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Complex projects don’t need complex contracts

December 15, 2011

Projects are made complex by the underlying complexity of the systems that are needed to support them.

There are three major elements that must be brought together to achieve project success:

– people

– process and rules

– legal and commercial frameworks

One of the fundamental challenges facing any major project is to ensure that each of these elements is adequately understood and that they are brought into alignment (i.e. that differences or contradictions are reconciled). Because this is relatively complex to achieve, there is a need for a disciplined methodology. And that is where the contracting process comes into play. A good contracting process will ensure that there is consensus over scope and goals, that there is an appropriate procedure for on-going governance and management. This includes forums for discussion and negotiation, reports that offer visibility and insight, analysis that places the spotlight on risk and copes with reducing its probability and consequence.

Conflicts between people, their interests, rules or commercial practices lie at the root of most under-performing or failed projects. Failure to understand and address them adds to the complexity and becomes potentially overwhelming. No matter how talented a project manager may be, he / she needs effective tools and a coherent framework within which to work. That is what a good contracting process will deliver.

Bad contracts are those that are dominated by specific interests, where power or measurement systems have been allowed to overwhelm wisdom and judgment. This is evident when a contract is imposed by one party on the other, or when a particular functional group such as Finance or Legal or Sales is allowed to dictate the terms.  Another source of failure often comes from senior management or project owners, where they prevent an open contracting process – perhaps because their past experience of contracts is negative.

As businesses face a growing range of complex projects and trading relationships, the importance of developing a more structured and reliable approach to contracting and commercial process is growing. There is increasing management realization that this is an area for focus. To build trust, profitability and competitive edge, organizations must become consistently better at aligning needs with capabilities, with defining and managing contract scope, with establishing sustainable and long-term relationships.

To achieve these goals, contracts and the process by which they are created must become simpler. They must be quicker and more efficient to form; they must be beter at addressing real and tangible risks; they must be more focused on delivering success; they must support and underpin constructive relationships.

In 2012, IACCM will offer in-depth insights to these challenges and a road-map for their resolution. Starting with the IACCM EMEA conference in April 2012, executives and senior practitioners will be invited to come together and explore how simpler contracting can help them to master complex project delivery. The prize for success is enormous. IACCM research suggests that the average business could be adding almost 10% to its bottom line.

  1. Arian Alexander Danilovic permalink

    Dear Tim,

    Where can we find out more information about the above referenced April 2012 conference?


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