Influence of owner impression and contract framing: could it be used to manipulate construction contractors’ perception of risk?

ABSTRACT

It is generally accepted that the primary factor in determining construction projects’ cost and duration is the contractor’s perceived risk. The goal of the research was to develop and test scientific theory about how risk perception and bid strategies can be influenced by organizational impressions and contract document framing. Priming and framing are two psychological phenomena widely used in other industries for impression formation (i.e. branding). The contractor’s formed impression of the owner is hypothesized to be one of the factors in the perception of that risk. It is further hypothesized that a contractor’s initial impression of an owner is influenced by the content and the context of bid documents, which consequently influences the contractor’s bid strategy. To test these hypotheses, a survey was developed and these two psychological phenomena were used positively and negatively in combinations to influence the contractor’s perceived risk for a given project. Selected factors used in other industries for impression formation and framing were tested with the expectation that what works in other industries should work for the construction industry as well. Several owner priming and contract framing factors that influence impression formation, which then leads to risk perceptions, and consequently impact bid strategies, were identified. Where possible, use of these factors is expected to minimize the negative quantification of the perceived risk in the form of elevated contract prices and durations for construction projects. In addition, owners working towards the use of these elements are expected to improve their contractual relationship with construction contractors.

KEYWORDS:

• Construction risk
• contract framing
• construction contracts
• owner’s brand recognition

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on Contributors

Dr Mehmet Nihat Hanioglu, Ph.D., is an adjunct faculty at Illinois Institute of Technology, Civil, Architectural and Environmental Engineering department in Chicago. Prior to IIT, Dr. Hanioglu lectured at Lehman College of City University of New York, Business and Economics department. In his earlier professional practice, Dr. Hanioglu was involved in several national and international projects in capacities progressing from a field manager to project director, consultant, owner's representative and owner. The projects he was involved included heavy civil construction projects and residential and mixed-use hospitality developments and were spread over in Americas, Europe, Near East, Central Asia and South East Asia. Dr. Hanioglu holds a Bachelor of Science degree in Civil Engineering from the Middle East Technical University, Ankara - Turkey, a Master of Science and a Doctor of Philosophy degree in Civil Engineering from Illinois Institute of Technology.

Dr Cindy L. Menches, Ph.D., P.E., is the IMPACT Director of Contractor Training & Development. She is responsible for the design, development and delivery of education and training initiatives to support the business success of union ironworker contractors and the Iron Workers International Union. Prior to joining IMPACT, Dr. Menches was an assistant professor at the University of Texas at Austin and the Illinois Institute of Technology in Chicago. Dr. Menches previously worked as a construction project manager in Chicago and Madison, and she is a former Air Force civil engineering officer. Dr. Menches holds a Bachelor of Science degree in Civil Engineering-Building Science from the University of Southern California, a Master of Science degree in Architectural Engineering from The Pennsylvania State University, and a Doctor of Philosophy degree in Civil Engineering from the University of Wisconsin.