Inter-organisational relationships and their effect upon small construction enterprises in South Wales: Co-operation at a cost

The culture of the construction industry often means that technological progression and innovative methods are failing to filter through the supply chain. It is documented that the construction industry in the United Kingdom trails foreign competition in terms of training and development especially within small firms. It is also maintained that processes such as partnering can arguably reduce costs within the construction process. These costs primarily arise due to a lack of harmonisation between contracting parties. Historically, this relationship has been transactional in nature, with both parties seeking to secure value added at minimal cost. Despite this fact, evidence suggests that mutual co-operation that can supersede a traditional cost led approach offers new hope for prosperity in the construction industry. It is argued that Industrial South Wales should be the focus of research due to the sectoral differences that exist together with the heterogeneity of the firms within the region. This paper provides preliminary qualitative research, highlighting that the competent implementation of mutually beneficial inter-organisational relations can only reduce transaction costs if the small subcontracting firm is fully integrated into the process. Thus, it is argued that harmonisation between large and small firms is a prerequisite for productive inter-organisational co-operation. The paper concludes that new practices will only have limited appeal to small subcontracting firms, if they continue to facilitate contractor opportunism instead of reducing the transaction costs of all stakeholders involved in the construction process.