Building a supply network for a large-scale nuclear new build project: The importance of contract design changes during the negotiation process

Strategic and operations management research has called for a richer understanding of the contracting process used by companies to govern inter-organizational relationships with their portfolio of suppliers. Our study addresses this gap in the contracting literature by examining in detail the drivers behind the selection (or deletion) of control and coordination contract clauses during the negotiation process. We specifically focus on the process through which a large, multinational energy company, with headquarters in France, negotiates contracts with the portfolio of key suppliers across their supply network. The supply network is responsible for building a $25 billion nuclear power plant. The context of this study is the nuclear industry in the UK with a special focus on a large-scale nuclear new build project.
We analyze the company’s portfolio of negotiated contracts by sampling the primary types of supplier contracts and compare them with the company’s internal contract templates to assess the number and type of changes to contract clauses made during negotiation. We conduct in-depth interviews with key informants from the dyad including lawyers, directors, and managers, and review secondary data including government and industry reports, presentations, meeting notes and agendas, and email correspondence to gain rich insights as to when and why various clauses are used. While research on contract content has emphasized behavioral, institutional, and structural factors, we posit that contract content is often shaped by a country’s legal system, industrial norms, dependence and size of the supplier, and the product/service category. In conclusion, by analyzing the process of portfolio contract design, the study contributes to the evolving discourse on contractual governance of inter-organizational relationships in a supply network.