Cooperation and competition in complex construction projects

• Author: Yseult Marique
• Position: School of Law, University of Essex, Colchester, UK

1 Introduction

Supporting major construction projects plays its part in the toolkit of potential strategies to bolster the economy at times of downturn. With tight financial constraints, governments are trying more than ever to optimize the taxpayer money that has been invested in these major infrastructure projects. Yet the means of achieving successful projects in public infrastructure are uncertain. Project management emphasises that partnering improves the design of complex infrastructures. This suggests a high level of trust between public and private contractors, developed over long periods of time. By contrast, the law emphasises a competitive market for bidders and new entrants and is willing to enforce public procurement rules through legal challenges, thus securing efficiency in market exchanges. The two approaches need to develop common ground, building on the strengths of each to secure successful and efficient projects. This paper maps out some of the key tensions between these two approaches, based on a comparison of English and Belgian complex projects: the law is overly predominant in the first, while the second straddles procurement regulations and partnering.

Complex construction projects, often organised through private finance initiatives (PFIs), integrate a range of contractual, financial and economic relationships into one major project. They are based on:

[…] the bundling of construction, maintenance and sometimes other services into long-term “whole life” contracts under which private sector contractors are responsible for the construction and functioning of public buildings over many years, in return for annual payment by public authorities¹.

The balance in these bundles of contractual and informal relationships is partially embedded in the legal context of each country: England and Belgium differ in their use of a common core of legal techniques based on EU public procurement and competition. The techniques of cooperation used to supplement these are more developed in England than in Belgium.

At the heart of complex construction projects, there is a tension between competition and cooperation, which is reflected in the interplay between transparency and trust. Public authorities should use taxpayers' money in an efficient way by choosing among innovative tenders drafted by competing bidders. The latter should access the market on an equal footing and be thoroughly informed about the tendered projects. Transparency, understood in an extensive sense as a duty to inform, to provide access to information and to justify public decisions, is then a means to pursue competition, value for money (VfM) and non-discrimination. However, complex infrastructure projects involve uncertain technical and social factors, idiosyncratic investments and long supply chains. To overcome these obstacles with innovative solutions, cooperation needs to be fostered, commercially sensitive information needs to be developed through cooperation between the public authority and the private contractors, and business secrets need to be sheltered from curious investigators. Yet taxpayers have the right to ask how their taxes are spent, if their trust in these infrastructure projects is to be maintained. The articulation of these conflicting imperatives does not depend only on the public authority and private contractors involved in a particular project, but also on central public authorities and judges. Organising overall transparency across the system may be another challenge. This paper suggests that comparing English and Belgian experiments gives a better insight into techniques for tackling this challenge, and thus enables reflections on how institutional frameworks illustrate the variety of possible balances between competition and cooperation, trust and transparency, all of which are central to enabling successful complex projects.

Section 2 maps out the tension between partnering and information, culminating in legal challenges and public control in England. Section 3 lays out the highly formalised context of procuring complex projects in Belgium, where public choices are strictly curtailed. It details how transparency leads to the displacing of public discretion to judges and experts. In this strictly controlled framework, cooperation only operates marginally, though increasingly. Section 4 suggests two possible developments, which may embed law more firmly into public management and project management in the judicial sphere. While these suggestions would need empirical testing, they aim to balance transparency and trust in a more nuanced way than an indiscriminate transparency requirement would achieve.

2 Challenging public choices in English complex projects

Investments in complex construction projects face a major issue, namely failures in the market and in projects. Prominent projects are delivered with major overruns in budget and time, when they are not cancelled part-way through. The need to develop an efficient market and successful projects draws attention to the factors underlying VfM and risk management. Gaps in information regarding risks deter potential bidders and weaken the achievement of VfM. A different approach to such projects has thus been needed to reduce this information asymmetry: PPPs/PFIs were supposed to bring about this change with new ways of procuring and managing public infrastructure.

From both construction ( Hibberd, 2010 ) and procurement perspectives ( Braun, 2003 ), PPPs/PFIs are a dramatic change in the approach to complex projects. In practice, this change happens incrementally at three levels. First, partnering draws attention to the overall lifecycle of the project, from design to termination, enabling innovative solutions to complex issues (Section 2.1). Second, PPPs/PFIs have triggered the development of the competitive dialogue, a specific procurement route embedded in strong remedies deemed to foster a transparent decision-making process among public authorities (Section 2.2). Finally, PPPs/PFIs have also resulted in the development of central public institutions, which facilitate and monitor how public authorities award the contracts for delivering PPPs/PFIs. Transparency has become a key issue for both these central institutions as they seek to control PPPs/PFIs and for individuals wanting to challenge these same PPPs/PFIs (Section 2.3).

2. 1 Partnering as a behavioural principle

The first strategy used to tackle market failures in construction projects is the development of a different ethos, such as partnering between construction actors. Developed from the 1990s onwards, especially with the Latham Report, partnering seeks to overturn the adversarial relationships endemic to the construction industry. It is supposed to bring about innovation through the cooperation that partners are encouraged to develop. This new partnering mindset is designed to improve the delivery of VfM projects. Project management understands partnering as “a long-term commitment between two or more parties in which shared understanding and trust develop for the benefit of improving construction” ( Bygballe et al., 2010, p. 239 ). Similarly, legal scholarship emphasises that partnership can be defined as follows: “[a] relationship […] based on trust, dedication to common goals and an understanding of each other's individual expectations and values” ( Mason, 2009, p. 206 ). In both cases, trust and sharing are highlighted. The challenge is to implement them in the relationships between public authorities and their private contractors.

Complex projects require that the planning process takes the specific features of these projects into account in terms of idiosyncratic assets, large investments and the major risks linked to their long duration. Partnering, i.e. the development of common goals, trust and a sharing of each other's expectations, may help in these respects. It has been applied to PFIs, both in general and in specific projects such as Building Schools for the Future (BsF), put on hold by the UK Coalition Government in 2010. Parties communicate their expectations to each other and clarify their own commitments should problems arise: parties should deal with each other with fairness, honesty and transparency. In theory, partnering allows the bringing in of new ideas, processes or techniques, which influence the overall project, resulting in VfM over the whole-life cycle of the project. It also brings the parties into a mindset, which facilitates both the prevention of issues and their constructive management when they do arise, with the benefit of securing successful projects. This mindset needs to be slowly integrated within the project from the start in order to find practical applications in risk management ( Morton and Ross, 2008 ).

However, partnering makes issues arise in relation to both management and the law. Recent project management research calls for caution about the risks involved in partnering (such as wishful thinking, exclusivity and encouraging opportunism) ( Bresnen, 2007 ). More empirical studies on the advantages of partnering and the variety of its formal and informal expressions are needed ( Bygballe et al., 2010 ).

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