Don’t Believe Everything You Sign: A contract doesn’t make a partnership

Every project starts with a contract. In far too many instances, it also starts with a myth about that contract. The myth is that a nice, dense document full of caveats will cover every possible contingency and create a successful project. But it doesn’t.

In fact, far too often, my colleagues and I see a stunning lack of partnership in the contractual relationships formed to deliver major infrastructure projects. Sure, there’s always a contract ostensibly joining partners’ interests, but it’s essentially a document that defines scope and assigns risk. You could even say that the contract – with all of its provisions for penalties, remedies for nonperformance, etc. – probably does more to set up partners as adversaries rather than allies.

It can look good on paper. But in practice, all kinds of problems can surface. For instance, in a low-margin project, as soon as deadlines start slipping and penalty clauses are invoked, a contractor is likely to react with immediate action to protect its interests. And that’s where the real trouble can start. It’s not unlike a marriage: When you have to start defending yourself for something, you’re not looking out for the whole of the relationship.

If you take a step back, you could say the bulk of the contract essentially serves as a prenup, with remedies to invoke when things go south. Quite often after a contract award has been announced, months are spent honing the contractual details, most of them addressing specific risks to the parties and corresponding penalties. It’s more about planning for failure. It isn’t going to create a successful marriage.

But partnering can be about so much more than risk mitigation: It’s a real opportunity to fulfill something much bigger. The name of the game in creating a successful partnership is learning to work so well together that you don’t really need the contract anymore; you’re not looking to it for remedies or penalties because the relationship is really working.

Yet here’s the thing: As in many relationships, partners aren’t always eager to openly recognize issues that arise. Especially in high-profile projects, reputation management is all-important, and positive optics are vital to organizations who are continually bidding for future projects. If somebody starts acknowledging there’s an issue with a current project, that could potentially eliminate them from being a contender for the next opportunity. So airing out problems is something that rarely happens. Instead, we see maneuvering without real communication, which rarely leads to anything good.

The posture and tone of courting – which you could call the procurement process – is very different from what it actually takes to have a successful marriage. The procurement process ultimately makes you partners, but it doesn’t create a partnership.

So if a contract doesn’t make a partnership, what does? There is certain work required up front – and to a certain extent, on an ongoing basis. This work falls into four categories:

  1. Put Perspectives on the Table
  2. Commit Beyond the Contract
  3. Honor versus Mitigate
  4. Agree About What to Do When You Disagree

1. Put Perspectives on the Table

It’s critical that partners reveal and challenge the conclusions and views in the background that could limit performance. No matter what the reality may be at any point in time, people’s perceptions and interpretations will always be more powerful forces. And if those perceptions and interpretations are veiled in the background, it is likely they will eventually surface in ways that limit – even damage – the partnership.

For example, consider people’s relationship to the project schedule. Maybe on the engineering side, people have a bias that leads them to believe their construction partners are padding the schedule, which in turn could influence how seriously they take deadlines (we’ve seen it happen). And the construction partner, in turn, might tend to be critical of the engineers for not hitting every milestone with precision. Or take safety, for instance. I’ve never met anyone who isn’t committed to safety. But for one organization, that might mean less than 0.1 total reportable injury frequency on a million hours; for another it might mean 5.0.

You have to talk these things through at the outset in a partnering session – one people participate in because of more than a sense of obligation. If the key stakeholders in a project approach this kind of session as a real opportunity to establish a foundation together – versus a box to check – it can position them for extraordinary project performance.

2. Commit Beyond the Contract

For a true, sustainable partnership, it takes a committed mindset of: “I can’t be successful unless we’re both successful.” Real alignment comes from a truly shared vision for the project. This means discussing what matters the most to each party involved, and committing to working together in a way that addresses and honors all of the key concerns articulated.

A contract can do a good job of defining the things that are important in the domain of cost, schedule, and quality. But there are other matters that are equally important – and less defined – that need a structure to be managed equally as rigorously.

parntervennIf you think of a Venn diagram with overlapping circles, you could say that the traditional partnership is where the joint interests lie—in shared concerns such as the budget, the schedule, and the conditions of satisfaction. The challenges for the relationship arise not where you have common interests, but where you don’t. My colleagues and I have been involved in projects where both partners involved care a great deal about matters beyond the contract clauses. For instance, a partner who is a government agency wants to remain in the good graces of the public and political players; the private company partner wants to not only meet minimum margins, but also have a good reference for their next bid.

So before the work gets started, the partners discuss the things that matter to them outside of the overlapping circles. It’s not about giving lip service to caring about the partner’s success and the greater good of the project; it’s understanding what that really means.

3. Honor Versus Mitigate

People’s commitments matter. When we work with struggling partnerships, we often find that people are working really hard to avoid problems rather than simply deal with them so that they can meet their broader commitments. They may overlook a deadline that slipped just a little, or a quality issue of minimal concern – as opposed to digging in to see what could be adjusted so that small problems don’t become big ones.

It’s the difference between (a) honoring the commitments made and (b) allowing those commitments to wane, then mitigating the consequences. It may seem like more work to stop and say “We missed a target, let’s figure out why,” rather than perhaps push out the schedule, keep moving forward, and hope it doesn’t happen again. But if unspoken issues are allowed to accumulate, that’s where things can get unexpectedly messy. Conversely, agreeing to talk about potential obstacles as they arise can lead to unexpected success.

For example, my colleagues worked with a federal agency in Australia that was awarded an $800 million road upgrade project, then surprised many by deciding to share the risks and rewards – with multiple partners – in its approach to the work. The key players had rigorous conversations at the outset that led to a no-blame, fix-it-first project culture. Despite deadline pressures and huge logistical challenges, the partners delivered award-winning, defect-free performance under budget and ahead-of-schedule. By negotiating beyond the nuts and bolt of the contract, all parties benefited, and the public got the sorely needed infrastructure improvement.

Time and again, the projects that we’ve seen succeed are those where the commitment to an end point is honored and the people prevail over the circumstances that inevitably arise.

4. Agree About What to Do When You Disagree

This part isn’t about penalizing, but rather, about being proactive. As projects become more and more complex, it’s critical for all groups to take ownership of the success of the whole venture. To return to the analogy, people may go into a marriage saying things like, we both want kids, we each want the other to be successful. But how many kids and how soon, and what does that mean for our respective careers? And very importantly: What do we agree to do if we reach an impasse on this or other vital matters?

In the road upgrade project I just mentioned, the parties involved committed specifically to certain metrics, from exceeding budget figures by double digits to defect-free completion of work in all phases. Everyone was clear about what “success” meant, and nothing was left to question in terms of the fundamental priorities of all involved. And if tension arose about how to handle unexpected obstacles or competing priorities, they had an agreed-upon process in place for raising the issue openly and hearing each other out, then finding next steps both partners could commit to and deliver. On more than one occasion, one partner or another essentially put a temporary halt to certain operations until they could have a joint conversation about the matter at hand and agree to next steps.

It can sound a bit tedious, and pausing to talk is the last thing people want to do in the heat of deadlines and other pressures. Yet it can make all the difference if it happens in the context of a commitment beyond the contract, a meeting of minds about how you will work together, and a pact for how you’ll handle things when the going gets tough.

It requires effort and honesty from the start, but if you’re interested in operating at a higher level of engagement and performance, and ultimately boosting reputations as well as bottom lines, it will be time and energy well spent. When the focus of a partnership—from the beginning—genuinely shifts from risks to rewards, that’s when people and partnerships experience the power of pulling together, and prosper as a result.

Leave a Reply