Defining a contract is essential to running it efficiently. If it cannot be defined, the risk and management framework must be in place to manage the changes effectively. However, the best advice is always to nail down everything that you possibly can. The benefit of this is that it creates certainty for all parties involved. Even if you need to change, you have a clear baseline from which to control the effect. There are 3 parts to effective contract definition:
Part 1 – Make sure that you understand the philosophy of your proposed procurement route and form of contract
The procurement route and form of contract are frequently muddied and the whole process will get off to a bad start. Procurement route is how you intend to package up the risk of the contract. Whereas the form of contract is the legal framework for its governance. For example, the philosophy of design build procurement is that you must make clear what you want and then avoid making changes. The philosophy of an NEC contract is that you work as a team to administer the contract as you go following the management principles outlined in the contract. You would therefore expect a clear set of Employers Requirements that would require little or no change and weekly site meetings to keep on top of any contract administration or risks.
Part 2 – Know what you want
Secondly, you must know what you want. It is surprising how many clients and their advisors allow projects to move forward without being sure what the end result will be. If you are in hi-tech sectors programming decisions on latest start logic is fine; but for most clients it is possible to be clear about what you want. Don’t be tempted to use provisional allowances or to kick a can down the road on a decision. A good test is to ask yourself what will really be any different in six months’ time to make not making the decision now any better.
Part 3 – Define what you want
Finally you must be able to define what you want. Do you know what your essential “control documents” are? These documents enable you to not only capture what you want but to define it in a way that the supply chain understand; without creating uncertainty or ambiguity (which have the effect of increasing the programme or price). If you frequently deliver projects then you can expect to have standard control documents but if you are a one-off client you are very dependent upon your project team creating the best possible documents on your behalf. Whichever you are, make full use of time to review the proposed documents and be sure that they define what you want.
Now you know the importance of contract definition. In our next blog, we’ll move on to the next stage, which is about capturing the defined requirements in the contract.
What Makes Great Contract Delivery Blog Series:
Part 1 – Delivery Philosophy