The interplay of governance mechanisms in complex procurement projects

Although many studies have investigated governance in inter-firm relationships, little is known about the simultaneous use of several governance mechanisms in complex procurement projects and their impact on project outcomes. In a case study about a complex procurement project in the Norwegian oil and gas industry, we investigate the interplay of contractual incentives, authority and relational governance. The project faced many problems with cost overruns and schedule delays. The study clearly illustrates the interrelationships between governance mechanisms and their effect on project outcomes. The findings suggest that relational governance (trust) is only beneficial for project outcomes when it is accompanied by contractual incentives and control systems (authority). Relational governance in itself does not guarantee an effective and beneficial interplay of all three mechanisms in a way that positive project outcomes are generated.

► The paper reports on a case study of a complex procurement project in the Norwegian offshore oil and gas industry. ► We examined the simultaneous impact of governance mechanisms in complex procurements. ► Significant interplay effects were found in the study, not just among governance mechanisms, but also between these mechanisms and project outcomes. ► Relational governance (trust) is only beneficial for project outcomes when it is accompanied by contractual incentives and control systems.