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Complex Project Contracting

November 16, 2009

In the last few days, IACCM kicked off its working group on complex project contracting. This joint initiative with the International Centre For Complex Project Management (ICCPM) has attracted more than 30 volunteers from 8 different countries and a range of industries.

There was lively discussion about the precise issues that the group should address. External commentators are increasingly highlighting the important role of contracts and contract management disciplines in overall business performance, but quite what is wrong often remains unspecified. The working group’s discussions led to the conclusion that the main problems that arise in project contracting relate to clarity of requirements and expectations, and the framework through which these are executed and managed. These issues impact performance and become more severe in complex projects because of a) typically long timeframes and therefore the project is subject to extensive uncertainty and change; b) difficulties in establishing and maintaining ‘competitive’ prices and undertaking on-going management of costs and benefits; c) complex projects are frequently subject to cultural variations between stakeholders and this increases the potential for misunderstanding.

These problems contribute to a variety of project failure characteristics, ranging from complete abandonment, to other factors such as severe delays or cost overruns.

Contracting methodologies and structures for handling disputes are well established, but there are no consistent contract formation or contract management methods that are used to address the problems outlined above. This applies to both the structure of the contract and its related terms and conditions, and to the deployment of appropriate resources at the right time and with the business acumen required to oversee and adjust the contract. The problem applies across the project life-cycle, from inception of the bid to close-out.

Today’s case studies are mostly anecdotal. They show specific projects that have worked well, but the analysis is too limited to draw deductions. It is the beleif of the team that different projects may fall into distinct ‘types’ and that be identifying these types, we can perhaps establish relationship and contract characteristics. Based on this, the working group has established the following goals for its initial deliverables:

  1. To define relationship types and the contracting principles that should apply to each of them;
  2. To develop a resourcing guide for each relationship type.

The work will draw on previous publications and expert input and all suggestions will be welcome.

[1] It is suggested that we use the recent Helmsman Group report to assist in defining the indicators of complexity

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