An empirical assessment of relational contracting model for supply chain of construction projects

Purpose: The purpose of this paper is to examine how the client–contractor relationship affects the project performance in light the theory of relational contracting. The empirical study evaluates the effect of project trust (PT) mediating through the dyadic factors and procurement-specific factors (PSFs) on the project performance. Design/methodology/approach: Research design is carried out in three phases. The first phase of review of literature has identified the key constructs of the study and the conceptual model is formulated. Subsequently, the constructs of the study are validated through expert opinion and pilot study. In the third phase, the questionnaire of the study is administered on 320 samples in various cities of India. The exploratory factor analysis and confirmatory factor analysis is carried out on the two different sample sizes. The structural equation model is finally tested with satisfactory fit. Findings: PT not only improves the dyad factors in construction supply chain (CSC), but also influences the project performance. However, project risk and relationship commitment are not associated with enhancing project performance directly. PSFs and dyad factors are the two mediators in transforming PT into relationship commitment and project performance. Client-led supply chain initiatives and contractor-led supply chain initiatives differ in the CSC. Research limitations/implications: The present research has employed behavioral data to understand the effect of project procurement on project performance. Nevertheless, future studies should use objective data to support the constructs of the study. This study outlines the common and socially rooted relational governance of the project. This study is useful to the clients, contractors and policy makers in understanding the interplay of various control mechanisms to ease the procurement of large and complex construction projects. Future studies should focus on separating client-led control mechanisms and contractor-led control mechanisms of the relational contracting and its effect on project performance. Originality/value: The research study contributes in formalizing the governance structure of supply chain in dealing with the complex construction projects. The study has contributed in understanding the client-led initiatives and contractor-led supply initiatives of establishing the supply chain of construction projects. It has demonstrated the mediating role of dyadic factors and PSFs in improving the project performance.