Open AccessPre-contractual relational governance for public–private partnerships: how can ex-ante relational governance help formal contracting in smart city outsourcing projects?
Author(s) -
Rui Mu,
Peiyi Wu,
Maidina Haershan
Publication year - 2021
Publication title -
international review of administrative sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.863
H-Index - 53
eISSN - 1461-7226
pISSN - 0020-8523
DOI - 10.1177/00208523211059643
Subject(s) - corporate governance , outsourcing , flexibility (engineering) , business , negotiation , relational contract , ex ante , public relations , knowledge management , industrial organization , economics , marketing , finance , management , political science , microeconomics , computer science , law , macroeconomics
In the literature on relational governance, it is often assumed that relational governance emerges primarily after formal contracting and acts as a functional supplement to a formal contract. In this article, we show that especially facing deep uncertainties, relational governance can emerge before the start of formal partnerships, in the form of trust-building, exchanging resources, and fostering flexibility. Based on a case study of a smart city outsourcing project, this article introduces a forward-extended framework of relational governance that captures the pre-contractual dimensions of relationship cultivation and their role in facilitating formal contracting. The study finds that pre-contractual relational governance facilitates formal contracting by reducing substantive, evaluative, technological, and procedural uncertainties in the project and helps the partners to design an elaborative contract, undergo an easy negotiation, adopt short-term contracts, and use simple monitoring and evaluation methods. The article thus argues that only understanding post-contractual relational governance is insufficient for exploring the relation between formal contracting and relational governance; facing deep uncertainties, it is necessary to understand how public and private parties develop their pre-contractual relationship and reduce the uncertainties before a formal contract can be signed. Points for practitioners Practitioners should realize that there is much room for relational governance in the pre-contractual phase of PPP projects when the projects are rife with various uncertainties. Public and private parties can take measures to build trust, foster flexibility, and create interdependence before a formal contract is signed. These ex-ante relational governance measures can facilitate formal contracting by reducing the various uncertainties, making a formal contract designable, making negotiation smooth and easy, and reducing the need for contract supervision.