Key Relational Contracting Practices Affecting Performance of Public Construction Projects in China

Abstract

Relational contracting (RC) is based on the recognition of mutual benefits and win–win scenarios that are achieved through more cooperative relationships among the contracting parties in a project. Although RC principles are less difficult to apply in private-sector projects, it has not been established whether public-sector projects can enjoy the full benefits of RC. This study aims to investigate the effective RC practices that are found in China’s public construction projects. The specific objectives are to (1) evaluate project performance levels in terms of cost, time, quality, and client satisfaction; (2) investigate the extent to which RC practices were adopted; and (3) identify the RC practices that lead to better performance. Because of the large geographical area of China, the surveys conducted were confined to Beijing and Hong Kong only. A structured questionnaire was designed to collect qualitative data. The results show that (1) public construction projects achieved significant success in quality performance and client satisfaction, but not in budget and schedule performance; and (2) RC practices were adopted to varying extents in public projects. The findings contribute to knowledge by identifying the specific RC practices that could boost project performance significantly. Another contribution to knowledge is the discovery that the relational contract theory is applicable to public projects notwithstanding the need to keep relations at arm’s length. A framework to manage public projects using the RC approach is recommended for adoption in Hong Kong and other countries that adopt project management style along the Project Management Institute’s framework. A different framework is recommended for adoption in Beijing and places that have a centrally planned and controlled economic system so as to help public projects achieve better project performance.