Investigation of Contractual Specification and Implementation of Relational Approaches in Public Private Partnership (PPP) Projects

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Virginia Tech


Public-Private Partnerships (PPPs) have unique characteristics such as a long time horizon and multiple stakeholders involved. This can lead to common transaction hazards – uncertainty, asset specificity, imperfect information and incomplete contracts, which can further promote opportunistic behavior between parties. Although contracts are designed to govern projects and curb opportunism, their efficacy is limited by these transaction hazards. Therefore, the development of strong relationships and cooperative behavior among stakeholders are often emphasized to complement contractual provisions, which can mitigate transaction hazard impacts.

Relational contracting includes a set of principles such as flexibility and effective communication, which promote cooperative behavior and advance mutually beneficial outcomes for stakeholders. A relational contract can include different relational approaches such as informal resolution procedures, partnering practices and incentives to promote relational exchanges in a project. The level of presence of these relational approaches in PPP contracts is an indication of their ability to further inter-organizational relationships. Although previous studies have summarized and further investigated relational approaches in construction projects using conventional delivery methods, similar investigations for PPP projects are limited.

Furthermore, relational contracting theory suggests that the contractual inclusion of approaches does not assure their implementation in the field. Stakeholders tend to form working relationships different than what is intended in the contract. Therefore, examining the implementation of these approaches is an important precursor to exploring their effectiveness and capacity to promote stronger relationships between parties.

Accordingly, this research presents three complementary studies to enhance understanding of relational approaches employed in PPP projects. The first study focused on the identification of relational approaches described in the literature for specification in PPP contracts to enhance cooperative behavior. A comprehensive literature review process identified relational approaches that were grouped into six categories – communication/nature of negotiations, partnering, conflict resolution methods, monitoring, changes process and risk allocation. The second study examined the extent that the relational approaches identified in the first study were specified in 22 PPP transportation project contracts in the United States. This investigation characterized how relational these contracts are, which is indicative of the capacity of these contracts to promote relational exchanges in a project. For instance, different partnering practices were either included in contracts or not, while the inclusion of conflict resolution methods in contracts was selective. The third study investigated the implementation of relational approaches in practice. Semi-structured interviews of 13 subject matter experts were conducted to obtain perspectives regarding the implementation of different relational approaches. For example, all the interviewees emphasized handling conflicts through informal resolution methods to save the time and effort required in third party methods such as mediation, arbitration and dispute review boards. A framework intended to promote proactive management of stakeholder relationships is proposed based on the findings.

Collectively, these three complementary studies shed light on the current state of contractual inclusion and implementation of relational approaches in PPP projects in the United States. Overall, this research contributes towards the growing literature concerning the complementarity between contractual and relational governance, which is needed for improved project performance. These studies have advanced understanding of relational approaches in PPPs by establishing a baseline for their current contractual specification in PPP projects and identifying factors influencing their implementation in the field. Future research can explore their impact on project performance and counterparty relations.



Public-Private Partnerships, transportation, relational, approaches, contract, content analysis, natural language processing, implementation