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Contract Management: When Worries Defeat Possibilities

September 27, 2011
The key to good contracting is when we put the same discipline around ‘possibilities’ as we do around ‘worrying’.
Anyone in contracts or procurement knows to treat the stated requirements of the customer or the capabilities claimed by the supplier with a degree of skepticism. Experience teaches us that both are likely to be somewhat optimistic or over-stated.
Our sense of realism, driven by that experience, causes us to focus on ways we can protect our organization against the consequences of those over-statements and the chances that things will go wrong. But rather than devising ways to test the truth, or building mechanisms that might assist in achieving the best outcome, it often seems easier to impose punishments for failure and rely upon these ‘negative incentives’ to drive performance. This is also a convenient way to avoid personal responsibility for the outcome.
Even when we include mechanisms in the contract that could support achievement of goals (such as regular performance reviews), they are often used to review failure rather than to plan success. And in many cases, governance procedures are seen by one or both parties as either optional, or irrelevant. Many continue to argue that it is ‘the relationship’ that matters when it comes to performance – and that can be true, but often is not, especially when combined with the competitive bidding and negotiation techniques common to most Western corporations and government agencies.
There is plenty of research that shows how worrying has negative impacts on performance. Indeed, as one medical researcher comments, “Perhaps you subconsciously think that if you “worry enough,” you can prevent bad things from happening”, but ‘worry’ is generally unproductive and frequently self-fulfilling. Over time, it tends to turn skepticism (valid questioning) to cynicism (expectation of failure).
Hence the problem with contracts and performance management is that there is often no disciplined counter-balance to the skepticism and cynicism inherent to the legal and contracting process. That is why it is so important for us to switch our focus to the terms and methods that ensure disciplined implementation and post-award contract management and relationship governance.
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