Toward a unified theory of project governance: economic, sociological and psychological supports for relational contracting

Abstract

Large, global, cross-sectoral, multi-phased civil infrastructure projects tend to be one-off projects for which transactions have no strong ‘shadow of the future’, but where elements of relational contracting are still ubiquitous. Such projects evolve through discrete phases—financial and technical feasibility, conceptual design, detailed design, construction, operations and renovation/replacement—each phase of which can be viewed as a discrete transaction during which key participants and stakeholders rotate in and out of the project. This discontinuity of participation across phases in the project’s lifecycle creates a heretofore neglected contractual hazard of ‘displaced agency’. Similar governance challenges arising from displaced agency are found in longlived aerospace and defence programmes, large-scale software initiatives and other sectors. We review, integrate, extend and apply economic, legal, sociological and psychological governance perspectives on relational contracts to address the extreme governance challenges of civil infrastructure projects. The transaction cost economics literature has pointed out that such projects require relational governance, but has not spelled out strategies to attain and sustain such structures. We set out a framework based on institutional concepts that integrates a range of strategies designed to enhance the efficacy of relational contracts, drawing not only on ‘regulative’ institutional supports (e.g. laws, regulations, contracts and their enforcement through mediation, arbitration or litigation), but also institutional supports that are ‘normative’ (e.g. socially shared expectations of appropriate behaviour and social exchange processes) and ‘cognitive’ (e.g. creating shared identities, scripts or conceptual frameworks to bridge differences in values or interests). We present a set of propositions as a first cut at a contingent, integrated framework to guide future research on governance of engineering projects, and ultimately to help managers select and deploy the appropriate mix of regulative, normative and cognitive governance mechanisms for each project.