Poor Contracting Carries A Human Cost

This week I am in India, where we are running an IACCM workshop on Contracting Excellence.

Yesterday we reviewed a number of recent newspaper headlines that illustrated the costs associated with poor contracting. Workshop participants explored the underlying causes and the role that contracts / legal professionals should be taking to reduce or eliminate them.

As if wanting to illustrate the importance of this workshop, ‘The Times of India’ has featured contract issues on its front page twice this week. The first related to action by the Government of the Maldives, revoking a $500 million contract with GMR to build a new airport. Today, the headline relates to a hospital and its gas pipeline system. Apparently there was a failure in oxygen supply which has resulted in the death of four patients.

The article carries a sub-section entitled ‘Blame Game’ – a term familiar to any contract manager. The supply and maintenance of the hospital’s gas pipeline had been contracted to an outside supplier since 1998 – but according to that supplier the operational contract expired in October 2011 and the maintenance contract in October 2012. As a result, they had started to reduce the number of staff deployed at the hospital and were threatening to withdraw all personnel. The hospital claims that it had  given verbal assurances of extension and that necessary funding was sanctioned 3 weeks ago.

The precise truth of the matter will doubtless emerge over time, but the story clearly indicates the importance of contract management discipline and the potentially fatal consequences when it is lacking.