Coopertition – is this the new game theory for business?
FairWay’s Denise Evans considers conflict, collaboration and coopertition in commercial activities.
The recent news that Fletcher Building has lost $600 million and is no longer in the market for large scale projects has raised concerns amongst the wider building and construction industry. The sector is asking itself how and why such a thing could happen?
The traditional siloed approach to commercial activities seems to have been an aggravating factor. In a recent NZ Herald article entitled Competition pushing construction sector into 'race to the bottom’ industry players have championed a more collaborative approach.
David Kelly, Chief Executive of the Registered Master Builders Association of New Zealand has been a leading voice in the call for the building industry to change how it manages tenders. In the Herald article he said:
“At the end of the day, all parties need to commit to working collaboratively and equitably to deliver on a project. Anyone building or renovating a home, let alone a multimillion dollar construction project, appreciates that there needs to be some flexibility in adjusting for costs.
"We need to move away from focussing on cheapest initial price — this never gets the best result, limits innovation and stifles research and development," he said.
It is not only the building industry that faces this challenge, this is a reality faced by all businesses. In the same article David Prentice said:
"You always want increased competition but as long as increased competition isn't a race to the bottom. Unfortunately, it has been a race to the bottom so people are going in incredibly tight to actually win revenue, so they've been chasing revenue as opposed to chasing profit."
Prentice believes that the way in which contracts are procured needs to change, as right now the client or customer is pushing all the risk to a consultant or contractor.
The environment referred to above often becomes an environment rich in conflict. People’s ability to deliver on contracts gets squeezed, not only by the money but also by the stress created in managing scarce resources. The juggling required means that relationships between client, contractor and sub-contractors become fractured and before long the race to the bottom is joined by lawyers and other skilled professional helpers which adds cost and therefore further squeezes any chance of profit.
FairWay Resolution Limited runs a building and construction dispute resolution service and hears frequently from builders that they are walking away from large sums of money because of the cost and delay in going through any process to recover the money. We also hear about projects being completed that result in significant losses to the builder.
At the heart of all these difficulties lie several common themes:
- Competition – at the core lies the issue of setting up winners and losers.
- Compromise – which means that no one gets what they really want, everyone settles for what they can get.
- Conflict – which is a loss for all both in times of lost time, money and stress.
Is coopertition the answer?
Collaboration is often not trusted because it can lead to cartel creation and may challenge the notion of the market determining price.
Maybe the answer lies in a combination of competition and collaboration – known as coopertition. Coopertition is based on the idea of teams helping each other to compete. It relies on game theory principles with the best outcome being where there are high levels of individual and group satisfaction.
Applied to the building and construction industry, coopertition would encourage the development of specialist teams of experts who can provide good information, quality workmanship or any of the other elements which form part of the build projects.
Coopertition works best when there is a skilled facilitator responsible for bringing out the best in the teams. With a combination of industry knowledge and facilitation skills, that person is able to encourage sharing of knowledge as well as bringing rigour to the process through solid reality checks based on FairWay’s experience.
Step in the right direction
As an industry, transformative work is already underway, currently being lead by BRANZ through the Industry Transformation Agenda (ITA). The ITA is a framework to bring about ambitious and meaningful change to New Zealand's building and construction sector through real collaboration between all industry players. The ITA process is a start and already has achieved collaboration in the site safety area. It can and no doubt will do more.
What is clear from all of this is that there is a need for wider collaborative transformational change. We cannot become a country which is on a race to the bottom or one where because of competition for work, we lose the ability to trust each other, to receive a fair remuneration for work done and at the same time ensure we deliver quality as well as fair value for money.
Perhaps a cooperative approach is the way forward?
About the author
Denise Evans is a Senior Resolution Practitioner at FairWay and she leads FairWay’s commercial services team. As an experienced lawyer, mediator and arbitrator, with over thirty years’ experience in the industry, Denise is committed to finding a way forward that maintains relationships and achieves the best outcome for all parties.
FairWay is New Zealand’s largest specialist conflict management and dispute resolution organisation. Each year, we handle over 14,000 disputes, reviews and enquiries. For more information visit www.fairwayresolution.com or contact us on 0800 77 44 22.
 New Zealand Herald 19 February 2018