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Collaborative Contracting

February 21, 2010

There is widespread agreement that collaborative relationships deliver superior results, so long as they remain focused on mutual value. But the role of contracts in enabling collaboration is less clear; indeed, there are many who believe that there is no real connection.

Some collaborative relationships emerge without a formal contract; and there are instances where  collaboration develops even after a confrontational negotiation. But the evidence suggests that contracting strategy plays a large part in determining the nature of the subsequent relationship.

Last week, members of the IACCM Board of Directors were joined by executives from other major corporations to discuss collaborative contracting. There was general agreement that adversarial negotiaion and unbalanced risk allocations damage the potential for collaboration and that this, in turn, undermines innovation and realising value. It was also agreed that good contracts are those which introduce effective governance and performance management techniques. In view of this, the session sought to understand why organizations cannot make the transition to more collaborative  contracting structures and procedures.

The discussion identified a wide range of barriers, ranging from ingrained attitudes to reward systems and distorted risk assessment. But it moved on to explore ways that the barriers might be overcome – and to establish an agenda for future IACCM initiatives. This included the development of a guide for collaborative contracting; continued focus on drafting balanced contract principles; and providing top executives with the data needed to understand the cost of today’s contracting practices.

This was the first of a series of IACCM ‘thought leadership’ workshops that will result in more detailed reports and action plans related to contracting and relationship management.

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