March 2011
IN FOCUS: CONTRACTS
How To Succeed On Projects With Precarious Contract Terms
Just as perfection in design and construction is a rarity, so is the perfect design agreement. It is a human enterprise subject to competing positions, competing leverage, preconceived biases and, ultimately, compromise. It is also rare that any agreement can fully anticipate all that can, and inevitably does, happen on any construction project.
While insurance companies and attorneys extol a vast array of contractual advice favorable to the design professional, owners and contractors have their own attorneys and advisors promoting contractual provisions equally or more favorable to their constituents. As a result, nearly any design agreement is either going to include provisions adverse to the design professional or exclude other provisions that could not be resolved into an agreement. It is the simple reality of business today.
Given this reality, many (or most) design professionals take one of two dramatically different approaches once the agreement has been executed. Some deliver the contract to their accounting department or otherwise file it away in the hope that they will never actually have to confront those imperfect and uncomfortable positions. Others seek to strategically identify and manage the imperfect provisions and omissions with the hope that proactive management will lead to project success and client satisfaction, as opposed to any contentions and/or costly legal debate regarding the subject provisions. For obvious reasons, the latter approach is the preferred model.
Successfully managing such variables is greatly aided by doing so within the context of an operating model. Use IROPE as your guide.
- Issues: Identify the issues of concern arising from both the undesirable clauses, as well as those omitted from the agreement.
- Risks: Identify the potential risks and, especially, the consequences arising from the issues identified in step one.
- Options: List and map the potential options to manage and minimize the risks and consequences. Inevitably, some may be implemented in conjunction with one another, while others may be inconsistent and require an election.
- Plan: From the available options, establish a plan to proactively manage (or at least closely monitor) each issue.
- Execute: Implement and follow the plan consistently through the project with adaptation as possible and necessary to deal with the competing issues.