Resolving Agency Issue in Client-Contractor Relationships: The Mech Innovation Center

A Case Study
Questions:

1. Which agency-related issues can you identify in the case?

The following agency-related issues were identified.

1. Degree of goal conflict. Goals and objectives occur naturally the moment a person

or an organization decided to plan and desire to implement a project. Attainment

of such goals and objectives is a long process that requires effort and resources.

Thus, when a goal or objective happened to not be attained, it puts a burden on

our emotional well-being, resulting in high levels of anxiety, depressive states,

and other indicators of emotional well-being. To put it simply, goal conflict

arises. 

2. Degree of opportunistic behavior. It is an act or behavior driven by maximizing

one's economic self-interest at the expense of the other. This occurs when one

party is in a difficult situation and needs assistance, while the other party tries to

profit from the situation. For instance, if a project is delayed but the client

requires a specific completion date, the contractor may overprice acceleration

measures and thus exploit the client.

3. Degree of information asymmetry. Information asymmetry happens when one

party has access to more relevant and timely information while the others are not.

It creates imbalances and can exploit those at disadvantage. 

4. Level of trust. It requires a lot of time and connection between two parties before

they can achieve the desired level of trust. Sometimes, it just sort of happens

especially if you work with them for a long time but there are levels of trust. In
 the case of Steven and Mark, they can build trust by being open and

communicative to the bidders. 

5. Level of concealment of negative outcomes. Concealment of negative outcomes

will not do any good to the project. It will not only affect the relationship between

the client and contractor but the success of the project as well. In the case study,

Steven and Mark professionally handled the negative event during the project by

being open and honest to the bidders. 

2. How were the different issues addressed by Steven and Mark?

 In the degree of goal conflict, Steven and Mark were both transparent and open to

their client. They made sure that the goals and objectives of the project were

clearly stated, communicated, and understood. It is one of the ways to reduce the

likelihood of misunderstanding and further conflicts as the contract moves

forward. 

 In the degree of opportunistic behavior, similar to the situation above, both parties

were transparent and open to the client. As the goals and objectives of the project

were stated, the process was explained next. This will allow both of them to

analyze how the bidders reacted, behaved, and to determine their strengths and

weaknesses. 

 In the degree of opportunistic behavior, both parties were centered to be collected

and be updated as much as possible to relevant information. This entails the

willingness to share all the information available. 

  In the level of trust, both parties made sure to give time and effort to know the

bidders and vice versa. It may take time to develop the trust and connection, but it

will help to build the connection and relationship they needed. 

 In the level of concealment of negative outcomes, both parties provide all the

important and available information including the strengths and weaknesses, and

the level of difficulty from the project. This shows that both parties are honest and

have no intention to conceal or exploit the situation.

3.  Do you think the way Steven and Mark addressed the agency-related issues was

appropriate and effective? Why?

This is very subjective, but in my opinion, Steven’s and Mark’s way of addressing

the agency-related issues was appropriate and effective because of the successful

implementation of the project. This shows that there is a process that happened including

planning, assessment, implementation, evaluation, and post-implementation phase. 

4. Can you relate mechanisms to resolve agency-related issues in this case to some of

the mechanisms identified in the CURED framework (see Bryde et al, in press)? What

does this tell us about Steven’s and Mark’s approaches?   

The agency-related issues identified in the CURED framework are:

1. Contract, to which both Steven and Mark made sure that the terms and conditions

of the contract were met and fulfilled. 

2. Understanding, to which both Steven and Mark have. Both parties have developed

a sense of understanding by a briefing of documents and workshops throughout

the process. Both parties are very transparent and open that helps them to reduce

the likelihood of misunderstanding and conflicts. 

 3. Resources, to which both Steven and Mark are aware of how important the

resources are for the project. It is not enough to have the knowledge and skills

because the project will not be put into the process without the resources needed. 

4. Education. Since Steven and Mark, including their respective teams, have no

formal education and training before the start of the project. The informal training

only started when the workshop took place, allowing participants to obtain an

awareness of working methods, project important issues, and connections among

the various parties involved.

5. The delegation, which both Steven and Mark have done by delegating the work to

appropriate team members including themselves. They also delegated some of the

controls to experts like Claire and Lilian. 

5. Steven and Mark decided to develop their own collaborative way of procuring

concrete and steelworks. Do you think their model should be recommended for

replication for other projects? Why?

Steven and Mark both did a great job in leading the success of the project. Their

contribution and point of view help the team to progress. However, whether the model

should be recommended for other projects or not is very subjective. There is a lot to

consider such as the resources, the team, terms, and conditions. This should be a matter

of discussion between the team or participants who will handle the project. This model

should only be used as a benchmark that could help and guide the team for the project’s

progress and success. Using this model alone is not advisable since it might need

modifications or updates depending on the project. 

6. Due to the introduction of additional requirements by the building authorities, a major

 disruption of the procurement process occurred. Do you think Steven’s and Mark’s

strategy to postpone this issue post-contract award is suitable? Why?

In my opinion, Steven and Mark's decision to postpone the issue until after the

contract was completed was appropriate. Since one of their intentions is to establish a

collaborative and trustful relationship with the contractor, they showed their willingness

to discuss and resolve all issues and concerns collaboratively and fairly through their

precontract behavior. Again, as I stated in the previous question, this is a very subjective

matter and should be discussed between the team or participants. 

7. Post-contract award the client offered bonus payments to Construct. Why did they

choose to spend extra money if they are not contractually obliged to do so? Do you

think it paid off?

To properly distinguish this voluntary award from all contractual duties, Steven

and Mark provided the incentive to Construct post-contract. In my opinion, the bonus

payment was not for the construct, but its success. It’s like a payment for the debt of

gratitude.

8. Bryde et al (in press) point to another area, where agency problems arise, namely in

the allocation of benefits and risks in uncertain situations. Which instance in the case

study addresses this particular concern of Steven and Mark? Did they adopt a value

or a risk-sharing perspective? Why?

It is stated in the case study that the issue regarding the allocation of benefits and

risks in uncertain situations occurs in OGHQ. The remaining two bidders were invited to

risk mitigation meetings, where the causes and effects of the disruption were discussed,
 and they were both asked for risk-reduction ideas and suggestions. Both parties were

given the chance to revise their estimates and prices.

9. Would you have done anything differently to Steven and Mark? Why?

Steven and Mark contributed a lot in leading the success of the project. Their

skills and knowledge, which can be seen through their point of view, helped the progress

of the project. I can’t say that what I would do will be different from Steven and Mark

because for sure, at some point, there will be similarities in our approach and of course,

differences. But as I stated earlier in the previous question, what Steven and Mark did

could be used as a benchmark that could help and guide the team for the project’s

progress and success. Using this model alone is not advisable since it might need

modifications or updates depending on the project. 

10.  In your opinion, is it likely that Steven’s and Mark’s approach contributes to the

success/failure of the project? Why?

Steven and Mark’s approach contributes to the success of the project or if not, at

least to the progress of the project. Both parties have their own opinions and point of

view which once collaborated, can provide a more concrete, appropriate, and better set of

ideas. Their approach overwhelmingly helped the project to address agency-related

issues. It also helped to build client relationships by putting trust between the client and

the team. Having a great client relationship helps both parties as it minimizes

misunderstandings and conflict. 

References:

https://en.wikiversity.org/wiki/Motivation_and_emotion/Book/2014/Goal_conflict_and_emotion

https://www.masterclass.com/articles/information-asymmetry-explained#what-is-information-

asymmetry

https://leadingwithtrust.com/2017/12/03/3-levels-of-trust-you-experience-in-relationships/

https://eprints.whiterose.ac.uk/157462/3/Revised%20Relationship%20management%20to

%20outsourced%20projects%20Final.pdf