Performance-based contracting in the defence industry: Exploring triadic dynamics between government, OEMs and suppliers

摘要

This study takes a rare longitudinal perspective to examine performance-based contracting (PBC) inudthe context of the development of a major capital defence project. It employs a triadic framework toudexamine changes in actors and their roles over time in fulfilling the project. The triads involve bothudcontractors as suppliers and government entities. More specifically, using a historical narrativeudmethod the study suggests that over the 30 year span of the new warship’s development, differentudparties occupy the nodes of triads where the roles or functions of the principal and agents in theudcontract change over time. Our use of a triadic perspective enables us to trace both the withdrawal ofudthe government customer from a position of authority and the specific strategy of one supplier toudoccupy the vacated role as systems integrator. The study makes three distinct contributions: firstly, toudour understanding of PBC through tracing the development of the conditions that enable PBC inudlargescale long-term public-private contracting such as clear role delineation. Second, it adds toudunderstanding of principal-agent behaviour in triadic public-private projects, suggesting thatudcustomer and supplier roles need to be perceived as supply network dynamics. Third, it suggestsudreasons why this defence acquisition underperformed, focusing on the mediation of the customer’sudvalue requirement through powerful players seeking to extend their control. We argue PBC must beudre-assessed in complex environments to include less direct financial measures such as long-termudmarket share and adopt a more nuanced approach to contractual management than simplyudtransferring risk.