The Foundations of Trust

A contractor submits its monthly payment application. Most of the work is readily measurable. A smaller part concerns changed work for which the parties disagree about entitlement or value. The contractor provides its records, expecting the application to be assessed in accordance with the contract and the amount properly due to be paid on time.

The assessment identifies the disputed items and explains the difference. The contractor does not agree with every conclusion, but it can understand how the assessment was made and pursue the remaining disagreement through the available process. Payment arrives when it should. The next month follows much the same pattern. Over time, the contractor has evidence that a disagreement will be dealt with on its merits without putting the whole payment at risk.

The same application could produce a different response. The client’s representative says that the project is over budget and asks the contractor to accept a reduction if it wants the payment released promptly. The contractor has wages and suppliers to pay. Its commercial manager may agree to the reduction while its project manager continues attending collaborative workshops. The payment record may show an agreed amount and no formal dispute. Neither tells us much about the trust within that relationship.

The contractor’s willingness to keep working may reflect confidence in its client. It may also reflect the cost of stopping, the difficulty of recovering what is already owed or concern about obtaining the next project. Asking the parties to trust one another requires attention to what happens when money is due.

In my seminars, I often suggest that one of the best ways to build trust is to do what you have promised to do, repeatedly. In construction, many of those promises are in the contract. Being contractual, in that sense, is a good thing. A client that pays properly and a contractor that provides reliable information are giving each other reasons to trust. The same cannot be said of a party that invokes collaboration while failing to honour its own obligations.

Reliability and the promises in the contract

Khalfan, McDermott and Swan (2007) examined trust through interviews across five construction case studies in north-west England, involving participants at different organisational levels and points in the supply chain. Participants associated trust with honest communication, reliable action and delivery of expected outcomes. Working together allowed them to judge whether people followed through on their commitments. Some also regarded recourse to the contract as a sign that a relationship had failed. Their accounts support the importance of repeated reliability, while revealing reservations about how contracts were used.

Where the contract contains the parties’ commitments, fulfilling them fairly should provide evidence of reliability. Giving a required response on time or issuing an instruction with the proper authority allows others to act with confidence. Repeated failure forces them to plan around the possibility that the organisation will not do what it has agreed to do.

Reliability nevertheless needs a wider meaning than predictability. A client that predictably pays late is easy to anticipate, but difficult to trust. A contractor that submits an optimistic forecast every month may be consistent while giving the client no dependable basis for a decision. The relevant question is whether conduct justifies reliance on the commitment made.

Mayer, Davis and Schoorman (1995) distinguish trust from the qualities that make someone appear trustworthy. Their theoretical model identifies ability, benevolence and integrity as important antecedents. Trust involves willingness to accept vulnerability to another party’s actions. Ability concerns competence in the relevant task; benevolence concerns a perceived intention to act for the other’s benefit beyond a purely self-interested motive; integrity concerns adherence to principles the trusting party finds acceptable. The model also distinguishes that willingness from the risk actually taken in a particular situation.

An assessor may be honest but unable to understand a complex valuation. Another may be technically capable but willing to let the client’s cash position influence the result. A third may make a difficult assessment competently, explain it candidly and correct an error once demonstrated. These are different reasons for judging trustworthiness. Friendly meetings cannot compensate for an assessment process that the people using it cannot rely upon.

Benevolence does not require a contractor to work without payment or a client to abandon legitimate financial control. In a commercial relationship, concern for another party can be demonstrated by recognising the consequences of a decision and avoiding unnecessary harm while meeting one’s own obligations. Promptly identifying the records needed to assess an item is more useful than leaving the contractor to discover the deficiency after the payment deadline. That is a matter of professional conduct; the legal requirements depend on the applicable contract and law.

Nor should scrupulous compliance mean exploiting every available ambiguity. An organisation may have an arguable reading of a clause and still administer it in a way that makes its assurances unsafe to rely upon. Conversely, fairly applying an express limitation is not necessarily opportunistic merely because the result disappoints the other party. The terms, the circumstances and the way the position is communicated all matter. Trust cannot depend on one party always receiving the answer it wants.

A notice preserving an entitlement can support that understanding. It tells the recipient that an event may have consequences which need attention. Treating any notice as an act of aggression encourages people to conceal the contractual position or rely on informal assurances that may later be disputed. The parties can record their disagreement accurately while continuing to deal with the work. Goodwill may make that easier, but trust concerns what each has reason to expect when cooperation carries a risk.

The vulnerability created by payment

In many construction arrangements, the contractor commits labour, plant and materials before the corresponding payment becomes due. The client receives the benefit of progress while the contractor carries expenditure awaiting assessment and payment. Retention and unresolved changes may extend that exposure. Advance payments, payment for materials and different commercial models can alter it; it would be inaccurate to describe every contract as creating an identical imbalance.

Clients also face substantial vulnerability. Defective work, delay or contractor insolvency can leave an asset incomplete and expensive to recover. Performance security, inspection and contractual remedies address legitimate concerns. Recognising those risks does not remove the particular influence that comes with controlling a payment on which another business depends. Once work has been done, the contractor cannot readily retrieve its labour or transfer the completed structure to another customer.

The distinction between an amount being disputed and payment being used as pressure is therefore important. A client should challenge an unsupported claim. A certifier may properly conclude that work has been overstated or that an entitlement has not arisen. But withholding money otherwise due to secure a concession on another issue changes the basis of the relationship. The contractor is being asked to price the cost of resisting as well as the merits of its claim.

That pressure can continue down the supply chain. A head contractor may be vulnerable to its client while controlling the cash flow of subcontractors with fewer reserves and a greater dependence on the next payment. It can seek fair treatment upstream and impose quite different treatment downstream. A collaborative relationship at the head contract level gives little assurance to a subcontractor whose payment is repeatedly reduced without a clear explanation.

Loosemore and Lim (2021) surveyed 337 tier-one subcontractors in Australia. Their analysis identified prompt payment alongside integrity, respect and fairness among the factors determining relationship quality. Trust was its most important dimension, with differences according to subcontractor size and dependence on turnover from the relationship. The survey establishes the importance subcontractors attach to these matters, rather than demonstrating that prompt payment alone causes trust.

More troubling evidence concerns the consequences of seeking payment. The Senate Economics References Committee’s 2015 inquiry into insolvency in the Australian construction industry recorded intimidation and retribution associated with using security of payment legislation. In Chapter 9, the committee expressed concern about that evidence and recommended an offence addressing intimidation, coercion or threats connected with access to statutory remedies (Senate Economics References Committee, 2015, paras 9.34–9.36). Its report is historical evidence of a serious industry problem, not a measurement of its present prevalence or proof that its recommendations became law.

A party operating under that kind of pressure may maintain a civil working relationship while withholding information, avoiding disagreement and accepting losses it cannot afford to contest. We should be cautious about describing the resulting absence of disputes as success. The commercial conditions may have made objection too costly. A relationship cannot reasonably be called trusting merely because the party with less room to manoeuvre has stopped challenging the other.

People can trust particular individuals even while fearing the organisation behind them, and some cooperation can survive considerable commercial insecurity. Sustained, justified fear that openness or a legitimate claim will invite financial punishment nevertheless undermines any assurance of fair treatment. I do not believe we can reasonably expect a party to trust on those terms. The conduct and protections within the relationship need to change.

The credibility of certification

Appointing a superintendent or certifier introduces professional judgement into the payment process. It does not necessarily remove the contractor’s concern about whose interests govern that judgement. The certifier may be the client’s employee or an external consultant appointed and paid by the client. The contractor can reasonably want to understand what happens when the client disagrees with an assessment.

We need to distinguish organisational independence from independence in performing a particular function. An external appointment does not guarantee freedom from commercial influence, and employment by the client does not prove a lack of professional judgement. Actual impartiality concerns how the assessment is made. Perceived independence concerns whether the parties have credible reasons to believe that the decision can be made without improper influence. Both matter to confidence, but a concern about appearances is not evidence that a certificate is wrong.

The legal position depends on the contract and the applicable law. In Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002), the New South Wales Court of Appeal distinguished the superintendent’s certifying functions from agency in the strict sense. Hodgson JA considered the superintendent’s obligation to act honestly and impartially in those functions and rejected a construction of a separate project management agreement that would require it to act as the owner’s agent when certifying (paras 50–54). The decision does not establish that every person called a superintendent owes identical duties under every form.

In Costain Ltd v Bechtel Ltd (2005), an English case concerning an amended NEC2 target cost contract, Jackson J regarded a duty of impartiality in assessment and certification as at least properly arguable. He was deciding an application for interim injunctions, which he refused, and expressly declined to give a final answer on the duty (paras 52–53 and 68–70). The reasoning supports taking impartial assessment seriously, but does not establish a final finding of misconduct or an Australian rule governing NEC4.

For a Queensland project, the task remains to examine the executed terms, the appointment and the governing law. Duties expressed as honesty and fairness, reasonableness or impartiality should not be casually treated as interchangeable. A duty owed by the client under the construction contract is also a different question from whether the contractor has a direct claim against the certifier. The job title alone cannot answer either.

The parties should understand who is responsible for an assessment and the authority under which it is made. The assessor should identify the contractual basis and evidence for a reduction, allow material errors to be addressed, and keep the decision separate from an instruction to improve the client’s commercial position. Those practices make the process more credible. The precise procedural obligations still depend on the contract and law.

Fairness concerns the route to the decision as well as the amount. A contractor may be better able to accept an adverse assessment if the evidence has been considered, the same rules have been applied consistently and the reasons answer the claim actually made. Procedural justice allows the other party to distinguish a reasoned decision from an unexplained exercise of power. It does not make an incorrect assessment right, or create a legal entitlement to procedures beyond those required by the contract and law.

The client has a corresponding management responsibility. If an objectively assessed entitlement exceeds the budget, that is information the client needs in order to manage its expenditure. Pressuring the assessor to reduce the number may improve a report temporarily while leaving the underlying exposure unresolved. A credible certificate is valuable to both parties because it provides a disciplined account of the position, including when that account is uncomfortable.

Safeguards that support openness

Formal protection and relational trust need not displace one another. Poppo and Zenger (2002), studying exchanges in information services, found support for formal contracts and relational governance operating as complements. Their findings concern that setting, rather than construction payment, but challenge the assumption that using a detailed agreement necessarily signals distrust. Agreed safeguards can give parties a basis on which to work together with greater confidence.

Zhang, Chen and Fu (2020) surveyed 295 contractor–subcontractor relationships in China. They found evidence that perceived contractual protection helped explain the relationship between contractual complexity and trust. Their findings favour the safeguarding explanation among the mechanisms they tested. This gives reason to examine the protection a subcontract provides, rather than assume that adding clauses will improve the relationship.

In Queensland, the Building Industry Fairness (Security of Payment) Act 2017 provides statutory machinery for progress payments and adjudication, subject to its scope and requirements. Section 74 renders pay-when-paid provisions ineffective; section 73 addresses when payments become payable. The legislation also provides project and retention trust protections where its requirements apply. These arrangements differ in purpose and coverage, and a statutory trust is not available on every project. Adjudication also sits alongside continuing contractual and civil rights, as reflected in section 101 (Queensland, 2017).

The practical effect of a safeguard depends on whether it can be used. Eligibility, service and time requirements need attention, and payment timing depends on the applicable terms and statutory constraints. A subcontractor also needs the resources and information to pursue a remedy. Security of payment cannot be treated as a universal payment guarantee or a substitute for assessing the counterparty’s financial position. Equally, exercising a statutory right should not be treated as evidence that the subcontractor has failed to collaborate.

Commercial security can be improved before a disagreement arises. Payment arrangements can reduce the period for which completed work remains unfunded. Suitable security or protected payment arrangements can reduce exposure where the project warrants them. Clear authority can prevent an agreed assessment waiting for an internal approval nobody anticipated. These measures have costs and require appropriate design, but they address the conditions under which a promise will be relied upon. A firm with dependable payment arrangements has less reason to protect itself by refusing every request involving additional uncertainty.

Control can nevertheless be used in ways that make trust harder. Kadefors (2004), in a theoretical analysis of construction relationships informed by Swedish research, explains how contractual incentives and close monitoring can legitimise behaviour inconsistent with ordinary expectations of a trustworthy partner and contribute to cycles of distrust. Her analysis warrants examining how controls are designed and used, rather than concluding that checking should cease.

Consider two approaches to supporting records. Under one, the contractor knows what evidence the assessor needs, both use consistent valuation principles, and a discrepancy prompts a proportionate enquiry. Under the other, each submission produces new documentary demands and information provided for one purpose is used to reopen settled matters without explanation. The first approach can make an assessment dependable. The second may encourage defensive submissions and concealment, which in turn invite further checking. Records are necessary in both circumstances; their purpose and treatment differ.

In the standard NEC4 ECC, clause 10.1 requires the Parties, Project Manager and Supervisor to act as the contract states; clause 10.2 requires mutual trust and cooperation. Patterson and Trebes (2023) explain how the contract’s remedies reinforce the obligation to perform. Both requirements apply to the administration of the same contract, subject to the amendments agreed for the project. A demand for trust provides no justification for ignoring an obligation to assess, respond or pay.

The Project Manager must also follow the assessment provisions. Clause 64.1 identifies circumstances requiring an assessment of a compensation event, while the valuation rules govern how it is made. Hunter (2022) explains that intervention is mandatory when the stated circumstances arise. NEC’s guidance makes clear that unaffordability is not a reason to reject a compensation event quotation and that details of the Project Manager’s assessment must be provided (NEC, n.d.). Professional judgement must be exercised within those rules; the Client’s preferred financial outcome cannot replace them.

A contractor that identifies a possible error needs confidence that an early warning will lead to a proper examination of what should be done. Liability may still need to be established, and notification does not remove the consequences of defective work. An early warning also does not replace another notice required by the contract. A proper investigation of responsibility is compatible with openness. Treating the act of raising a concern as a reason for punishment makes that openness harder to sustain.

Edmondson’s (1999) study of 51 teams in a manufacturing company found an association between team psychological safety and learning behaviour. Psychological safety concerns a shared belief about interpersonal risk within a team. It is relevant to admitting mistakes and asking for help, but it is not the same as commercial security between firms. Applying it to construction therefore requires attention to both. A site engineer may feel comfortable raising a problem with colleagues while knowing that the employer fears the payment consequences of telling the client.

Earning confidence across the project

Those different experiences can exist within the same project. Directors may describe a strong partnership while subcontractor supervisors expect every request for clarification to become an allegation of delay. Site staff may resolve difficulties informally while commercial staff later discover that commitments were made without authority. Trust in one person cannot reliably carry obligations that the organisation will not recognise.

Gharouni Jafari, Mottee and Whyte (2025) drew on 27 interviews concerning Australian water infrastructure projects using NEC4, including 11 directors or senior managers and 16 middle managers. Their emerging findings identified challenges in implementation, collaboration competencies, and systems and processes across office and site. Although they did not test payment insecurity as a cause of distrust, the difficulties they describe show why a contractual framework needs capable staff and workable processes across the organisations involved.

For payment, that means following the commitment beyond a project meeting. An agreed correction must reach the person preparing the certificate. The certificate must reach the people releasing funds. A head contractor’s assurance about subcontractor treatment must survive the incentives applied to its buying and commercial teams. Repeated reliability is an organisational achievement when several people must act before the promise is fulfilled.

Failures will still occur. An honest valuation error, an administrative delay and deliberate pressure to surrender an entitlement call for different responses. Treating every failure as dishonesty makes repair difficult; dismissing repeated failure as a misunderstanding gives the affected party little reason to change its judgement. The explanation needs to account for what happened and the correction needs to address its consequences.

Gillespie and Dietz (2009) propose a systemic framework for repairing employees’ trust in their organisation after a failure. They examine how organisational arrangements contribute to failure and repair, rather than treating an individual apology as sufficient. Their framework concerns an employment relationship. I would apply the same attention to organisational causes when a construction payment is mishandled: correct the amount, address the contractual or statutory consequences and change the process responsible. Subsequent payment cycles provide evidence of whether those changes have worked.

This does not oblige the affected party to restore trust immediately. Additional checks or suitable protection may be reasonable while confidence is rebuilt. The aim should be to address an identifiable exposure, with a clear understanding of what would justify reducing the additional control. Otherwise a temporary response to failure can become a permanent source of friction, even after performance has improved.

I regard contractual reliability as a foundation for trust because it gives people evidence they can use. It allows a contractor to distinguish an unfavourable but fair assessment from commercial pressure, and a client to distinguish an emerging problem reported honestly from an attempt to conceal poor performance. Adequate protection makes those judgements less dangerous to act upon. Neither requires the parties to stop checking or abandon their legitimate interests.

The monthly payment may still leave the parties disagreeing about changed work. Confidence can grow where the assessment follows the agreed rules, payment is made as required and the remaining disagreement can be pursued without a threat to unrelated entitlements or future treatment. Repeated over the project, that conduct gives the promise to collaborate credibility. A collaborative charter can express the intention. The ordinary decisions about work, certification and payment establish whether there is a sound basis for believing it.