Relational Contracting

* Relational Contracting (RC) and the Need for Adoption in Sri Lanka

Traditional procurement systems are criticised for their fragmented nature, leading to unsatisfactory performance and a lack of innovation ( Doloi, 2013; Lahdenperä, 2012). The need for appropriately integrated teams has been established as a key driver of change in many construction industries and shown as essential in order for the construction industry to improve its performance and innovation. RC is defined as “the approach to establish and manage the working relationship between the parties through a mutually developed, formal strategy of commitment and communication aimed at win-win outcomes for all parties” (Kumaraswamy, Rahman, Ling, & Phng, 2005, p. 1066).  This considers a contract to represent a relationship between the parties and introduces a degree of flexibility into the contract on the basis of understanding the other party’s objectives. Therefore, parties develop mutually beneficial objectives and a high level of commitment, cooperation and trust. RC principles such as partnering, alliance, joint venturing, integrated project delivery, early contractor involvement, and improved risk sharing arrangements are increasingly being used to deliver construction projects.

The benefits of RC practices include better project performance in terms of cost, time, quality, increased stakeholder satisfaction and innovation efficiency, higher responsiveness to client requirements, improved business relationships and cooperation and increased stakeholder competitiveness (Doloi, 2013; Lahdenperä, 2012). RC practices require a high level of cooperation, collaboration, trust and open communication. These conditions may be difficult to achieve, as adversarial relationships may arise with: improper selection of a RC team, technical incompetency of project stakeholders, lack of prior experience in RC, improper level of commitments, misalignment of goals and opportunistic behaviour (Ning, Ling,...