One of the major and common problems associated with construction procurement, as described by the participants of this study, is the complexity of contractual mechanisms and procedures used in construction projects. Four themes emerged out of the primary data that led to the formation of this sub-category; these themes are as follows:
Textual complexity,
Level of formality or leniency of contracts
Complexity of rules and clauses related to obtaining warranted compensation events
Unfair or unclear divisions of liability or responsibility.
The complexity of contractual procedures and mechanisms can lead to various non- value adding activities (e.g. unnecessary heavy admin work load) which could lead to waste of human potential. It could also lead to adversarial relationships due to lack of common understanding, which in turn could lead to conflicts, which could lead to claims and disputes that are very costly and time consuming. In addition, textual complexity and the high levels of formality of contracts may encourage project participants to engage in opportunistic practices, as will be discussed in section 4.3.
When a senior QS working for a leading contractor was asked about the typical commercial challenges they face with their suppliers, he blamed and criticised subcontractors as follows:
“The biggest problem at the moment is that a lot of subcontractors do not understand what they sign to. So, in an NEC subcontract, it requires a quite depth administration and there are processes to follow and they are not particularly good at following those processes” (Senior QS, Nov 2015).
The QS was then asked about the reasons for subcontractors’ poor contract administration and whether it is related to lack of experience or not. The QS emphasised to the author that most of their suppliers are in long-term relationships with them. They also offer them full day courses that are focussed on the main requirements of the contract as requested (e.g. the compensation event processes) to try to give them a head
start before the job. Instead, the problem seems to him to be associated with resistance to change and to some extent linked to self-interest and inefficient habits and ways of working. This is described by the QS as follows:
“I think it is because you’re more used to dealing with other forms of contracts, so you are not used to dealing with the different requirements of the NEC. I guess maybe the use of JCT sort of mindset as opposed to being opened and collaborative, which then tries to drag you off towards that. I think it is a bit of that. And I then think that people fully need to understand what they sign for before the sign up to something that becomes a surprise to them when it perhaps should not” (Senior QS, Nov 2015).
In order to gain a deeper understanding of this issue, the author interviewed one of the subcontractors involved in the same project. The interviewee was asked about his opinion up on whether subcontractors find it difficult or not to administer NEC contracts, especially when it comes to early notifications and compensation events. The response was as follows:
Right, from our own opinion we are from an Irish-based company so we don't deal with NEC contracts until we came to the UK. And with learning terms to do with the NEC contracts, hmm the mechanisms within the NEC contracts are a bit complicated” (Director and Project Manager at a specialist subcontractor, 2016).
Interestingly, the subcontractor then blamed their client for using the contract in a bureaucratic way. He accused them of using the contractual rules related to assessing compensation events as a means to finding reasons to reject their claims, rather than using the early notification procedure as a way to solve problems as a team as early as possible. This has been mentioned by him as follows:
“We raise an early warning, we raise them with our main-contractor client, and then the problem we have then is them coming back actually looking. Hmm, we've raised them from our end but it's waiting for them to come back then from their end type of come to an agreement within us…Hmm from our end, end of
that we've raised the early warnings…But the fifty percent of them that have been dealt with to date, it is the one that I have not had response back from the client that is the problem, which will then typically get pushed down towards the end of the job and then they will come part of the final account…That’s not good to do” (Director and Project Manager at a specialist subcontractor, 2016).
This contradiction in the responses of the QS and the subcontractor demonstrates how complexity of contractual procedures could lead to the creation of an adversarial environment that is focussed on blame rather than learning. This led the study to refer to the senior design-coordinator working for the main contractor, in order to gain a more rounded understanding about this phenomenon. According to him:
“The contract does not distinguish between whether there is a small event or a large event. So, in theory, everything requires the same amount of diligence or you know going through it, processing it…these things are quiet complex and therefore it takes a lot of work to put that case forward….And then clearly when you're putting that case doing, you're obviously you've still got your work to do, if that makes sense you know”… we work with a variety of subcontractors and suppliers. And there are obviously on a different scale and a different size, and I think we tend to be more lenient with the smaller suppliers because they are just smaller suppliers if that makes sense. They do not necessarily have the full kind of office backup to follow the contract as they should. Hmm, I think it can be frustrating to some of the QSs at times though” (Senior Design Coordinator, 2016).
The response above clearly indicates that complex contractual procedures, in the absence of relational norms (McNeil, 1985), can contribute to the generation of wasteful behaviours and process. To confirm this argument, the author interviewed a senior site agent working for the main contractor, to check how contractual complexity could impact on compliance with the programme. Interestingly, the interviewee emphasised the significance of managing projects from a relational perspective to support production rather than through relying on contract formality. This challenge was described by the site agent as follows:
“The way normally it will work, contractually he could probably say: ‘No, no, according to the programme I'm, I'm, I will be due to come here’. Hmm, but it's about communication. Making sure you keep in contact with your subcontractors. You know communicating with them on a regular basis. With all the major subcontractors, we try to have a weekly meeting, hmm either formally or informally. I mean we will discuss programme. You know programme is one of the key issues we discuss… [it’s all about] having a good communication and having a good relationship and being quite open with them” (Site Agent, 2016; emphasis in bracket inserted by author).
4.2.2 Exclusion or late involvement of key actors during pre-construction stages