Construction procurement practice of Dutch municipalities

The dissertation concerns the construction procurement and tendering practice of Dutch municipalities. The results of the study show the problematic nature of the construction market, and the strategies adopted by the municipalities to overcome this problem. In their effort to gain more control over separate projects municipalities deliberately select contractors on past projects' performance (in terms of quality as well as flexible co-operation). The contractors anticipate on this habit. For them there is more at stake than the earnings of specific projects. A satisfied client is a relative certain source of future turn-over. To protect this potential turn-over contractors become less opportunistic, and tend to be more aware of client satisfaction. The municipalities use this characteristic of the construction market. Proverbially they control the contractors' performance through the carrot of future assignments, instead of the stick of legal sanctions.

To award well performing contractors the municipalities prefer private tendering and avoid the open public tendering procedures. Subsequent recurrent transactions alter the relationships between the municipalities and contractors, from just ad-hoc contracting parties towards co-makership. The contractor obtains a kind of preferred supplier status.

The research is conducted out of the paradigm and perspective of Transaction Costs Economics (esp. O.E. Williamson). The findings are coherent with the results predicted by this theoretical framework.

The outcome of the study raises questions about the adequacy of the European procurement directives, especially about the emphasis on open public tendering combined with price competition. It appears that the underlying views on the functioning of the construction market are more idealistic than realistic. The directives ignore the problematic nature of transactions in the field of construction and building, and disregard the value of the procurement (tendering) as an effective tool in project control.