The importance of procurement negotiations for project success

Abstract

The allocation of a contract for public construction projects in Europe usually requires a European tender procedure. This has to do with the size, the use of public means and the complexity of this type of projects. Compared to regular partnerships, it is hard to develop trust between the buyer and supplier in procurement situations. Inspired by transaction costs economics, in construction procurement processes are still considered as predominantly legal processes that are required before starting a project. Consequently the legal requirements usually prevail over the social process of deciding on the right firm to establish a collaborative relation or the best proposal for constructing infrastructure. Nevertheless, the right partner and good design are critical for project success.
We argue that the basis for successful cooperation between client and contractor is created during the procurement stage of construction projects. Only parallel processes of organisational sensemaking and bargaining will create a common understanding of the project and its environment. Therefore tender processes should be considered as an essential step in front-end project management and designed accordingly. Based on interviews and observations in two Dutch case studies, a Design Build contract for a Provincial Government House and a Design, Build, Finance, Maintain (DBFM) contract for a large Tunnel, we demonstrate why procurement processes should be considered as negotiation processes in which the procurement system facilitates the actors in making decisions for the future project. This kind of awareness contributes to a sound starting position for the project team and stimulates internal motivation for collaboration. Implementing these insights requires further development of strategic project management competences and involvement of the project manager in procurement processes.