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Principles for Appropriate Contracting Solutions

Join us to explore strategic choices and best practices in contracting. Address common contract problems like governance, risk allocation, and incentives. Learn about contract protocols, payment mechanisms, and role clarity. Enhance your understanding of uncertainty and readiness.

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Principles for Appropriate Contracting Solutions

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  1. Principles for Appropriate ContractingDr Jon Gosling, Cardiff University

  2. Aim of this session To jointly explore strategic choices and good practice in relation to appropriate contracts. Our Cast: Client Consultant Main Contractor Sub-contrator

  3. Make a note of your top 3 problems that you typically experience with contracts?

  4. Problems cascade through contracts

  5. GOVERNANCE ISSUES RISK ALLOCATION ISSUES WRONG INCENTIVES Protocols not clear Wrong organisation owns risk Misaligned values, objectives, measures Payment mechanisms encourage wrong behaviour Lack of Clarity Over Roles Uncertainty & Capabilities not fully understood Contractual Issues Scope Creep and Change Cascading &Interface Risks Custom Contracts / Z Clauses Complex Legal Terminology Engaged too late to influence Poorly defined scope DRAFTING / CLARITY SUPPLY CHAIN ISSUES SCOPE

  6. GOVERNANCE ISSUES RISK ALLOCATION ISSUES WRONG INCENTIVES Protocols not clear Wrong organisation owns risk Misaligned values, objectives, measures Structured Approach to Alignment More Effective Learning, Review and CI Systems Payment mechanisms encourage wrong behaviour Lack of Clarity Over Roles Uncertainty & Capabilities not fully understood An Overarching Set of Principles to Guide Good Practice Better Understanding of Uncertainty and Readiness Contractual Issues Scope Creep and Change Cascading &Interface Risks Custom Contracts / Z Clauses Complex Legal Terminology Engaged too late to influence Poorly defined scope DRAFTING / CLARITY SUPPLY CHAIN ISSUES SCOPE

  7. Better Understanding of Uncertainty and Readiness

  8. Starting Point? ‘KNOWN UNKNOWNS’ ‘UNKNOWN UNKNOWNS’ ‘KNOWN KNOWNS’

  9. GOVERNANCE ISSUES RISK ALLOCATION ISSUES WRONG INCENTIVES Protocols not clear Wrong organisation owns risk Misaligned values, objectives, measures Structured Approach to Alignment More Effective Learning, Review and CI Systems Payment mechanisms encourage wrong behaviour Lack of Clarity Over Roles Uncertainty & Capabilities not fully understood An Overarching Set of Principles to Guide Good Practice Better Understanding of Uncertainty and Readiness Contractual Issues Scope Creep and Change Cascading &Interface Risks Custom Contracts / Z Clauses Complex Legal Terminology Engaged too late to influence Poorly defined scope DRAFTING / CLARITY SUPPLY CHAIN ISSUES SCOPE

  10. Variations in Contract Mechanisms • Fixed Price Lump Sum (NEC A & B) • Target Cost / Pain-Gain (NEC C & D) • Cost / Time Re-imbersement (NEC E)

  11. Client Cost/Time Re-imbersement Contract Mechanism Target/Pain-Gain Priced/FPLS Codes and Standards Existing Designs Research Penetration Point

  12. Design Reviews by Contractors Solution Development & Testing Client Cost/Time Re-imbersement Complex Rail Schemes Smart Motorways, Viaducts, Custom Bridges Allocation of Risk Contract Mechanism Target/Pain-Gain Innovation Consortiums, Research Projects Wind Turbine Towers, Standard Bridges, Standard Housing Schemes Viaducts, Innovative Housing Schemes Priced/FPLS Contractor Codes and Standards Existing Designs Research Penetration Point

  13. Do you have different contractual routes to suit different circumstances?

  14. GOVERNANCE ISSUES RISK ALLOCATION ISSUES WRONG INCENTIVES Protocols not clear Wrong organisation owns risk Misaligned values, objectives, measures Structured Approach to Alignment More Effective Learning, Review and CI Systems Payment mechanisms encourage wrong behaviour Lack of Clarity Over Roles Uncertainty & Capabilities not fully understood An overarching set of principles to guide good contracts Better Understanding of Uncertainty and Readiness Contractual Issues Scope Creep and Change Cascading &Interface Risks Custom Contracts / Z Clauses Complex Legal Terminology Engaged too late to influence Poorly defined scope DRAFTING / CLARITY SUPPLY CHAIN ISSUES SCOPE

  15. “Problems cascade through contracts”

  16. Does anyone have such a system in place?

  17. GOVERNANCE ISSUES RISK ALLOCATION ISSUES WRONG INCENTIVES Protocols not clear Wrong organisation owns risk Misaligned values, objectives, measures Structured Approach to Alignment More Effective Learning, Review and CI Systems Payment mechanisms encourage wrong behaviour Lack of Clarity Over Roles Uncertainty & Capabilities not fully understood An Overarching Set of Principles to Guide Good Practice Better Understanding of Uncertainty and Readiness Contractual Issues Scope Creep and Change Cascading &Interface Risks Custom Contracts / Z Clauses Complex Legal Terminology Engaged too late to influence Poorly defined scope DRAFTING / CLARITY SUPPLY CHAIN ISSUES SCOPE

  18. Review of Strategic Questions • Where are our penetration points? • What are our contractual routes and mechanisms? Are they fit for purpose? • How do we capture contractual lessons learnt? • How can we embed good principles in our routines?

  19. Many Thanks for Listening and Participating Please feel free to take away a hard copy of ‘the principles’

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