Big Purchases – addressing complex projects and procurements
JONATHAN CALOF  |  May 17, 2017

A new approach for addressing complex projects and procurements

At FrontLine, we search out new ideas and concepts that could help enhance safety and security. With that in mind, I would like to alert you to a new report entitled “Contracting for Success in Complex Projects”.  Released 27 April 2017, it is a joint effort by the International Center for Complex Project Management (ICCPM) and the International Association for Contract and Commercial Management (IACCM). The conclusions were based on roundtables in Canada, USA, UK and Australia, involving 250 leading and senior project management practitioners from both the public and private sector, and is available for download from the ICCPM (iccpm.com).

This is about the BIG procurement – the contracting for major purchases, revamping communication systems, or developing new technologies for wide-scale government use – those large complex projects many of you are familiar with. These big acquisitions take many years both to formulate requirements and proposal documents, and longer to stickhandle the contract process and then to manage the acquisition.

You may also be familiar with project complexity in terms of mega projects that require the integration and cooperation of several organizations. A good example of this is disaster planning and the interoperability that is required for effective response. Complex project management and major procurement is integral to the safety and security sector. For example, the U.S. National Nuclear Security Administration has a complex management team, and the American Society for Industrial Security (ASIS) has material on security project management.

The report notes that 25% of the world’s Gross Domestic Product arises through large, complex projects and the ensuing elaborate contracts. Studies from around the world suggest that 40-60% of these projects, programs, strategic initiative perform below expectations (referred to as a performance gap), often coming in over budget or delayed.

The roundtables that fed this report generated much in the way of interesting and provocative insights. At an event put on for Parliament by the Pearson Center in Ottawa, one of the report authors, Stephane Tywoniak, a professor at the University of Ottawa Telfer School of Management, introduced the report by informing the audience that there is global consensus (both with the private and public sector participants and in all countries around the world). “We need to reset our approach to contracting for major projects,” he advised.

It’s not so much about fixing the current system, he said, but more about developing an entirely new approach that is capable of being adaptive to deal with the incredible uncertainty arising from projects that are so complex, involve multiple organizations, and extend over lengthy periods.

Roundtable participants expressed growing frustration with the limitations of traditional forms of contracting – where every detail has to be described in the project plans and contracting, where rigidity in contract implementation is the norm, and where risk-aversion is the key process driver. This may be feasible for commodity projects, but such micro-management encumbers the large, complex projects more than it clarifies.

What was advocated, by both public and private sector participants, was the idea that contracts should be dynamic – able to evolve through the lifecycle of the project – where they can be modified and updated based on changes in the environment.

Bottom line, things can happen over time that impact the “reasonableness” of what has been contracted for (for example a new technology that should now be integrated into a security system, such as the need for the system being developed under contract to now integrate the ability to detect a new threat based on a terrorist act).

The roundtables recommended innovative contracting ideas such as head/ umbrella contracts that incorporate just-in-time agreements, rolling wave contracts, or the newest: visual/comic contracts. These types of contracts allow for flexibility and provide mechanisms to make modifications over time as the environment changes and as needs may change. Even the key performance indicators for each phase of the project can be changed over time.  

Professor Tywoniak highlights four key recommendations from many in the report:

  1. Government and Industry to lead the design of systems and processes to address how to maintain competition and probity, and foster collaboration and cooperation at the same time.
  2. Organizations must differentiate programs and projects based on levels of complexity before considering contracting mechanisms to allow executives to recognize when different contracting methods may be required.
  3. Executives must value trust and collaboration between client and contactor/s as a foundation to move from managing the contract to managing the relationship.
  4. Executives must be encouraged to participate in education, talent management and mentoring programs to better understand complexity and the effect it has on business performance.

All of this represents a fundamental change in the mindset around managing complex contracts. It suggests the need for a more flexible approach to contracting and more sharing of information between the different groups involved in these projects – both between government agencies and between the public and private sector. Before you say “this can never happen”, several of the recommendations made in the report have already been implemented or are in the process of being implemented in the United States, the UK, Australia, and South Africa (where a lawyer has developed a legally binding contract that only uses pictures).

The growing complexity of keeping citizens safe and secure will demand increased government procurement of goods and services, joint development of new technologies and products – and the ensuing complex, major, multi-year procurements discussed in the report. It will demand increased cooperation not only between government agencies, but also international agreements.

All of this demands, according to the study, a fundamental change in the way these contracts are developed and managed. Failure to do so could result in the sort of performance gap of 40-60% mentioned and will not provide us with the best possible safety and security systems and approaches.  

I urge our readers to download the report (iccpm.com) and consider implications for the work that you are doing.  Today’s safety and security threats demand new approaches, and perhaps this report provides some interesting ideas to help ensure that tomorrow’s threats can also be effectively dealt with.

Jonathan Calof, Executive Editor