What are the best strategies for future-proofing your contract with stakeholders?

A contract is an agreement between parties to provide a product or service in return for a compensation. There are several factors that contribute to successfully delivering such services, in addition to the efforts of the parties delivering and receiving the service. So, the contract should state clearly the product and/or service being delivered along with the circumstances, terms and conditions under which they are delivered. The contract can also specify a formulae or a guideline to modify the contract if the conditions change.

To future-proof your contract with stakeholders, employ these strategies: Clarity: Ensure contract language is precise and unambiguous. Flexibility: Include provisions for change, adaptation, or renegotiation as circumstances evolve. Risk Assessment: Identify potential risks and establish mitigation plans. Compliance: Stay updated with legal and regulatory changes. Communication: Foster open, ongoing dialogue to address emerging issues. Technology: Leverage digital tools for efficient monitoring and reporting. Contingencies: Develop contingency plans for unexpected disruptions.

There are several types of contracts and a seasoned contract manager selects the right one based on the requirement. Adding flexibility to the contract is the best way to have a contract that is firm but fluid enough to take the shape of the vessel. The buyer negotiating a fixed scope contract, can include a negotiated rate for any additional hours spent on the job for a change in scope. The unit rates for the additional hours spent can also be based on a tier based pricing, which means the unit rate goes down when the additional hours goes beyond a specific number. There can also be terms on how to reduce the price of the contract if the scope is reduced.

Effective communication is essential for the the successful execution of the contract. Consider a Metro rail development project awarded to a consortium of contractors. The Project development might need approval of drawings and documents, land permits, approvals from several agencies which could be the responsibility of the Customer. Delay in approvals might lead to cost over runs. Thorough communication by the contractors on the timelines for approvals, and adequate and appropriate response by Customer would help to keep the project on track. Delays and shortcomings if properly communicated can minimise the risk of Project delays and cost over runs.

‘Risk Management’ is the process of identifying, planning, monitoring and acting in a timely and appropriate manner to mitigate Risks. Risk management is an important part of contract management. Risk management should be led by seasoned professionals who understand the business and the risks that might occur. Risk planning involves identifying, analysing and evaluating risks and developing an action plan to mitigate the risk. The Risk Mitigation Plan includes responses to the various kinds of risk identified. The usual responses are Risk avoidance, Risk Reduction, Risk Transfer / Sharing, Risk Acceptance. Risk Management Team maintains a Risk register which is updated from time to time as the project progresses.