Chapter 22: Improved Owner-Contractor Work Relationships Based on Capital Project Competencies

Stuart D. Anderson, Ph.D.Texas A&M University
Shekhar S. Patil, Ph.D.Independent Project Analysis, Inc.
G. Edward Gibson, Jr., Ph.D.University of Texas at Austin

Introduction

This chapter presents a decision process that assists owner companies in creating and sustaining properly aligned owner-contractor work relationships for the development and execution of capital projects. The objective of the research that led to the development of this decision process was to answer questions about how owner-contractor work relationship decisions are made in owner organizations. The decision process defines "work relationships" based on the stakeholders' technical and organizational capabilities, identified in terms of project competencies. The concept of a competency is widely used in management literature on organizational strategy. In this research, it is extended to the development and execution of capital projects. A relationship continuum is devised for assigning an appropriate work relationship for each project competency. An existing decision process developed by the Construction Industry Institute (CII) was evaluated and modified as a result of three successful applications of that process. The improved process was then validated using a Delphi approach. The Delphi validation involved experienced personnel from thirty-two owner companies in North America. The Delphi rounds were conducted by providing each participant with a summary of the process and a structured assessment protocol. The validated process constitutes a systematic approach for owner companies to evaluate their in-house capital project competencies and make rational decisions about creating well-aligned owner-contractor work relationships on capital projects.

Organizations respond to the changing business environment by adapting to the demands of that environment. Particularly, in the case of owner organizations, any attempts to reduce costs and maintain profitability while delivering quality products and services are frequently accompanied by downsizing or reducing capital projects organizations, shifting capital project responsibilities to business units or operating facilities, or outsourcing more project work to contractors. Concurrent with this phenomenon is the gradual attrition, through retirement, of a whole generation of experienced managers and engineers. The combined effect of these changes has left many owners inadequately equipped to develop and execute capital projects effectively (Sullivan et al. 1997; Gibson et al. 1998). Therefore, owners are seeking ways to realign their relationships with contractors, while leveraging contractor manpower and expertise where necessary. A recent research effort attempted to provide a solution to this problem by developing a decision process to assist owner companies in creating and sustaining properly aligned owner-contractor work relationships. The decision process was termed the "Owner-Contractor Work Structure (OCWS) process", and was published by CII in 1997 (Construction Industry Institute 1997).