Global study reveals the true state of construction supply chain relationships

New research published by NEC Contracts explores the factors shaping supply chain relationships across the built environment.

The report, Trust, Contracts and Outcomes: A Global Study of Construction Supply Chain Relationships draws on the views of more than 1,000 industry professionals in the UK, Australia, Peru, Singapore and Hong Kong, and provides a detailed picture of current attitudes to trust, collaboration and contracting, and the gap between where the industry is and where professionals believe it should be.

The research paints a clear picture of an industry under significant commercial pressure. On average, respondents estimated that only 58 per cent of projects they had worked on in the last three years were delivered on schedule and to budget. Poor estimating and job costing (42 per cent), uncontrolled changes in project scope (39 per cent) and late payment culture (33 per cent) were identified as the biggest causes of business instability, financial stress and disputes across supply chains.

Adversarial dynamics are widely recognised as a structural feature rather than an occasional problem. Globally, 61 per cent of respondents agreed that built environment projects create inherently adversarial supply chains, with just 11 per cent disagreeing. Sixty-eight per cent agreed that commercial and contractual pressures make project delivery more difficult, while 75 per cent agreed poor supply chain relationships risk business continuity.

The UK data highlights specific pressure points. Sixty-three per cent of UK architects reported that formal external dispute resolution had been often or very often necessary in the past five years, more than double the global average of 26 per cent. Fifty-nine per cent of UK main contractors identified late payment culture as their single biggest source of instability, the highest figure for any sector in any market surveyed.

Despite these challenges, the research reveals strong and consistent belief in the value of collaboration across all five markets. Eighty-three per cent of respondents agreed that trust between parties is critical to successful project outcomes, 81 per cent agreed that higher levels of collaboration help issues to be resolved more quickly, and 78 per cent agreed the most effective supply chain relationships are built on trust and cooperation.

When asked what factors matter most in minimising disputes, effective communication (48 per cent), clear boundaries and processes agreed from the start (39 per cent), positive supply chain relationships built on trust and cooperation (34 per cent) and contracts that support transparency and risk-sharing (34 per cent) emerged as the leading responses globally. In the UK, strong client leadership also featured prominently.

One of the most important findings of the report is the scale of the gap between positive attitudes toward collaborative contracting and actual adoption. Globally, 79 per cent of those familiar with collaborative contracts felt positive about their more widespread use, yet fewer than one in eight respondents in any country said they actively drove for their adoption.

Among those familiar with collaborative contracts, the perceived benefits are clear and commercially significant: 76 per cent agreed collaborative contracting helps protect their business, 74 per cent agreed it improves project delivery timescales, 71 per cent agreed it reduces legal disputes and improper risk allocation, and 69 per cent agreed it improves project profitability.

Yet awareness and experience remain uneven. In the UK, one in five respondents (20 per cent) had never heard of collaborative contracts, the highest figure across all five markets, and only 27 per cent had worked on projects using them, compared with 40 per cent in Hong Kong and 38 per cent in Australia. The predominance of traditional contract forms is driven overwhelmingly by client specification, pointing to the critical role client organisations must play in accelerating change.

Rekha Thawrani OBE, Global Director at NEC Contracts, said: “The findings of this report confirm what many of us working in collaborative contracting have long understood: that the industry knows what better looks like, but has not yet found a consistent way to get there. The connection between collaborative contracts and better outcomes is clearly evidenced in this research, and the appetite for change is real. What is needed now is decisive action from clients, who have the greatest power to shift the dial.”

The full report, Trust, Contracts and Outcomes: A Global Study of Construction Supply Chain Relationships, is available to download here.