Negotiating subcontract conditions in the Australian construction industry

Abstract

Strategic negotiation of subcontracts appears to contain many benefits regarding cost savings, quality improvement, better project time management, and project value enhancement. The primary purpose of the study presented in this paper is to investigate the current and prospective concepts of negotiable subcontract conditions in the Australian construction industry that can alleviate elongated negotiations and attain a win/win result for both contractor and subcontractor. The study first discussed legislative regulations and opinions concerning subcontract negotiation through extensive review on academic literature and Australian Standards including AS 4903 General conditions of subcontract for design and construct and AS 4300 General conditions of contract for design and construct. The study was further developed in the form of a survey, collecting data from 71 respondents (i.e., contractors and subcontractors) from the Queensland, New South Wales and Northern Territory construction industries in Australia. Cronbach's alpha assessed the reliability of survey responses. The research then statistically analyzed not only critical negotiation factors contributing to project performance based on Fisher's exact test but also significant differences between contractors' and subcontractors' viewpoints to subcontract negotiation by ANOVA testing. The survey results revealed that contractors and subcontractors attain different opinions regarding the fairness of subcontract conditions; however, both parties believed that there were genuine opportunities to improve project performance and value via the negotiation of subcontract conditions using an integrative approach.