![]() The governance board consists of a representative for each critical delivery partner, and each representative has a vote in every decision related to the project. ![]() Joint management structureĭuring execution, collaborative projects are typically governed by a joint management structure or regularly convened board with an explicit contractual obligation for all parties to make decisions in the project’s best interest. Instead, all project-related decisions are binding and made by the governance board. In contrast to a traditional lump-sum contract, in which owners attempt to transfer as much risk as possible to other parties, the partners within a collaborative contract have a limited ability to submit claims when they occur. Most often, collaborative contracts include a no-fault clause that requires members to forfeit rights to claim against one another. In addition, it outlines detailed voting rights, representation on the governance board and execution leadership team, and the change-order process for the project. It also defines compensation (actual cost and overhead recovery) and the profit sharing if the project is successful. The single and final agreement, signed by all parties, clearly defines the scope of work, schedule, coordination guidelines, and collaboration obligations for each critical delivery partner. Single contract among all critical delivery partners It then negotiates and finalizes the commercial terms of the contract that link everyone’s interests through the project’s completion. ![]() This core team then works closely-usually at the owner’s expense-on a conceptual design, cost estimate, and schedule. Defined preplanning periodĪt the inception of any collaborative-contracting process, the owner starts by selecting all critical delivery partners, including an engineer and architect, the main original equipment manufacturers (OEMs), and at least one contractor. These elements translate into four major practices: partners working together during a defined preplanning period, a single contract among all key partners, a no-fault clause, and a joint management structure. The elements of collaborative contractsĪ fully collaborative contract, such as those found in IPD, is founded upon cocreation of the project’s scope of work, transparency, and joint governance. Finally, owners can integrate best practices-from a project’s start through its completion. Then they should assess their own readiness for collaboration, select the right partners, and invest, as early as possible in the process, in building out a detailed project description and aligning critical partners’ incentives. To break old habits and adopt more-collaborative contracts, our analysis shows that project owners must start by fully understanding the elements of a collaborative contract and the spectrum of possible collaboration. The result is an inability to shake the status quo-an adversarial contracting practice in which parties rush through fixed-price contract negotiations, opening the door for purposely understated timelines, long delays, and massive budget overruns. Moreover, some public-sector owners are legally required to award contracts to the lowest qualified bidder, preventing them from entering into more-collaborative contract terms. In addition, financing parties often hesitate to approve anything other than fixed-price agreements, citing uncertainty and an inability to transfer risk. Many willing industry participants stumble because they are unfamiliar with what it takes to implement collaborative models or have difficulties finding the right partners who agree to this type of structure. Despite success in the relatively small number of implementations to date, project stakeholders have not widely adopted collaborative contracts.
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