Contract relationships between clients and service providers are integral to most businesses operating high-risk worksites. They are essential to ensure that parties meet their obligations and that the agreement works for each. This week's Contractor Safety Management newsletter explores the benefits of building quality client-contractor relationships, strategies for establishing trust, tips for improving quality, effective communication, and measuring success.
Introduction to Contract Management Relationships
Contract management relationships start to form even before the formal agreement between a client and contractor is made through the prequalification and bidding stages. Once a contract is established, it's critical to ensure that the terms are met and that the interests of each party are well represented. A contract management relationship is not just about the contract itself but also the people and processes that ensure the contract terms are implemented effectively and efficiently.
The success of any contract management relationship depends on the trust between the parties involved. Trust is necessary for the contractual relationship to be successful. Trust is built through communication, honesty, mutual understanding, and a commitment to meeting the terms of the contract.
The Benefits of Building Quality Contract Management Relationships
Building quality contract management relationships brings many value additions. The most obvious is ensuring the parties understand their roles and responsibilities within the contract framework. This ensures that project stakeholders are aligned and that expectations are being met.
Another benefit is the previously mentioned trust factor. The trust and goodwill banked early in the contract relationship is drawn on when resolving issues that may arise later. In addition, it allows the parties to better understand each other's goals and objectives, which can lead to more effective communication and cooperation.
Finally, a quality contract management relationship can improve stakeholder satisfaction. When clients know that their requirements are being managed day-to-day, they are more likely to be satisfied with the services they receive over the long term. Likewise, contractors' satisfaction levels rise when they are treated fairly and consistently.
Strategies for Establishing Trust in Contract Management Relationships
Establishing trust in contract management relationships is essential to the success of any business. Here are some strategies that can help:
- Transparency. Being honest and open about the contract terms and the project's assumptions, constraints, and deliverables guides each party's behaviors, especially for conflict resolution.
- Consistency. It is essential to honor the contract's terms and meet expectations consistently.
- Develop a clear communication plan. Standards for how the parties will communicate with each other are vital. This will ensure that any day-to-day issues are addressed quickly and efficiently.
- Proactivity. It is crucial to stay on top of any changes in the contract and any issues that may arise. Don't let minor problems become big ones due to avoidance or distraction. It is a key competency of effective project managers and superintendents to lead on these issues.
- Sanctions for non-compliance or non-performance are a reality on high-risk projects like commercial and industrial construction. Bonding and other mechanisms are used to ensure performance to contract requirements. Other contract mechanisms, like payments for the achievement or implementation of specific initiatives and programs, incentivize management engagement and proactivity. Examples are safety, quality, or productivity-related training and other elements that contribute to improved work management.
Tips for Improving Quality in Contract Management Relationships
Improving the quality of the contract management relationship is essential to the long-term success of both clients and contractors. Here are some tips to help:
- Establish clear objectives. Understanding the project assumptions, constraints, deliverables, methods of execution, and reporting requirements will keep parties aligned as the schedule progresses.
- Monitor progress. Ongoing monitoring of work progress ensures that the terms and conditions are complied with.
- Pay attention to the milestones. Most projects identify key milestones. Good contract management practice is to keep the major milestones top of mind and manage sub-activities toward their achievement.
- Work on operational consistency. Meeting project objectives using the agreed work methods with good cost management, quality and safety build trust between the client and contractor teams. Consistency over time and early identification of potential problems foster a team approach to unexpected turns in the road that nearly all projects face. ?
Developing Effective Communication Strategies for Contract Management Relationships
?Here are some tips for developing effective communication strategies:
- Establish a plan with defined methods for formal and informal reporting of project-related communications. Sort out format, frequency, level of detail, and distribution early. Ideally, these specifics are identified in the contract and reviewed with the key stakeholders through the kick-off and onboarding phases. They should also be written into the project-specific execution plan. Consistent use of the agreed tools and methods will engrain their utility as the work progresses.
- Listen. It is important to listen to the other parties involved in the contract and consider their views. Everyone on the worksite has a stake in its outcome, and effective contract management provides a safe environment for each to bring issues forward without fear of recrimination or dismissal.
- Be responsive. Responding to messages quickly and with genuine guidance or direction builds trust. Closing action items and communicating status is also a faith-building activity, particularly for things that affect line supervision and worker quality of work life.
- Be respectful. High-risk workplaces can be particularly intense, given schedules, budgets, and other factors that lead to elevated emotions. Psychologically safe workplaces promote professional disagreement with corresponding respect for all parties.
Methods for Measuring Success in Contract Management Relationships
Measuring success in contract management relationships is essential to ensuring that the contract is implemented best. Here are some methods for measuring success outside of the usual metrics of schedule, budget, quality, and safety:
- Track client satisfaction. It is vital to track client satisfaction to ensure that the services provided meet customer expectations and contract requirements. Client satisfaction is typically more than the sum of all the contracted parts and almost always more than budget or schedule alone. A contractor can deliver on time and on budget but be excessively difficult to work with, for example. Clients, too, benefit from open dialog about systems and behaviors that unduly impose on their contractors. Late payment for services is a common example.
- Contractor Self Audit. Measure compliance with contract requirements and report performance. Proactively self-auditing and reporting demonstrate cooperation, commitment to meeting compliance requirements, and connecting key client stakeholders to daily successes and challenges.
Resolving Conflict in Contract Management Relationships
?Conflict is common in contract relationships. Here are some strategies for resolving them:
- Establish a conflict resolution plan. Having an agreed process for how conflicts will be addressed is crucial. Identify issue escalation processes, key stakeholders, and arbitration mechanisms as part of the contract terms and conditions.
- Stay focused on the issues, and do not get sidetracked by the emotions of the moment. Use data and documentation where available. Avoid charged or subjective statements. Conflicts come and go, and the reality is that not all of them get resolved to the satisfaction of all parties. But bargaining in good faith helps preserve relationships and builds trust in the long term.
- Seek outside help if/when necessary. Outside arbitration, either formal or informal, can be sought when impasses occur. A trusted and respected third party can often broker conflicts to an acceptable conclusion.
Conclusion
Contract management relationships are essential to the success of any business. It is vital to prioritize building quality contract management relationships to maximize success. Building trust, developing effective communication strategies, and measuring success are essential. It is also important to have processes to resolve conflicts and adapt to change. By following these strategies, businesses can ensure that their contract management relationships are as successful as possible.
