Stakeholder power and mutual dependence: construction contractors are caught in an economic vise

This paper asserts that construction contractors are caught in a little understood dynamic of rapidly changing construction industry value each quarter. Chaotic work acquisition volume is the start of other follow-on problems that may lead to financial distress. Unpredictable construction volume at the local level causes negotiating power and mutual dependence imbalances that manifest in misaligned tenders and, thus, suboptimal contract agreements for contractors" main and sub. Tendering is the leading source of insolvency for contractors in Australia. At the same time, the number of competitors stays the same and the means of production" their trust and qualified people" are the last resort in cost cutting. Since net profit margins in construction contracting are single digit percentages, these firms are never far from producing a year-end financial loss. Additional pressures on contractors include a disproportionately high number of competitors when compared to established industries such as manufacturing. Construction material suppliers are few, so they control the flow of necessary materials for project installation while having the ability to limit credit amounts and penalise late payments via an adverse public report. These negative dynamics are exacerbated by uncertain workflow and cash flow. This paper asserts that contractors should develop more risk management strategies for the work acquisition function. We suggest some, such as the Developer-Contractor business model and structured decision-making systems. For society, the long-term critical need is for better organisational and project outcomes. These are critical for mitigating the emerging crisis of climate change effects and rapid urbanisation.