Successful projects are dependent upon strong teamwork, and owners are constantly reviewing the effectiveness of their relationships with contractors. An overwhelming majority of the respondents anticipate more collaboration over the next 5 years. One interpretation of these findings is a desire to integrate contractors into the boardroom to help streamline project delivery, drive down prices and pass on greater risk.
There is, however, another way of looking at the results. Owners may want to stay closer to contractors because they do not fully trust them. Only a third believe they have a ‘high’ level of trust in their contractors, with 60 percent describing the degree of trust as merely ‘moderate.’
Indeed, poor contractor performance is cited as the single biggest reason for project underperformance, with over two-thirds (69 percent) of survey participants ticking this box.
The continued dominance of lump sum (fixed price) contracts underlines the potentially fragile state of owner-contractor relationships. Only the larger organizations involved in the survey embrace other approaches: a quarter use a guaranteed maximum price, while 18 percent adopt a target price with incentives and penalties. A fixed price contract defers risk firmly into the hands of the contractors and does not necessarily foster a collaborative approach.
Seventy-two percent of respondents hold full competitive tenders when awarding contracts, which is another way to maximize risk transfer – and further reflects the lack of trust between owners and contractors. Again, the bigger companies/institutions show a more enlightened attitude, with 34 percent favoring limited value-based proposals, which reward innovation, expertise and quality, and encourage a greater focus on energy efficiency and design excellence.
Respondents believe that the balance of power is tilting towards owners. Just under half say that they expect to have more negotiating strength when delivering capital projects over the next 5 years, which again, does not imply a more open, collaborative mindset. Executives from larger organizations are more likely to believe that contractors hold the balance of power, which could make this group willing to create equitable, win-win relationships, rather than try to exploit their bargaining position.