Contracting for Effective Collaborations in Complex Projects

-what the findings of the ICPM Taskforce Report mean for contracting in complex programs

NASA PM CHALLENGE 2012 February 2012

Bretton AckroydCOO ICCPM

Email: coo@iccpm.comPhone: +61 406 420 642

Introduction

• Speaker – Bretton Ackroyd COO ICCPM

• ICCPM – who we are

• ICPM Taskforce Report – Overview

• ICPM KD2 and ongoing Research Agenda

Complicated vs. ComplexA Working Definition

Complex – when you don’t

Complicated – when you know what you have to do

Overview

• Introduction• The Problem• ICPM Taskforce Report findings• Key traits for delivering Complex Projects• Giving effect to the Report findings – Proposed Practical Contract and Organisational

measures

Summary

• To deliver the full benefits of complex projects and programs requires the capacity to engage in effective complex collaborations

• Traditional forms of engagement and risk averse organisational cultures can often hinder or even prevent effective collaborations.

• Research has identified some traits necessary for the development and realisation of Complex Projects.

• To achieve best results organisations need to reflect, promote and support these “traits” through their practices policies and engagement agreements.

Modern Complex Projects Involve Complex Web of Commercial

Connections

The Problem:Traditional contractual/ engagement approaches

• Adversarial / Blame focused• Inappropriate risk allocation• Lack of systemic view• Lack of effective change and conflict management

Influence of Subject Matter Experts/ Dominant interest groups in Contract Formation.

• Short term focus of most SME’s and interest groups at contract formation• Incentivises game playing

Dominance of Reactive Organisational Culture.• Adversarial, • Risk focused,• Distrustful of others/change – not made here syndrome • Process driven/process controlled

Contracts & Process

Short term focus

Culture

Problems: Traditional contractual / engagement approaches

Adversarial

Process Driven

Lack of Systemic view

Risk management?Blame focusedover regulated

No future vision

Dominance of Reactive Organisational Culture

Vicious Cycle

Vicious Cycle: Lack of trust/over regulated, policy driven engagements

ICPM Taskforce Report

Findings:• Competition needs to be selectively applied and targeted to

provide effective outcomes and best benefit realisation.• Processes that facilitate early supplier/industry involvement

essential for complex projects.• Contracts need to acknowledge and support the iterative &

collaborative nature of effective risk management.• Contracts need to promote and support the growth of both

strategic and tactical level collaboration.• Need to develop commercial advisors and related key subject

matter experts that have the capacity to take a systemic view to contract formation and realising long term benefits benefits.

Contractual and Organisational Traits Required to Maximise Benefits from Complex Projects?

• Flexible outcome focused Organisation; Creation of entity with processes, people and leaders flexible enough to address complexity and evolve throughout life of the program

• Portfolio of Interrelated Projects; Systemic approach look at the whole as well as the parts; addressing the entire supply chain and beyond.

• Long Term Benefits Driven Contracting Strategies; nuanced, targeted and Informed by clear understanding of the benefits sought by Stakeholders.

Flexible Outcome Focused Organisation

• Flexibility essential to delivering effective solutions and realising total benefits. Must be nimble enough to address Unknown Unknowns.

• Recognition of role as Steward/Champion of the capability being developed.

• Processes and procedures that support collaborations and the focus on benefits realisation instead of risk transfer.

• Leaders that develop and project the shadow of the future and have cognitive flexibility to manage emergence.

• Transparent and efficient governance regimes that support achievement of benefits not hinder it.

Portfolio of Interrelated Contracts

• Systemic approach – look at the whole as well as the parts. Influencing the entire supply chain.

• Manage as an integrated program rather than individual projects.

• Active Identification and management of interrelationships to enhance overall benefits realisation.

• Active promotion of cross portfolio knowledge sharing and collaboration.

“Benefits Driven” Contracting Strategies

• Multiple Contracting strategies applied to different components of capability– Nuanced, targeted and informed by clear understanding of

the benefits sought by stakeholders.– Targeted use of competition as one of a range of approaches

underpinning value, not as a weapon.• Recognition that the owner organisation (gov. or private)

cannot walk away from the program and risk is shared not transferred.

• Mechanisms for collaboratively managing unknown unknowns as they emerge.

• Iterative implementation – opportunities to pause, learn and adapt.

Implementing the Findings

• Earlier industry involvement reduces risks increases likelihood of realising benefits.

• Test commitment to collaborations through limited risk, Project incubator programs and ECI arrangements.

• Develop and promote trust through being trusting.• Active management of conflict for best results.• Incentivise achievement of overall benefits over short term

profit taking.• Secure appropriate rights upfront to minimise barriers to future

collaborations.• Recognise that for some collaborations there is no such thing as

an Off Ramp – manage for the long term.

Clear Performance Baseline Collaborative Behaviours

Flexible & Cooperative

Risk Management

Appropriate Performance Management

Measures

Integrated Delivery Team

Supportive of Trust/Fluid

Human Interaction

Empowered Decision Making

Cross partner

Teamwork

Clear understanding

of customer requirements

Two Limbs of Effective Complex Project Agreements

Proactive and and Efficient

Conflict Management

Incentives for

effective Efficiency

Systems of Systems role

Proactive Change

Management

Customer Networks

Customer Networks

REGULATORS

Customer Networks

REGULATORS

Strategic Suppliers

Strategic Suppliers

Strategic Suppliers

Suppliers

Suppliers

Develop and Apply Systems of Systems Contracting Strategy

Complex Project

Agreements

Normalising Relationships

Managing Change

Risk Management

Social Contract

Statement of Requirements

Recognise Multiple Functions and Aims of Complex Project

Agreements

Realistic, Balanced and Cooperative Risk Management

Continual process Within 7 days of dispute notice

Conflict AvoidanceInformal Discussions & Negotiations

Project Staff and Management

Formal Negotiations

ProjectSenior management

3rd party Dispute

ResolutionLitigation

Proposed Dispute Managment Board Activities

Stage

Conflict Resolver

Provide guidance and dispute avoidance advice

Dispute management and independent advice to senior

management

Provide non binding dispute

resolution decisions

Time frame14 days 21 days

DRB Assessment

CEOAssessment

Resolution or

Issue referred back to project for monitoring (Specific review period)

3rd Party &Courts

Establish Pro Active Dispute Management Process

Demonstrate Accountability

Deliver impact

Compliance

OutcomesMeasurement

Assessment

Evaluation

Did it happen?• Process metrics• Audit

Did it work?• Business case• Informal review• Anecdotal data

Did it really work?•Focus on proving• Control groups• Longitudinal•Capture what did happen

How well is it working?• Focus on improving•Timely data analysis•Actionable reports•Capture what is actually happening

KPI BALANCED SCORE CARD

Risk reward KPI’s + Non risk /reward KPI’s

Cost and profit transparency

Risk/Reward Curves

KPI Type

Weight Targets Actual Score

KPI Performance ScorecardPARTNERIN

G CHARTER

Identification & Agreement on of Long TermBenefits Sought

Performance Management and Incentives linked to Partner Charter

Contracts that Incubate Project Collaborations & Support integrated

Team Work

• Flexible Outcome Focused PM/ Acquisition Organisation • Holistic System of Systems Approach • Nuanced Benefits Driven Acquisition

Strategy • Effective Collaborations focused on

return of long term Benefits.

Questions