The UK Government’s Construction 2025 report says that our industry’s success depends on taking a strategic approach to contracts:
“Repeat customers… approach the industry in a strategic way and secure a better outcome, particularly in the context of whole life value – and generally through the early engagement of key suppliers from across the supply chain… However, the industry’s customer base is even more fragmented than the industry itself. This means that much of the industry’s workload comes to it on a one-off and piecemeal basis, where such a strategic approach can be challenging.”
Steven Covey’s 7 Habits relate to both contracts (“make and keep a promise”) and contract strategies (“involve others and work out a solution together”). The ideal is to follow a clear informed collaborative strategy from contract inception, through creation and finally to contract operation. If you do, there will be far fewer letters of intent and disputes. The Government Strategy also anticipates reduced cost and time for clients as well as more sustainable projects.
How do you rate your company against some of these bad habits?
1 Use Your Strategy Lazily
Is your strategy based getting to the end as fast as possible or achieving the best result for you and your project team? Do you ignore your carefully prepared strategy when difficult decisions have to be made? Does your strategy include informed alternatives for dealing with the curve balls life throws at a project? What is your Plan B if eg none of the tenders meet your budget, the contract cannot be signed in time, the funding falls through, or the purchaser becomes insolvent…?
Tip: your strategy should be clearly linked to both your business’ goals and your supply chain’s goals.
2 Begin with Failure in Mind
Does your strategy align with your view of success both once the project is complete and during the journey? Wembley stadium is a great success as a national stadium but the contract inception, creation and operation phases were disastrous.
Tip: your strategy should be aimed at success throughout the stages of the project.
3 Put First Things Last
In the Office for Government Commerce construction strategy, there were 15 steps – contract creation was one small part of that process. In practice, the contract can often appear to drive the strategy, like the tail wagging the dog. In your strategy, are all elements (inception, creation and operation) equal? If not, why not?
Tip: your strategy should not be ignored when you get to contract creation – if it does not allow for a letter of intent, don’t use one!
4 Think Win/Lose
Collaboration and trust is the key to a successful contract strategy. Does your strategy involve the project team as early as possible so you can use their expertise to work out the right solution for your needs?
Tip: aim to build trust throughout the contract strategy including within the terms of your contract.
5 Seek Misunderstanding
Just like contracts that are excessively long and irredeemably complex, your contract strategy might not be clear enough for someone to really understand the project properly. Does your contract strategy make sense to an outsider and are your aims clear (not hidden)?
Tip: write your strategy in plain language.
Defective contract strategies assume that different members of the supply chain are placed in silos, each protecting its own interests. Effective strategies create teams to combine the strengths of everyone to produce an even better result. Is your strategy clear that the supply chain will jointly decide the solution to any problem, rather than having one party impose its ideas?
Tip: ensure your strategy treats your supply chain as a long-term partnership for mutual benefit.
7 Blunt the Saw
Defective strategies seek short-term profits for the funder and developer at the expense of long-term relationships with their supply chain. Is your contract strategy truly collaborative or is it merely window-dressing an adversarial approach?
Tip: focus on agreeing joint procedures, principles and practices as this provides room for improvement as you learn.