The interplay between formal and informal contracting in integrated project delivery

Abstract

This research examines the interplay between formal and informal contracting in integrated project delivery (IPD). It investigates how the interplay enables parties in health-care construction projects to cope with uncertainty and complexities, due to, among others, changing demands. New delivery models based on collaborative interaction, such as IPD models, often rely on relational contracting principles, defined as the simultaneous use of formal contracts and informal relational mechanisms to govern relationships between partners. Five case studies of IPD health-care construction projects in the USA and Norway are presented and analysed. The results show that the projects rely heavily on the formal contracts and structures to stimulate collaboration between the project team members and to enhance problem-solving. However, informal mechanisms play just as an important role. While formal mechanisms facilitate the building of trust and personal relationships between the partners, the formal mechanisms are in turn created and recreated through informal practices, illustrating a mutual constitutive relationship between the two types of mechanisms. The findings also indicate that previous experiences reinforce informal mechanisms in the project. The paper concludes that IPD models involve a complex interplay between formal and informal mechanisms, which engenders commitment resulting in joint problem-solving and responsibility throughout the construction process. The findings also indicate that even if the dynamic context and future uncertainties in health care are taken into account, dealing with such flexibility issues is not at the core of the current IPD model.