In my view, opportunism in alliancing is triggered by uncertainties and risk avoidance mechanisms in alliance arrangements. There could be many options, but I reckon extensive scenario planning and thinking, undertaken by all stakeholders collaboratively, is one of the ways to go.

Moreover, if risks are known and shared, parties are unlikely to be bothered (proactive) about risk events that are not listed against them. Such unplanned risks often multiply reasons for opportunism.

A project management approach to limit opportunism in this is to give incentives to every party for reducing risk exposure to other parties. This is also possible by defining guaranteed maximum benefits to every party should project meets its milestones and core goals.

Thank you for your response. I agree with you that opportunism is triggered by uncertainties and risk avoidance mechanisms in alliance arrangements. The trick is how to reduce those uncertainties or unknowns. I'm in the process of analysing some alliance projects that had large amounts of work in the ground. The contractors were about to trigger Variations (Change Orders) thus avoiding the risks associated with work. What do you think the role of Variations (Change Orders) are in Alliances ?

Scenario thinking and planning (SPT - is a business management jargon) helps players to preplan for uncertain and risk events. If this is left undone in the very early stages of a project, it is probably going to be too late to control changes later on in the project.

In the middle of a contract, it will be hard to stop variation orders and the opportunisms that go with them unless the reasons for the change orders are controlled. The only thing I can think of is to 'tighten' contract conditions and promote known incentives for project's maximum benefits/goals.

hope this helps.

Very useful and thanks for sharing

Hi Anthony,

I am not familiar with construction alliances in particular, but if you are interested in general mechanisms of reducing opportunism I would recommend the following articles: 

• Wathne and Heide (2000) Opportunism in interfirm relationships: Forms, outcomes, and solutions. Journal of Marketing
• Schepker, Oh, Martynow, Poppo (2014) The Many Futures of Contracts: Moving Beyond Structure and Safeguarding to Coordination and Adaptation. Journal of Management 
• Futlotti (2007) There is more to contracts than incompleteness: a review and assessment of empirical research on inter-firm contract design. J Manage Governance
• Gulati, Wohlgezogen, and Zhelyazkov (2012) The Two Facets of Collaboration: Cooperation and Coordination in Strategic Alliances. Academy of Management Annals

I hope some of these will help you. 

Best Regards,

Tobias

Agree with Oluwole Alfred Olatunji ....

Good question.. Please share me the best answer might you trust...

Regards…

Peter Love makes a good point, and the paper he nominates is a useful insight

I agree with Peter. All the industrial psychology in the world will not outweigh a thoughtfully developed pain-gain share scheme. One of my important clients down under that has been active in the alliancing arena has a rule that I really like - "never sign a contract with someone you don't trust." While not perfect, the collaborative alliance model used by SCIRT in New Zealand has effective mechanisms that discourage opportunism.

Cheers Doug

Synergy, in my opinion, it's what is necessary when a subject that is by studying and the interest is the green world future.

I want to agree with Peter and also add that having a clear framework agreement that "protects the interest of all stakeholders" and entrench Open-Book prior to the Alliance might be necessary to reduce the incidence of opportunistic actions from contractors. Like Peter said, low-profit margin is a treat in the construction industry and we have seen some burst in the the UK of recent. Contractors may resort to the survivalist model where they think there interest, in this case - profit, is not "sustainable" or being threatened or at risk by the demands of the Client. Clients must understand the market and make fair demands on the contractors. The pain and gain share formula must be seen to be fair and equitable.

Hi Tony,

that’s a great question. As Peter stated, the partnering is institutionalised in an allice contract. So i dont see any room for opportunistic behaviour by NOPs when they enter to an alliance contract. The payment mechanism of alliancing is the key . If the project goes over the TOC the NOP‘s margin is at risk. On the other hand, the incentive is the motive for all partners to save the cost and time to increase their profit.

I believe Fashid has understood the dilemma, the pain/share gain/share must be understood and trusted by the NOP's. The issue of trust is central to the ultimate success of the alliance. Doug Gransberg summed if up nicely, "never sign a contract with someone you don't trust."

Anthony Mills and Peter E.D Love