Relational Contracting in the Building Sector in Jordan as a Substitute to Conventional Formal Methods

Abstract

The socioeconomic policies within the Hashemite Kingdom of Jordan aim to enhance the Public-Private Partnership (PPP), one of the Relational Contracting models, to encourage investment, improve public services, upgrade infrastructure and boost financial resources, in line with Jordan 2025 Vision (Ministry of Municipal Affairs, 2014). The construction sector itself has a growth plan of 5% in order to meet this vision, however, it suffers many difficulties. This paper aims to highlight one of the main problems (i.e., wrong choice of the contracting model) that causes a significant effect on the project as well as create a practical project management tool that supports the decision-making process at the concept stage of projects in Jordan. The project context (internal and external factors) has been linked to different parts of the contracting model; contract forms, compensation forms and co-operation forms “Fig. 1”. The aim is to find the relationship between each factor within every part of the contracting model. Consequently, identify how all these relationships could affect the process of selecting the cooperation form, between the owner and the contractor(s). Semi-structured interviews with parties who have actual experience with relational contracting in the Jordanian construction sector have been conducted. The main findings of this research led to the creation of a project management tool that supports the decision-making process at the concept stage of projects in Jordan, regarding relational contracting. These findings suggest that relational contracting is the right choice for complex projects within the context of critical resources, critical resources and lead-time and uncertainties.