Good question, I can offer one theory shared by two different posters on different sites.What does that piece actually do? Does anyone know?
"This is the pre-load adjusting collar. The point is to make sure it grips the top ball joint as hard as the bottom ball joint gets gripped." Post #2 here.
"By "Pre-loading" the upper ball-joint, what you are really doing is adjusting the distance between the upper and lower ball-joint-studs. A distance that can and will change slightly with normal production tolerances. Add years of use, "curb-checks", Non-stock parts, and so on. It's easy to see how that distance might changed over-time." Post #7 here.
It makes sense and I can't argue with those explanations, although somebody probably can, because you are supposed to torque the lower bj stud nut first, then torque the adjustment collar and finally torque the upper bj stud nut. As far as I understand.