The Contract – straight-jacket or open door?
Many industries long for the day when they can become end-to-end service providers. They believe that they can reduce operational time and cost and provide more flexible services within a single contract. These aims are mostly missed because both customers and suppliers are not very good at collaborating and setting up and managing flexible agreements. Suppliers are happy being told what to do and customers like to tell them what they want. The trouble with this is it drives down margins and limits service scope and innovation.
Every business arrangement needs a legal basis because at the end of the day each side needs to know where it stands and that its rights are protected in law. In a collaborative relationship where a high level of flexibility is required, the terms of the agreement will need to be less detailed and capable of being adjusted to meet new opportunities. Does your standard contract do this? Here is an example of a contract that was clearly not fit for purpose.
“The product is not performing to the standard we would have anticipated. This has been on-going for at least 2 years. Rather than this softening their commercial stance, we seem to be seeing the opposite”. Commercial Manager, Aviation Services
One partner’s commercial department proudly announced to us that they had developed a ‘collaborative contract’. On close inspection it turned out to be their standard contract but with extra terms and conditions. Can you have a collaborative relationship if you are working within a standard contract?
“Our objectives and way of achieving them, are not aligned. We all need to move towards a managed service relationship rather than one based on detailed Ts&Cs.” Project Director, Global Software Services
In a collaborative arrangement, governance is still important. It does need you to be more innovative in your thinking about flexible working. However, it is still essential to keep control over things such as cost and quality.
“The Board decided that to encourage a ‘can-do’ attitude they would reduce ‘bureaucracy’ at the working level. The result was a £7m project overrun with no clear idea of who was to blame.” Chief Engineer, Global Construction Company
We are not talking about ‘pie in the sky’ here. Where commercial teams are involved in creating a flexible agreement then a joint enterprise is likely to be both innovative and profitable. Are your Commercial people part of your relationship management team?
“'A major success factor was the unusual combination of commercial staff on both sides who were lateral thinking and open to new ways of doing business.” Project Manager, UK Defence