understanding. The influence of the rhetoric of Total Quality Management (TQM) is readily apparent in the reference to ‘continuous improvement’. The tone of the definition offered by Bennett and Jayes (1995) reflects similar themes:

“Partnering is a management approach used by two or more organisations to achieve specific business objectives by maximising the effectiveness of each participant’s resources. The approach is based on mutual objectives, an agreed method of problem resolution, and an active search for continuous measurable improvements.”

It is notable that improvements must not only be continuous, they must also be ‘measurable’. The definition recently offered by the recent ‘Egan Report’ provides a similar emphasis on continuous, measurable improvement:

“Partnering involves two or more organisations working together to improve performance through agreeing mutual objectives, devising a way for resolving disputes and committing themselves to continuous improvement, measuring progress and sharing the gains.” (DETR, 1998)

The DETR further consider partnering to be a ‘tool to tackle fragmentation’ which is increasingly used by the best firms in place of traditional contract-based procurement and project management. According to the Construction Industry Board (1997), partnering has three essential components:

• establishment of agreed and understood mutual objectives;
• methodology for quick and co-operative problem resolution;
• culture of continuous, measured improvement.

The achievement of the appropriate ‘culture’ is almost universally held to be of vital importance to the success of partnering. The Construction Industry Board emphasises that the first step towards partnering is to ensure that the culture of the company is conducive to a ‘whole-team co-operative approach’. It is further recommended that a champion should be appointed to promote the partnering concept and that senior management must act as exemplars of the required culture.

Whilst partnering is often equated with long-term relationships, the two terms are not synonymous. Several sources make a distinction between ‘project specific’ partnering and ‘strategic’ partnering, where the partners work together on several projects. (Construction Industry Board, 1997). Strategic partnering supposedly allows the benefits of improved understanding to be carried forward to subsequent projects. The philosophy of continuous, measured improvement however demands that each project exceeds the performance of the previous one. Despite the seductive discourse on ‘empowerment’, ‘working together’ and ‘relationships’, the ultimate measure of success seems to hinge on cost improvement.

Underlying influences

McGeorge and Palmer (1997) suggest that formal partnering as a construction management concept dates from the mid-1980s. Several early partnering arrangements were apparently established in the process engineering sector. Specific examples include Union Carbide with Bechtel and Du Pont with Fluor Daniel. Notwithstanding these early American examples, it would seem that the currently advocated philosophy of partnering is heavily influenced by the collaborative practices of Japanese supply-chain management. Indeed, it is difficult to separate partnering from the principles of TQM, from where the emphasis on continuous improvement has been borrowed. Within the UK, the cause of partnering has been championed by a number of powerful clients who have become dissatisfied with the supposed under-performance of the construction industry. The large UK supermarkets have numbered amongst the most enthusiastic advocates of partnering. As regular clients of construction, they understandably wish to extend the control that they exert over the grocery supply-chain to the construction sector. It is by no coincidence that Bennett and Jayes (1998) include exemplar case studies of Sainsbury’s and Asda. The Egan Report (DETR, 1998) also cites the case of Tesco, who have apparently:

“…reduced the capital cost of their stores by 40% since 1991 and by 20% in the last two years, through partnering with a smaller supply base with whom they have established long term relationships. Tesco is now aiming for a further 20% reduction in costs in the next two years and a farther reduction in project time”.

If true, the benefits achieved by Tesco though partnering are indeed significant. Strangely, the Egan Report says nothing about the corresponding increase in profitability achieved by Tesco’s partners. Other large clients who are strong advocates of partnering include BAA and Whitbread, both of whom were also members of the Egan Construction Task Force. Other notable top-twenty UK clients who claim to be committed to partnering include Rover Cars and John Lewis Partnership.

Buying power and the rhetoric of seduction

Given the collective buying power of the aforementioned clients, it is unsurprising to find that many leading contractors also claim to be committed to partnering. To do otherwise would be to risk attracting the label of ‘adversarial’, thereby denying themselves access to a significant part of the UK market. This exercise of buying power is made especially clear by the Construction Clients’ Forum (1998), who collectively account for some 80% of the construction market. The CCF document commits its members to promoting relationships based on teamwork and trust, and to working jointly with their partners to reduce costs. They also promise not to unfairly exploit their buying power, but to look to form lasting relationships with the supply side. The overall tone is one of barely-disguised seduction. However, they then issue a unveiled threat to those who may still be unconvinced:

“The message from the Construction Client’s Forum is clear. If this Pact is concluded, clients represented on the CCF will seek to place their £40bn of business with companies that are seen to follow the approach descri...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Preface
• 1. Partnering
• 2. Harmonious Relations
• 3. Contract and Contractual Relationships
• 4. Procurement Systems and Strategies
• 5. Designing and Building
• 6. Private Finance Projects
• 7. Culture
• 8. Information and Decision Systems
• 9. Change, Technology and Value Management