“Working together is much easier than working apart.”
Graham Thomson
In a recent survey and roundtable that Affinitext supported, alongside DLA Piper and Partnerships Bulletin, the respondents’ views of relationships in operational PPP contracts were more positive than I thought they might be – and that also seemed to be the opinion of the roundtable participants. It is a good thing for the market that, notwithstanding current negative publicity, many are comfortable with their relationships.
However, when you look at the relationship between the SPV and the client – which is the key relationship – that is not so strong, and that relationship was viewed much less favourably by respondents.
This was highlighted at the roundtable, where there was a common belief that individuals need to be better able to understand and be on top of what are very complex relationships.
The survey also highlighted that people are now referring to the contracts frequently. When you compare that with how respondents viewed the way they used contracts two or three years ago, it is clear that the market is moving towards better understanding and managing contracts – collaboratively where possible.
The traditional problem in complex risk-transfer contracts is that most people have tended to work in silos, rather than working collaboratively on projects.
However, things are changing and there is now a standard which underpins a more collaborative way of working: ISO 44001. A number of PPP projects are now looking to work with this standard, especially in defence.
Personalities
Personalities are important because today’s projects are increasingly complex. If you think back to the early 20th century, the contract for the massive Hoover Dam project in the United States was just 172 pages long and contained only eight defined terms.
Fast-forward to building a school under PPP in the late 20th century and early 21st century, and you get a contract comprised of 13,500 pages, 5,000 defined terms and 16,000 clause-to-clause references throughout the contract. The average PPP contract today also includes 4,500 contractual obligations or entitlements. When parties reach a deal, all those requirements are being transferred to the project teams to manage.
This complexity makes it vital to identify people who are willing and able to work collaboratively. Therefore, it is not surprising to find that “personalities” was at the top of the list of reasons for a contract not working well.
There is a formula for optimising the chances of a successful project: it is about having competent people, equipped with the best tools and processes. When those three things are all in place, you have the optimal chance for project success.
When talking about “competent” people on an operational PPP contract, it means people who are not only technically capable, but who also have personalities and skills that are right for that environment. In a PPP context, that means having a collaborative approach to working. Unfortunately, many people in the major contracting world don’t come from a collaborative background, as the sector traditionally operates somewhat adversarially.
Obligations
Once the have competent people in position, organisations then need to focus on collaborative and other processes and equip their employees with the best tools for the optimal chance of project success.
Another issue raised by the survey related to the number of obligations that respondents said they managed. Although an average PPP deal has 4,500 obligations, almost a third of respondents said they manage only 1-50 obligations in a PPP contract each year.
While not all obligations in a contract will need managing closely, there will be many in any given contract that need to be well managed on a regular basis. If a manager is only managing 50 obligations per year, that is a very, very light touch approach to contract management and the question is: what is happening to the other promises contained in the contract?
Our experience is that new projects do not adopt light-touch, and that many existing projects having light-touch managed for years, are now concerned at the risk exposure of not being on top of their contracts. In putting this right, they adopt new technology which allows the thousands of obligations in a project to be extracted and published in a spreadsheet in just seconds; enabling the parties collaboratively to agree which obligations they want to manage, by whom, when and with a link to the compliance documents. Tasks are then created at each relevant clause and compliance is managed in a real-time database with the aid of “just-in-time” reminders.
Our experience is that new projects do not adopt light-touch, and that many existing projects having light-touch managed for years, are now concerned at the risk exposure of not being on top of their contracts.
Graham Thomson
Of course, many people are still using old technology such as Word (35 years old) or PDF (25 years old), which were invented before the internet came into common usage. Those people, too, will need to take advantage of new technology as the requirement to manage their contracts more confidently and effectively becomes ever more important to their business.
In PPPs, I believe that the procuring authority ought to take a lead here. BIM is a great example of how the public sector took a leading role on accelerating the adoption of new technology into the construction industry, requiring BIM on its new projects. The same ought to happen in accelerating the introduction of collaborative contract management into PPPs and other projects.
Generally, the public sector allocates a short amount of time scoping a project, a long time in the procurement phase, and insufficient resources for the contract management phase. The effort applied should be the inverse of this, with plenty of resource and time spent scoping a project to ensure you know what it is that you want; a procurement phase that is short and designed to obtain best value, not lowest price; and then providing the right people, tools and processes to confidently and collaboratively manage the contract over the long term. This will unlock the benefits of collaborative working, with ISO 44001 having a core role in achieving these benefits.
The original version of this article was first published in Partnerships Bulletin.
