Lean contracting : relational contracting influenced by lean thinking

Abstract: The construction sector represents a most vital proportion of Swedish society through its main task of meeting the demands regarding buildings and infrastructure needed, among other things, for living, work, leisure time, education and communication. That this is executed in an effective manner is an important issue for a sustainable development of society. However, the construction sector has time and again been the focus as well of a mass media attention as well as of public investigations following construction failures, unfavourable cost development and even unveiled cases of improper competition. The situation has lead in Sweden as well as in many other countries to development of the construction process through application and development of new concepts and process tools. The current development of society also emphasizes the need for a changed and a more dynamic, flexible and innovative construction process to meet increased demands by law and by customers set upon the construction sector and also by a higher magnitude of more complex projects and projects surrounded with different kind of uncertainties due to, among other reasons, shorter lead-times.How the actual set of project-oriented and external factors in the project context affects the contracting process and as how the choice of the contracting model affects the process design during the project execution phase, have also been studied in the scope of this research project The findings of the research presented in this thesis contribute to the development of theory and practice within the field of contracting and the design of the construction process mainly in the following ways: ' The choice of an appropriate procurement model for contracting of projects is often very complex as there are a lot of contextual factors, project specific factors and external factors, to consider in order to find solutions that promote an efficient construction process. The most important prerequisites to consider are the type of project, the market situation for bidding, the lead-time for the project and uncertainties causing risks of changes and variations during the project execution phase. This important choice is also affected by personal and cultural preferences regarding cooperation and distribution of responsibilities. ' The contracting model has three interacting and important components to be considered simultaneously in a procurement situation. Firstly the distribution of responsibilities between the client and the contractors (contract form), secondly how the contractor is compensated (compensation form) and finally how the governance of the project is structurally organized (governance structure). ' The choice of governance structure is in many ways based upon trust and is also the basic pillar of the procurement model, because it determines basically the type of cooperation and the nature of legal adherence that the client wants to establish in the project. The outsets are classical contract models with "arm's length distance" between the actors and reliance on legal frameworks and relational based contract models with high emphasis on cooperation and trust.' The choice of contract form is in legal terms mainly a question of how to distribute the responsibilities, especially regarding design, between the client and the contractors. However, this decision is also influenced by the project type, the market conditions and risk factors due to uncertainties of different kinds. This choice seems also to a high degree to be a question of trust between the client and contractors and is accordingly also linked to the choice of governance structure and compensation form.' The choice of compensation form is also an important proportion of the procurement model to be regarded when contracting. This is especially important in the context of uncertainties, time and resource critical conditions and also when the client wants to get a base for active cooperation with the contractors in process design issues. Accordingly, the choice of compensation form is to a high a degree also connected to the choice of appropriate governance structure. In relational contracting transparency is one of the fundaments of a trustful cooperation.' In projects with a relational contracting oriented governance structure, for example with application of partnering concepts, it is important that the process design promotes an efficient project execution. An important indication of the research carried out in this thesis is that the core group in a relational contracting arrangement has to involve most of the strategic stakeholders in a trustful and equal manner. Other important factors are the establishment of an innovative climate through promotion of innovative thinking and a systematic search for innovations to apply for the benefit of the project in many ways. Innovations have also to be highlighted as an important component in team building and development of trust in an organisation.