The dynamics of contractual and relational governance: Evidence from long-term public–private procurement arrangements

Abstract

This paper investigates the detail and dynamics of how contractual and relational governance mechanisms are deployed in managing complex, longterm public-private supply arrangements. Using empirical data from two UK Private Finance Initiative (PFI) cases, the paper analyses the interplay of governance mechanisms along a timeline of project phases. Conceptual and practical findings confirm that relational and contractual mechanisms are indeed complementary forms of exchange governance but also that the relational intentions of all parties frame whether the contract is interpreted as a written sign of distrust or commitment. Equally, relational and contractual governance follow different development paths: both follow cumulative trajectories but (a) inter-personal relational mechanisms are more incremental and fragile, whereas (b) contractual mechanisms move with fewer degrees of freedom and 'anchor' the exchange throughout the life cycle. Finally, the different development characteristics of relational and contractual mechanisms mean that their dynamic interplay does not follow consistent patterns. The paper concludes with suggestions for more longitudinal studies.

Impact of Relational Management and Culture on System Success Perceptions in an IT Outsourcing Project

“…Combination of contractual and relational governance can in turn help projects run more smoothly and increase the perception of successful outcomes, thereby improving morale, help fill in the gaps in contractual stipulations and achieve superior overall interaction between the two parties. The relational management perspective emphasizes flexibility, solidarity, and information exchange to safeguard against exchange hazards and facilitate the enforcement of mutual obligations (Baker, Gibbons, & Murphy, 2002;Zheng, Roehrich, & Lewis, 2008). Especially useful against unforeseen contingencies that may or may not be covered by contractual clauses, relational management provides backup to ties with the vendor in a project (Zheng et al, 2008).…”

Contract functions in service exchange governance: evidence from logistics outsourcing

“…Since TCE is well-established within operations and supply management (Zheng, Roehrich, and Lewis 2008), this section focuses on the aspects most relevant to the present study. TCE posits that exchange attributes determine governance choices (market vs. hierarchy) with a view to minimising transaction costs and efficiently governing economic exchanges (Williamson 1991;Masten, Meehan, and Snyder 1991).…”

Examining Value Co-Creation in Healthcare Purchasing: a Supply Chain View

“…Purchasing decisions and network relationships are gaining attention as execu tives are finding it difficult to provide quality care, while making efficient decisions in the face of rising uncertainty and cost consciousness (Zheng et al 2008). The dynamic nature of the network makes purchasing decisions even more challenging and healthcare has been identified as having some of the best and worst supply chain practices extant in any industry (Byrnes 2004); necessitating iden tification of apt processes, activities, and competencies.…”

“…Advanced technologies provide real time connecti vity, synchronization of data, and improved efficiency. This is observable in the implementation of e business processes (Zheng et al 2008). Bhakoo and Chan (2011) in their paper on e business implementation in the Australian healthcare's pharmaceutical supply chain context have highlighted the importance of transparent SC transactions in procurement.…”