In construction, the customer is often seen as an adversary. Contractors have a contentious relationship with owners, architects, and designers and most owners see contractors as potentially problematic vendors that bear watching. This relationship often devolves into contract disputes, slow pay, costly legal action, blown budgets, broken schedules, and even project collapse.
How did this dysfunctional relationship have evolved in the construction industry? What were the conditions that led to this perverse, counter-productive business environment? Can anything be done about it? These are the questions we asked ourselves after studying the causes of contractor failure for more than 30 years. We realized that the irony of seeing the customer as an adversary had profound implications for success in construction, and that it would benefit the industry to conduct a little self-examination.
An Example: The Auto Industry
As it turns out, the automobile industry is another example of dysfunctional customer relations. In an effort to compete, auto dealerships began to “deal” with the customer on price. The sticker price became merely an “opening bid” in a contest with the customer to see who could outsmart the other and get him to pay too much or accept too little. The customer came to mistrust auto sales personnel and went in to buy a car in a defensive posture. Gradually, dealership profits began to erode, and customer loyalty became a fond memory.
A Comparison: The Construction Industry
Like the auto industry, we found that the following traditional practices in construction procurement and production corrupted customer relations transforming customers into adversaries.
- Low-Bid Procurement – During the 1920s and 30s, in response to suspicions about how contracts were awarded the prerequisite for the awarding of municipal construction contracts “low-bid” became the standard procurement method in the construction industry. Keeping the auto industry in mind, it doesn’t take much imagination to see how the “low-bid” standard for contract award gradually transformed construction industry “customer relations” into “adversarial relations”.
Best Practice Procurement – The industry is gradually evolving away from low-bid procurement, and considering reputation, risk management, and quality planning when awarding construction contracts. This will definitely reduce the contested atmosphere where some contractors feel they have to bid low and hope to take up the slack with change orders and “corner-cutting” efficiencies. In the full disclosure pre-contract environment of best practice procurement owners will no longer distrust the contractor and feel the need to watch “the rascal” closely.
- Pre-Contract Planning –Traditionally, contractors have done limited pre-contract planning. This has contributed to an abundance of “surprises” and “change orders” that immediately become contentious between contractors, owners, and architects. Customer relations quickly devolve into adversarial relations.
Proper prior planning prevents poor performance – As pre-contract planning becomes the standard in the industry, cooperative customer relations between contractors and owners will be gradually restored.
- Integrity vs. Ingenuity – As “low-bid” is replaced by “best-practice” procurement, contractors will be able to replace ingenious methods of wringing profits from unrealistic “low-bids” with integrity when planning a project prior to contract award.
Sanity – Because owners participate in the pre-contract planning process they will no longer approach the contractor with suspicion. Adversaries will begin to dissolve. Construction will be restored to sanity.
- Complexity and extended duration lead to unforeseen conflicts during construction projects. Because of the unique nature of the construction transaction, conflicts often emerge even in the most cooperative environments.
Conflict resolution techniques that prevent, rather than lead to, litigation will eliminate the poisonous adversarial relationship that always develops during litigation.
The current generation of construction professionals are initiating new programs like Best Practice Procurement and Pre-contract Planning in an effort to transform customer relations from adversarial to cooperative. If we all keep our eye on the ball, sanity will gradually be restored to the industry. The alchemy of “good faith” will spin conflict into trust and mutual support.