The concept of 'relational contracting' as a tool for understanding inter- organizational relationships in construction

Managing the relationships between the various parties involved in construction is becoming more crucial as the industry moves away from fragmented and adversarial ways of working. Under less-adversarial procurement routes and contractual arrangements such as partnering, it is essential that the parties develop mutually beneficial objectives and a high level of commitment, cooperation and trust. When disputes do occur, without good relationships between the parties they are likely to refer back to the clauses of the contract which, in turn, may start a return to adversarial ways of working. The concept of 'relational contracting' has been developed by Macneil (1974, 1980, 1981 and 1983). 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. Based on a review of recent literature, this paper explores the dimensions of relational contracting that are applicable to the construction industry. Since the principles of relational contracting have received relatively little attention in the construction management literature, work from other disciplines have been explored in order to promote a fuller understanding of its implications to understanding the way in which people from different organizations work together. It is suggested that previous work has viewed the concept of relational contracting in isolation rather than as an integrated set of relational principles. It is argued that when viewed as a joined-up set of dimensions, relational contracting has the potential to facilitate a better understanding of inter-organizational relationships within the industry.