Wednesday, 25 February 2009

Power in construction contracts

We had an industry seminar about our research into the relationship between power and innovation. Among other things, we were talking about how power shifts from the client, thtough the design team, ultimately to the contractor, as the project progresses. Much of this was explained in Building Design Management by Colin Gray and Will Hughes (Butterworth-Heinemann, 2001) One of the participants in the seminar, Innocent Okorji, a barrister, wrote after the event that the shift of power may not be between people at all.

He suggested that there was a metaphor in the field of administrative law. He said, "in military dictatorship or feudal system, parliamentary or presidential State, power initially resides with who ever wields the preponderance of force. As soon as the wielder of the force/power enacts a constitution (repressive or not), power is then transfered to that constitution. The constitution does not change during the process of governance. If there are any amendments to be made in any form or manner, including re-allocating authorities/powers within the polity/state executives, the amendments will usually be based on the provisions of the existing constitution. It follows therefore, in an organization such as [a construction client], power, ... initially resides with the [client organization]. Once the [client organization] adopts one form or the other of a governance structure within their organization or in relation with outside parties, the power is automatically transferred not to any individual or construction organization per se, but to the institutional matrix that regulates the integrity of the relationships within such organization and/or with outside organizations.

The governance structure once it is adopted, it remains in force. Any variation whatsoever to the status quo may only happen according to the provisions of the governance structure. In a construction project scenario, once the employer enters into a contract with external organization or chain of organizations, power to regulate the transaction automatically resides in the provisions of the contract."

Now, I found this very interesting, and responded thus. It sounds right to me because in practice, the people who best understand the governance structure are those most likely to be able to turn it to their benefit. So clients will perceive that the power base has shifted after they sign the contract, but also they may, perhaps, perceive the power base to be with the contractor, even though it is in the contract. In an ideal world, to run the contracts the way they were written, a Chartered Engineer or an Architect would hold the power, as they have roles which spring solely from the contract. They represent the contract. But in most places we have either moved away from that position, or perhaps not even got there. So the contract ends up as a two-way relationship between buyer and seller, with very little effective third party involvement. Presumably, this is why we had to invent statutory adjudication in the UK, to deal with the problem caused by contract administrators failing to fulfill adequately the role envisaged for them in contracts?

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