The role of effective relationship management in successful large oil and gas projects

Abstract

Project success has been a central topic in the project management literature. The high volatility attended with oil and gas upstream projects has enhanced the need for relational contracting approaches. Successful Large International Engineering and Construction Projects can deliver value to project parties (clients, sponsors, contractors, subcontractors, etc.) and other stakeholders (users, investors, communities affected by the project, etc.) in the project supply chain. Supply chain and procurement strategies play a significant role in project success, due to their impact on project value and on the way project risks are managed. In this study, we review insights gleaned from 13 oil and gas senior procurement executives, from which we derive a set of propositions and some preliminary results related to the success of these elements. In general, we find that relationship management plays a critical role in the outcomes associated with oil and gas project success. Procurement relationship management practices affect the way the needs of project stakeholders outside the contract (users, suppliers, communities affected by the project, etc.) are attended as well as the way project relationships are managed inside and outside project teams. As a result, those strategies are also related to important drivers of project success, such as relationship and stakeholder management.

Successful buyer–supplier relationships

“…This is certainly true of the supply chain process. Negotiations extend beyond the task of fixing the contract terms with an acknowledged role in establishing and maintaining buyer–seller relationships (Cummins, 2015; Handfield et al, 2015, Roxenhall and Ghauri, 2004).…”

“…Having clear goals, the motivation to cooperate and the willingness to trust, exchange information and to put in place the surrounding structures that enable communication to be maintained and issues addressed quickly are all elements of a mutual gains approach to workplace relations (Kochan and Osterman, 1994; McKersie et al, 2004; Oxenbridge and Brown, 2004; Walton et al, 1994). Similarly, relationship management with regard to the supply contract is an important factor in success (Batt and Purchase, 2004; Handfield et al, 2015; McQuiston, 2001). Despite its importance, clarity on what actually happens during business negotiations, especially those involving B2B transactions, remains scarce (Fells et al, 2015; Geiger, 2017).…”

“…Both parties might envisage a partnership developing with repeated contracts to their mutual benefit (again, negotiation would appear to be the process through which this partnership can be built). Despite the importance of negotiation in the supply chain process, the manner in which these negotiations are undertaken has been less well researched and is typically described in only general or prescriptive terms (Artz and Norman, 2002; Atkin and Rinehart, 2006; Fells et al, 2015; Gattiker et al, 2007; Handfield et al, 2015). Here, we seek to explore how supply chain practitioners manage their negotiations and their supplier relationships.…”

Reconsidering contact risk and contractual risk management

“…But even the core area of transactions – contractual performances (1) – can be comprehended through risk by a large extent. The decisions for a procurement strategy (Hackett et al , 2007; Handfield et al , 2015), the chosen performance description, the type of pricing (Haapio and Siedel, 2013) or the terms of payment (Handfield et al , 2015) all arise from a risk-opportunity trade-off consideration. Finally, the subjects of regulation commonly attributed to the general conditions (4) can be encompassed through the concept of risk, too (take e.g.…”

Strategic Cost Management for Construction Project Success : A Systematic Study

“…Traditionally projects were perceived as successful when they meet time, budget and performance goals (Shenhar, Dvir, Levy & Maltz, 2001). Therefore project success has been a central topic in the project management literature (Handfield, Primo & de Oliveira, 2015). Project Success can be defined as meeting goals and objectives as prescribed in the project plan.…”