Bryan Green
2023-04-11
In the world of project management, it’s easy to become caught up in the intricate details of contracts and legal agreements.
Don’t get me wrong. I love a good contract.
But, while contracts are undeniably important, it’s essential to remember that they serve the ultimate goal of the project, not the other way around.
It’s critical for everyone – contractor and client – to maintain focus on the project’s objectives.
Doing so ensures that the contract supports and facilitates the successful completion of the project.
The Role of Contracts in Project Management
Contracts play a vital role in project management.
On small projects, the contract may just be a basic agreement on the amount and scope of the contract.
On large projects, the contract may be a complex document (or set of documents) that give specifics on the when, the how, and the what of the project.
I’ve worked on projects where the contract was a single page.
I’ve worked on projects where the contract was thousands of pages of drawings, specifications, schedules, and articles.
In both cases, and all cases in between, contracts establish the terms and conditions under which work is performed, ensuring that both parties understand their respective responsibilities and obligations.
Here’s what you should look to cover in a contract:
Scope of work:
A contract should clearly define the project’s scope, outlining the tasks to be completed, the deliverables to be provided, and the timeline for completion.
A good contract will also outline exclusions from the scope.
Everyone should be on the same page about what the contractor is, and isn’t, expected to do.
Payment terms:
Contracts should specify the payment terms, including the amount to be paid, the payment schedule, and any penalties for late or incomplete work.
Some contracts are lump sum, some are cost+, and some are itemized. A good contract will outline these terms, specifically.
The last thing you want to be doing is arguing over payment structure and terms after the contract is signed… Trust me.
Quality standards:
Contracts should establish quality standards for the project.
The should provide guidelines for acceptable levels of performance and outline the procedures for addressing any issues that may arise.
Ideally, you should have your own quality program, and will tailor your program the contract requirements.
Risk management:
Contracts should address the potential risks and uncertainties associated with the project, outlining the steps to be taken in the event of unforeseen challenges or changes in circumstances.
As above, you should have your own risk management strategies.
In my personal experience, risk management is not handled well (or at all) in many contracts. But you should still be prepared.
We’ll cover risk management approaches in a future post.
Dispute resolution:
Contracts should include provisions for resolving disputes between the parties, outlining the procedures for mediation, arbitration, or litigation.
No one wants to go to dispute resolution, but disputes are bound to arise. You’ll be happy to have a process outlined in the contract that can help keep the resolution civil.
The Primacy of Project Goals
While contracts are important, they should not overshadow the overall purpose of the project.
The primary objective of any project is to achieve specific goals. In construction, the primary goal is often obvious: Build a thing.
Contracts are merely tools to help facilitate the successful completion of the project.
The contract provides a framework for managing the work and ensures that all parties are aligned in their objectives.
More importantly, the contract outlines what each party can hold the other party to. The key word being “can”.
If contract language does not benefit either party, or if it fails to propel the project forward, then it should be considered as secondary.
Assuming all parties want to see the successful completion of the project, then the contract should be means to that end.
To maintain focus on the project’s goals, consider the following strategies:
Start with the end in mind:
Before diving into the details of contracts, take a step back and consider the overall objectives of the project.
What are you trying to achieve, and how will the contract support these goals?
When reading the contract and collecting requirements, consider each contract clause from this perspective:
“Does this clause support the project goal?”
Balance flexibility and control:
While it’s important to establish clear expectations and guidelines through the contract, it’s also essential to allow for some degree of flexibility.
Projects are often subject to change and unforeseen challenges, so it’s important to strike a balance between control and adaptability.
Additionally, no contract is perfect (sorry lawyers). Contract language is up to interpretation and the most progressive interpretation is that which moves the project forward.
Foster open communication and collaboration:
Encourage regular communication and collaboration between all parties involved in the project.
By fostering a sense of partnership and shared responsibility, you can help to ensure that the contract serves the project’s goals, rather than becoming an obstacle or distraction.
Clients are much less likely to pursue disputes if they feel comfortable that the project is being done to their wishes. It doesn’t always work.
Some clients will be more difficult to collaborate with than others. But open communication gives you your best chance at avoiding a contractual dispute.
Ensuring Contracts Support Project Goals
Sometimes — especially on larger projects — you’re handed a contract you had no hand in writing. In those cases, your best course of action is to execute the contract as openly and collaboratively as possible.
Sometimes, however, you will be involved in drafting or revising the contract. And in those cases, you have more capacity to tailor the contract to the project’s objectives.
To ensure that contracts effectively support the project’s objectives, consider the following best practices:
Align contract terms with project goals:
Ensure that the terms and conditions of the contract directly support the project’s objectives.
Consider the question posed before:
“Does this clause support the project goal?”
This may include provisions related to scope, quality, timeline, and payment terms that are specifically tailored to the needs of the project.
Ultimately, every clause, article, drawing, or schedule should support driving the project forward.
Involve key stakeholders in contract development:
Engage all relevant stakeholders in the development of the contract, including project sponsors, team members, and external partners.
It would be great if the project were tailored to meet the needs of the client and the contractor.
However, most projects will affect individuals outside of the project. And involving more people *can help build a more collaborative contract.
This collaborative approach can help to ensure that the contract addresses the needs and concerns of all parties, promoting alignment and buy-in.
*I italicized can above because its important to remember to strike a balance.
Not everyone wants the same things, and you have to know where to draw the line when taking input.
Monitor contract performance:
Regularly review the performance of the contract in relation to the project’s goals.
This may involve tracking progress against milestones, assessing the quality of deliverables, and evaluating the overall effectiveness of the contractual arrangements.
By monitoring contract performance, you can identify any areas of concern and make adjustments as needed to better support the project’s objectives.
Be prepared to renegotiate or amend contracts as needed:
Recognize that contracts may need to be renegotiated or amended as the project progresses and new information becomes available.
Contracts may be legal documents, but they aren’t laws. They are subject to change if they fail to meet the changing needs of the project.
(Laws can change, too. But you know what I mean.)
This can done via formal change order, agreed upon by both parties.
Some people have the impression that a change order needs to reflect a change in project cost or duration, but that simply isn’t true.
Change orders can be helpful for making material changes to the contract, regardless of their impact.
As a contractor, I often push for a change order when the contract requires a revision, even when the project price and schedule are not subject to change.
Be open to making changes to the contract if they will better serve the project’s goals, ensuring that the contractual arrangements remain aligned with the project’s evolving needs and circumstances.
Learn from experience:
As you complete projects and work with various contracts, take the time to reflect on the lessons learned and incorporate these insights into future contract development.
While you’re early in your career, don’t hesitate to discuss contract language with more senior managers. Leverage their experience and lessons learned while you’re creating your own.
By continually refining your approach to contract management, you can ensure that your contracts consistently support the project’s goals and facilitate success.
The Benefits of Prioritizing Project Goals Over Contracts
When project goals take precedence over contracts, a number of benefits arise, including:
Improved focus on outcomes:
By keeping the project’s objectives at the forefront, team members can maintain a clear focus on the desired outcomes, ensuring that all efforts are directed towards achieving the project’s goals.
Enhanced adaptability:
Prioritizing project goals allows for greater flexibility and adaptability in the face of change or unforeseen challenges.
Contracts can be amended or renegotiated as needed to better support the project’s evolving needs, promoting resilience and agility.
Stronger collaboration and stakeholder alignment:
When contracts are designed to support the project’s goals, stakeholders are more likely to feel engaged and committed to the project’s success.
This fosters a sense of shared responsibility and collaboration, helping to create a positive and productive working environment.
Greater efficiency and effectiveness:
By ensuring that contracts serve the project’s objectives, resources can be more efficiently allocated, and efforts can be more effectively directed towards achieving the desired outcomes.
In project management, it’s essential to remember that contracts serve the ultimate goal of the project, not the other way around.
By maintaining focus on the project’s objectives and ensuring that contracts support and facilitate the successful completion of the project, you can create a more efficient, effective, and successful project management process.
Remember to prioritize project goals over contracts, involve key stakeholders in contract development, and monitor contract performance to ensure alignment with the project’s objectives.
By adopting these best practices and continually refining your approach to contract management, you can create a more collaborative, adaptable, and outcome-focused project management culture that consistently delivers results.
BG
