Page 414 - Global Project Management Handbook

PARTNERING IN PROJECTS 20-3

be a company (contractor) rather than a person, what the Dutch would call a “legal person”
rather than a “natural person.” However, the owner should view these legal persons as
much as his or her employees as natural persons and motivate them to achieve their proj-
ect objectives.
Levitt and March (1995) say the following about the purpose of organizing:

The problem of organizing [is] seen as one of transforming a conflict (political) system
into a cooperative (rational) one. A conflict system is one in which individuals have
objectives that are not jointly consistent. It organizes through exchanges and other inter-
actions between strategic actors. A cooperative system is one in which individuals act
rationally in the name of a common objective.

The aim of project organization should be to create a cooperative system in which
individuals, legal persons and natural persons, work together in a rational way to achieve
a common (the owner’s) objective. The owner should try to motivate the contractors to
achieve his or her objectives, and it is widely recognized that this is best done through a
win-win game. Turner and Müller (2004) actually have shown that cooperative working
on projects improves project performance; cooperative working is a necessary condition
for project success. They defined cooperative working on projects as
● Having common, well-defined objectives
● Working together in a spirit of cooperation and partnership
Unfortunately, throughout the latter half of the twentieth century, the norm has been
the alternative approach—to view the project as a competition in which only one party
can be the victor, the contractor or the client. I can speculate why this might be. One rea-
son is almost certainly that the client and project manager are in a principal-agent rela-
tionship (Turner and Müller, 2004; Jensen, 2000), in which the project manager has more
information about project progress and the factors influencing project performance than
does the client, leading to discomfort and mistrust on the latter’s part. Turner and Müller
(2004) have suggested communication mechanisms to reduce this discomfort. Another
reason is the result of bounded rationality. Even though the project manager might like to
achieve the client’s objectives, through human frailty, he or she cannot do so perfectly
because

● The project manager does not have perfect information about the client’s require-
ments of project performance.
● The information the project manager does have he or she cannot process perfectly.
● The project manager cannot foretell the future and so cannot forecast all the risks and
issues that will be encountered.

This leads the project manager to “satisfice”—to do what is adequate in the circum-
stances, not what is perfect.
Thus the aim of the project organization should be to develop a cooperative working
relationship between the client and the project manager or between the client and the con-
tractor. Where the client and project manager work for separate legal entities, the project
contract is a key governance mechanism for project organization. Thus, to achieve coop-
erative working, we need forms of contracts that encourage it, and project partnering is
one such form. However, before describing project partnering, I wish to consider how
attitudes toward risk sharing on project contracts changed throughout the last two decades
of the twentieth century.