Supply Chain Management Practices in Construction and Inter-organisational trust Dynamics

Abstract

The poor trust culture in the construction sector is often considered an inhibiting factor to collaboration success in the United Kingdom (UK) despite reform efforts. Numerous reform initiatives tend to have focused on improvements in client and main contractor aspects of construction supply chain relationships, prompting claims that failure to integrate subcontractors, suppliers and consultants into collaborative arrangements remains a major shortcoming. Main contractor and subcontractor relationships therefore continue to be typified by such problems as late payments, charging fees to tender for work, award of contracts based on cheapest price rather than best value, negative margins and demand of retrospective discounts and cash rebates; all of which negatively impact on trust. Some main contractor organisations however, continue to embed supply chain management practices as a strategy for levering value from subcontractors. Such collaborative practices and their implications for inter-organisational trust development, and indeed overall project outcomes, have nonetheless received limited attention in construction management research, raising significant questions on the empirical basis for their implementation. This research was thus undertaken to investigate strategic supply chain management practices adopted by UK main contractors and its implications for inter-organisational trust development during projects. The study adopts a multiple case study design so as to unravel complex subtleties of inter-organisational trust development in the main contractors’ supply chain during projects. With four purposefully selected UK main contractor organisations that had implemented strategic supply chain management, data was gathered through a supply chain workshop, semi-structured interviews, passive observations and documentary analysis. From analysis of the data, it was revealed that strategic supply chain management practices of the main contractors were instrumental for trust manifestation across cognition, system and relational based dimensions. These practices served as constitutive elements of face-to-face interactions through which inter-organisational trust developed, whilst providing the institutional framework to which respective supply chain parties directed their psychological expectations. These findings highlight the importance of maintaining a core of subcontractors from which the main contractor can leverage long-term value irrespective of economic climate. This can be achieved by adequately prioritizing relationally trusted subcontractors for sensitive and high risk work packages whilst ensuring that strategic supply chain management principles can be used to engender impersonal (cognition and system-based) trust dimensions amongst other subcontractors used on a project. Accordingly, a supply chain management oriented framework for engendering inter-organisational trust during projects has been developed based on the study findings and evaluated through semi-structured interviews with selected target participants. This framework does not only provide a systematic and coherent approach for implementing or benchmarking strategic supply chain management in a main contractor’s organisation, but can also be used to prioritize and promote different trust dimensions and their associated behavioural consequences on projects, depending on perceived work package risks.