Construction industry backs trust, but supply chains remain adversarial, global survey finds

While most built environment professionals agree that trust is crucial to project success, 61% of those surveyed said that supply chain relationships remain adversarial in nature.

The findings come from new research by NEC Contracts, consisting of a global study that surveyed over 1,000 professionals across the UK, Australia, Singapore, Hong Kong and Peru.

Gathering the views of stakeholders from across the supply chain – including civil engineers, main contractors, subcontractors, public sector clients and procurement professionals – the research set out to explore the pressures they’re facing, and how to address them.

What makes supply chains adversarial?

The research was clear about what drives adversarial dynamics.

When asked about the factors responsible for business instability, financial stress and disputes, respondents pointed to:

• poor estimating and job costing (42%);
• uncontrolled changes in project scope (39%); and
• late payment culture (33%).

These pressures fall unevenly.

In the UK, main contractors identified late payment culture as their single biggest source of instability, with 59% selecting it – the highest figure for any sector in any market surveyed.

The parties with the least commercial leverage consistently bear a disproportionate share of the industry's structural problems.

An industry that knows what good looks like

Despite the adversarial baseline, there’s a clear and widely shared understanding of what good looks like:

• 83% of respondents agreed that trust between parties is critical to successful project outcomes
• 81% agreed that higher levels of collaboration help issues to be resolved more quickly
• 78% agreed the most effective supply chain relationships are built on trust and cooperation.

A structural solution to a structural problem

Collaborative contracts, such as New Engineering Contracts (NEC), directly address the pressure points supply chains are facing.

Among those who are familiar or have experience with this type of contracting:

• 76% said it helps protect their business
• 74% said it improves project delivery timescales
• 71% agreed it reduces legal disputes
• 71% said it reduces improper risk allocation
• 71% agreed it reduces the impact of uncontrolled scope changes

The opportunity ahead

While 70% of organisations still use traditional contracts, the appetite for change is real and growing. Among those who are familiar with collaborative contracts, 79% feel positive about their wider adoption.

The research has also found that across all markets studied, the client’s requirements most often determine which type of contract gets selected for a project.

Where clients have committed to collaborative contracting consistently and seriously, the effects have been felt across supply chains and across generations.

Take Singapore for example, which has seen more client-driven uptake of collaborative contracting than other markets. 64% of country respondents said that in the last five years, more than half of their projects were delivered on time and to budget.

This is a notably higher figure than other markets.

Building trust for the next generation

The data on early career professionals is particularly striking.

In Hong Kong and Singapore, they rated trust levels in the industry higher than their non-early-career counterparts. They also showed stronger support for collaborative contracts.

This suggests that young practitioners who begin their careers on NEC-based projects develop a different set of expectations about how projects should be managed.

The contrast with the UK is significant. In the UK, 53% of early career professionals said that very few or a minority of organisations want to work collaboratively, compared to 32% of non-early career respondents.

One in five of UK respondents hadn’t come across collaborative contracts yet, and only 27% had worked on a project that used one.

This suggests that the UK’s early career cohort is forming its professional expectations in an environment where adversarial contracting is still the norm.

The confidence to act

Rekha Thawrani OBE, global director at NEC Contracts, said it was “encouraging” to see that there’s a global understanding of what collaborative contracting can bring to a project.

"The challenge is giving more organisations the confidence and the mechanism to act on it,” Thawrani said.

Andrea Naylor, managing director of Thomas Telford Ltd, which NEC Contracts is a part of, added: "This research reflects an industry that is ready to move forward.

“The evidence is here, the appetite is there, and the direction of travel is clear. We look forward to working with clients, contractors and supply chain partners to help turn that appetite into action."

Download the full report