B. Identify Problems Early

Contract management plans need to include processes to identify issues early so that they can more easily be resolved.  Consider the following for your contract management plan:

• Encourage the contractor to bring forward issues, problems or concerns early. The contractor may be aware of a problem or potential issue before the owner.  If the relationship between the parties is positive, the contractor will be comfortable proactively informing the owner, rather than keeping information to themselves in the hopes that they can resolve it before the owner is aware of the problem.
• Have a workable quality measurement process. The owner must check that the services and deliverables meet the contractual requirements before paying invoices. This process should be systematic (i.e. done regularly in the same way) and consider budgets and staff workloads.  If the contractual measures are not met and the owner does not address this, it’s natural for the contractor to assume that they are not important.
• Let the contractor take ownership of resolving issues.  Unless the problem identified is solely the responsibility of the owner (e.g. delays in approvals), the contractor should plan the resolution.  This encourages the contractor to take ownership for the solution, rather than just doing what the owner said to fix the problem (which may or may not work).
• Have clear escalation processes.  Sometimes issues and problems cannot be resolved by the day-to-day contacts, as decisions may be required at more senior levels, or a roadblock is discovered.  The contract should identify the escalation contacts for both parties to avoid delays when addressing such circumstances

C. Adapt to the Unexpected

Even with the best contract management plans, there’s always a possibility of an unexpected event impacting what the owner needs or what the contractor can deliver.  Contract management plans must be adaptable to such events, while still ensuring that both parties are meeting their contractual responsibilities.  The following strategies may help for these situations:

• Create a risk mitigation plan.  The procurement planning process should identify all risks that might happen and for each one, how the parties will be aware of it and how it will be mitigated.  Doing this work upfront means that the contract has a course of action if the risk occurs, and each party knows their mitigation role. Depending on the nature of each risk, the risk mitigation may require a change order to compensate the contractor for additional work they need to do for a risk they do not control.
• Have a mechanism to mitigate unexpected risks to scope, quality, timelines, or cost.  If an unexpected event occurs that was not part of the risk mitigation plan, a process to quickly determine how to manage it with the least possible impact to the contracted services is required.  This may involve the contract’s escalation procedures to identify an acceptable solution.
• Consider the BATNA.  If an issue occurs where the owner and contractor cannot agree on a resolution, identify the owner’s BATNA (i.e. best alternative to a negotiated agreement) and what the contractor’s BATNA might be. For some contracts, the owner’s BATNA may be limited (e.g. there are few available vendors, or considerable costs to changing contractors), and therefore the owner may have less negotiating power to resolve issues than the contractor. This makes it even more important to have clear, measurable deliverables and risk mitigation plan.

Following this advice does not guarantee a problem-free contract but can be helpful to keep owners and contractors focused on what they both want – a successful contract.