Competition, collaboration and collusion ; balancing company interaction within the New Zealand engineering industry. (2019)
Type of ContentTheses / Dissertations
Thesis DisciplineCivil Engineering
Degree NameMaster of Engineering
PublisherUniversity of Canterbury
Projects in the engineering industry are becoming larger, increasingly more complex, and requiring different, often more specialised, skills. Only a small proportion of companies have the required resources and/or capabilities to solely deliver projects of larger magnitudes. This trend is accompanied by a shift towards collaborative arrangements and partnerships. Partnering represents a fundamental shift from the traditional and adversarial relationships, which have been reported to mar the constructio n industry, towards a more co-operative environment. Partnering has been the subject of numerous studies, many concentrated on anecdotal success stories of improved project performance, and experiences of exemplar companies operating in foreign markets. It would appear that literature has not closely examined the rationale associated with initiating these partnerships.
To understand the rationale for partnering and identify how companies balance competitive and collaborative interactions, this research has focused on three aspects. Firstly, it quantifies factors which influence partnerships either internally or by external pressures. Secondly, it identifies and describes qualities which companies look for in a partner and serve as a point of differentiation. Finally, it uncovers the rationale behind forming partnerships and their associated implications, such as transgressing toward collusive or anti-competitive behaviours. Understanding the rationale company’s employee when selecting partners could be a catalyst for shifting away from traditional, adversarial, arrangements.
To investigate these aspects, exploratory research has been adopted. Information on previous project records was gathered from the NZ Transport Agency’s online database and through an Official Information Act request. Project records were used to identify companies who had previously bee n involved in partnering and provide quantitative information. Insights from the project records, in conjunction with the literature review, formed the basis for interview questions. As people and their opinions are the focus of this research, a qualitative research method was adopted. To gather information, expert opinions were sought through semi-structured interviews. Interviews were undertaken with participants from across the industry; contractors, consultants, NZ Transport Agency, and third-party industry companies/associations. Furthermore, a Likert-type scale was used so interview participants could quantify the importance of partnering qualities. Interviews were transcribed, and thematic analysis used to develop research conclusions.
This thesis identified seven factors that influence partnerships. Project location, size and duration, and contract arrangement are four external factors, which result from industry conditions that cannot be influenced by individual companies. The three remaining factors: competitive advantage, consolidatio n of industry and individual perceptions are internal factors and are dependent on the actions of individual companies or people. Changes to external factors such as increases in project size and duration will influence the shift towards more collaborative arrangements and drive the consolidation of companies within the industry. This has led to an industry environment suited to existing larger companies, where competition is limited to a small pool of suppliers with a national presence. Thus, the benefits of partnering become a point of differentiation between larger companies. In addition, partnering becomes a necessity for smaller companies looking to compete. The most sought-after qualities were soft-skills more evident in individuals than companies; trust, teamwork, integrity/respect and capability. Of the qualities considered, differentiation of a company was attributed to their people, track record and capabilities. Possessing qualities that offer a competitive advantage, and a point of difference aids companies in attracting prospective partners. For the qualities sought after in a partner, individual people were a reoccurring theme and the centre of their genesis. Qualities sought after in a partner, and the basis for which qualities are perceived, relate to individual people more than companies themselves.
As a company’s rationale cannot be captured by a single sentiment, the considerations which shape decisions have been explored to understand how they affect partnering. The rationale for partnering adopted by each company differs based on their own underlying considerations; this introduces variability into partnering arrangements. As part of maximising the likelihood of winning a project, rationale is further shaped by decisions around: short and long-term; regional and national; defensive and offensive mentalities; and partnering with similar companies. With the permutation whic h maximises competitive advantage being the desired outcome. Short-term considerations based o n winning projects dominate the industry, but there is a strong desire for long-term, sustainable relationships. Long-term partnerships provide brand consistency and allow efficiencies to be recognised from having previously worked together. It is evident that short and long-term considerations are not mutually exclusive. To support variable partnering arrangements, companies require strong, long-term relationships, particularly between individuals.
Despite the perception of collaboration which surrounds partnering, it also recog nises self-interest; both companies need to benefit, otherwise it would not be pursued. Implications of partnering include dependency issues and whether companies should retain or outsource parts of the project . As larger projects are being delivered through more collaborative arrangements, in which companies partner to form a consortium, this may facilitate collusion. Factors identified overseas, that stimulate collusion, were found to align with the current state of the New Zealand construction industry. While such factors can promote collusive or anti-competitive behaviours, it was opined within the industry that suc h practices do not exist. The threat of such practices was considered more likely to stem from people not understanding the limitations or boundaries prescribed by law. Collusion was deterred primarily by procurement practices already adopted by the NZ Transport Agency and the damage a company’s reputation would incur; to a lesser degree personal ethics, competitiveness and legislation were also considered to prevent collusion.
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