This article was previously published in Supply Management.
Trying to end the ‘them and us’ culture in supply chains is laudable but a partnering approach to contracts needs a skilful touch.
The rhetoric is easy. We want a more ‘partnering’ approach to projects. We must end the “them & us” culture in supply chains. Do we then get lost in the small print by protecting our own positions, being risk averse and pushing responsibilities onto the other side? Or can a contract be a prerequisite to the successful delivery of partnering initiatives?
Sir John Egan back in 1998 was unambiguous. “Effective partnering does not rest on contracts. Contracts can add significantly to the cost of a project and often add no value for the client.”
There can be undiscovered treasures in successful contracts that underpin partnering relationships. They generally rebel against the standard form. Time is invested in making the contract work for the partnering project, promoting as well as protecting commercial positions whilst being brave enough to provide for a truly collaborative approach.
Consider the following when crafting your contract to fit your partnering project:
- Promote good communication. It’s about the front line and contract managers. In housing management, for example, the supply of timely and practical information to tenants about a programme of works to replace windows is vital, as is taking on board tenants’ suggestions.
- Who takes decisions on a day-to-day basis? Is it senior managers? This is particularly critical with contracts affecting people, the delivery of social care services to the frail elderly, for example. It can also make the difference in delivering a construction contract to time.
- Effective governance will weigh competing priorities and take tough decisions. Outsourced contracts providing school support services are good examples. Budgets are tight and the shifting of resources to address an urgent need, for example, increasing pupil numbers leading to an additional class in a particular year group can put an unexpected strain on the delivery of services.
- Promote openness. Open book accounting; a system of early warnings; and the fast tracking of reported problems. It’s about trust and accountability.
- Think about measuring performance and data collection. Only ask for information if you are going to use it.
- Ultimately, why write this down? Every contract needs to contemplate what will happen if it goes wrong. What remedy is there? Focus on the intention of the partnering project and provide for proportionate remedies. Bar catastrophe, it is rare for all the intended outcomes of a contract to be lost. Salvage what is best from what remains. Money may help (for a building contract that has overrun, supplying additional labour). Refocus on the scope. Such a contract may waive the parties’ right to sue for anything other than gross negligence or deliberate default, a common law right if not reflected in a partnering contract. This can really set the tone.
- Terms to avoid. A laborious contract change mechanism and too detailed a specification. Focus on broad outcomes, time critical deadlines and budgets for costs and allow the contract itself to develop following signature.
So is it possible to enter into a commercial contract with partnering at its core? Get it in writing!