Modelling targeted procurement strategies and relationship quality criteria influencing the development of small contractors in South Africa

Targeted Procurement strategies are widely used in government contracts to achieve contractor performance and development objectives in the South African construction industry. However, there have been reports of poor performance and high attrition rate of contractors in contractor-development programmes. There is little or no objective empirical evidence informing the implementation of SMC-friendly policies in South Africa. The study fundamentally set out to empirically validate the pre-existing assumption that targeting small and medium-sized contractors, and increasing their participation in government contracts, stimulates their growth performance and development. The research further examines whether the quality of relationships in the project supply chain mediates the relationship between targeted procurement strategies used and contractor development. An embedded mixed methods research approach was adopted, that primarily employed quantitative (survey) means of data collection and supported by secondary qualitative data (focus group interview) which was conducted concurrently. A sample size of 307 contractors registered on Grades 3 to 6 of the Construction Industry Development Board (CIDB) Register of Contractors that have executed targeted procurement projects and been part of a CIDB-registered contractor-development programme within a five-year period (2011-2015) constituted the focus of the research. Data collected was subjected to both descriptive and inferential statistical analyses. The empirical model developed was validated using partial least squares structural equation modelling (PLS-SEM) technique. Findings from the study reveal that targeted procurement strategies influence the quality of relationships in the project supply chain and is a statistically significant predictor of the growth performance and development of targeted contractors. Moreover, relationship quality emerged as an important mediator of the relationship between targeted procurement strategies and contractor development. These findings demonstrate that targeted procurement has the potential to achieve its intended results of improving the performance and development of historically disadvantaged contractors where the quality of relationships in the project supply chain has significant elements of trust, communication, collaboration, joint problem-solving and risk allocation. The study contributes to the existing body of knowledge recognizing the importance of social and relational dimensions of inter-firm relationships within the context of project management and particularly relating to public-sector procurement and small contractor development. The findings imply that the government, as a key construction sector client, should continue to invest in targeted procurement or affirmative action policies that benefit historically disadvantaged SME contractors. The recommendations made calls for the establishment of a framework on targeted procurement for ease of application by the government and accountability. This also implies further research into more measurable criteria for the proposed targeted procurement framework. The policy implication of the findings from this study is the need for policymakers, state entities, and public-sector client departments to recognize their role in shaping construction supply chains. They should encourage the design and implementation of strategies and policies that enable adequate relationship management to be entrenched in the supply chain and consider including relationship management as a relevant criterion for participating in public contracts.