Partnering through the commercial lifecycle
A contract is not a competition and a win:lose mentality can be fatal
Most of us, without much thought, can name at least one contract that has made the headlines for the wrong reasons. Often these are contracts for infrastructure where there is scale and complexity; transport, health, defence, information and communication technology and digital goods and services.
There are many causes of failure. Whether it’s the way a contract is initiated, managed or exited, failure can occur in a multitude of places along the way and failure can involve multiple parties to the contract.
Failure however does not need to be terminal. In most cases with the right interventions at the right time, failure can be avoided altogether or very quickly addressed. Key to this is understanding of what can fail, and more importantly, why.
Anatomy of a contract
Every contract has a lifecycle. There is a beginning, a middle and an end. Contracts also have three elements that are fundamental to success - people, process and systems. Failure can be foundational - a failure across one or more of these three elements. Or it can occur during one of three phases, and most often in the transition from one to the other.
People
This is not just about having the right people at the right time. It is also about instilling the right culture and training as well as commitment to openness and collaboration. For many longer term projects there is also an issue of consistency. Too much churn and not enough knowledge transfer from one team to another.
With the right interventions failure at the people level is perhaps the easiest to avoid or turn around. The vast majority of people involved in any given contract want it to be successful and when motivated and armed with the right tools, will become agents of change.
Process
The management of all stages of the contract lifecycle need to be supported by formal processes with the right blend of rigour and flexibility to deliver success. Here is where you define the ways of working, the hand-offs between teams, and the different phases of the lifecycle that are essential to success.
Systems
Systems are essential to the effectiveness of almost every part of the contract. From supporting market engagement, open and iterative development of contracts, effective document management and obligations tracking using electronic versions of the contract through to the drawing of management information and insight from administrative and performance data. Use of the right systems in the right way can also facilitate efficient and effective data migration and transition as part of contract expiry. The failure to adopt the systems or mobilise and use them appropriately can lead to costly failures.
Common points of failure
Failure can occur almost anywhere in the lifecycle. Sometimes it is a single catastrophic event but more often it is a series of straws on a camel’s back. There are a number of areas where problems are most likely to occur:
In the beginning…
Failure to design a contract that will deliver for all parties
Lack of openness and transparency leading to vague definitions of success
Failure to engage effectively with the market and drive innovation
In the middle…
Failure to understand the demands of mobilisation - poor time, resource and governance planning
Lack of proper contract management plans, information management and reporting
Inflexibility in the contract - no room for innovation and evolution
In the end…
No proper provision for exit
Mismanagement of demobilisation and the transfer for people, process and systems
No accountability for delivering value
Contracts can fail for one or all of the reasons above but perhaps the biggest cause of failure of all comes from an inability to work together to achieve equitable outcomes. A refocusing on the requirement to deliver for all - buyer, supplier and end user - can, and often is, transformational. A contract is not a competition and a win:lose mentality is fatal but failure is not inevitable and no matter where a contract is in its lifecycle, it can be recovered.