Fairness in interorganizational project relations: norms and strategies

There is a strong preference for fairness in human interaction, so that people who experience unfairness tend to react with anger, resentment and loss of motivation. Concerns to appear fair influence the behaviour of both individuals and firms. Perceptions of fairness are susceptible to framing and may be influenced by various norms for outcome distribution as well as by decision processes and interpersonal relations. This paper deals with causes and effects of fairness perceptions in construction project relations, mainly fixed price contracts procured by competitive tendering. In such projects, uncertainty results in continuous post contract award problem‐solving and negotiations, and fairness concerns may have incremental but significant influence on the terms of exchange. Case studies of client–contractor interaction in two projects are used to discuss of how fairness norms relate to strategies and industry culture. It is concluded that that an intuitive cost‐based norm of fair pricing shapes interaction in construction projects, but that consequences vary between projects. The norm may favour contractors, but is also related to poor risk management and client distrust. To improve performance, clients need to design procurement practices and communication so that perceptions of contractor losses are counteracted.

[1]  E. Friedberg,et al.  Inside Partnership Trust , opportunism and cooperation in the European automobile industry , 2006 .

[2]  D. Kahneman,et al.  CHAPTER EIGHT. Fairness as a Constraint on Profit Seeking: Entitlements in the Market , 2004 .

[3]  William Samuelson,et al.  I Won the Auction But Don't Want the Prize , 1983 .

[4]  A. Gouldner.  THE NORM OF RECIPROCITY: A PRELIMINARY STATEMENT * , 1960 .

[5]  R. Bies,et al.  The predicament of injustice: The management of moral outrage. , 1987 .

[6]  M. Pillutla,et al.  Social Norms and Cooperation in Social Dilemmas: The Effects of Context and Feedback. , 1999, Organizational behavior and human decision processes.

[7]  J. Brockner,et al.  An integrative framework for explaining reactions to decisions: interactive effects of outcomes and procedures. , 1996, Psychological bulletin.

[8]  Anna Grandori,et al.  Interfirm Networks : Organization and Industrial Competitiveness , 1999 .

[9]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[10]  Sarah Maxwell,et al.  Rule-based price fairness and its effect on willingness to purchase , 2002 .

[11]  L. Willcocks,et al.  ABOUT THE PRESENTER: , 2002 .

[12]  Barnaby Marsh,et al.  Heuristics as social tools , 2002 .

[13]  Robert Folger,et al.  Organizational Justice and Human Resource Management , 1998 .

[14]  Praveen Aggarwal,et al.  Who is the fairest of them all? An attributional approach to price fairness perceptions , 2003 .

[15]  G. Loewenstein,et al.  Egocentric Interpretations of Fairness and Interpersonal Conflict , 1992 .

[16]  P. Ring,et al.  Developmental Processes of Cooperative Interorganizational Relationships , 1994 .

[17]  G. C. Homans,et al.  Social Behavior: Its Elementary Forms. , 1975 .

[18]  M. Bazerman,et al.  The Descriptive and Prescriptive Use of Previous Purchase Price in Negotiations , 1996 .

[19]  Jana L. Raver,et al.  Culture and egocentric perceptions of fairness in conflict and negotiation. , 2002, The Journal of applied psychology.

[20]  J. H. Rogerson,et al.  A quantitative study of post contract award design changes in construction , 1999 .

[21]  R. Cialdini.  Influence: Science and Practice , 1984 .

[22]  Madan M. Pillutla,et al.  Unfairness, Anger, and Spite: Emotional Rejections of Ultimatum Offers , 1996 .

[23]  G. Leventhal.  What Should Be Done with Equity Theory , 1980 .

[24]  J. S. Adams,et al.  Inequity In Social Exchange , 1965 .

[25]  E. Fehr,et al.  Altruistic punishment in humans , 2002, Nature.

[26]  William Samuelson,et al.  Status quo bias in decision making , 1988 .

[27]  Michael Pezet.  Negotiating Skills in Engineering and Construction , 1991 .

[28]  Martin Loosemore,et al.  Responsibility, power and construction conflict , 1999 .

[29]  Robert Folger,et al.  Relative deprivation and procedural justifications. , 1983 .

[30]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .