Three reasons why collaboration on capital projects fail

Collaboration is a bit like “motherhood and apple pie” – everyone seems to believe that it is a fundamentally good and worthy thing.

Why then is true collaboration between project parties so rarely seen on engineering & construction projects?

People in the industry say that Net Zero targets and Energy Transition will depend on better collaboration between project parties. So what are the main barriers to collaboration on projects and how can we overcome them?

Barrier #1

Most Owners/Investors remain driven by a lowest-bidder mentality

The desire to award a contract to the lowest bidder has a long tradition, as illustrated by a quote attributed to John Ruskin, a social/political thinker and critic who wrote in the 19^th century:

“It is unwise to pay too much, but it’s worse to pay too little.

When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing you bought it to do.

The common law of business balance prohibits paying a little and getting a lot – it can’t be done.

If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.”

Not much seems to have changed in the procurement strategies of capital projects: Lump sum fixed-price contracts and their accompanying risk allocation often end up in cost and schedule overruns. Competitive bidding and lowest-bidder mindsets may not be their only cause, but they certainly contribute. As long as owners, investors but also main contractors adhere to a belief that it is possible to “pay a little and get a lot” while passing on the execution risk, conventional contracting is likely to remain the norm.

Barrier #2

The Anglo-American legal system has dominated international contracting practice and shaped an adversarial culture

British and American legal and contracting practices have strongly influenced international contracting. The contracts are transactional and often one-sided. For a long time, British Quantity Surveyors were the go-to profession to administer construction contracts on international projects. Their working practice is steeped in the adversarial nature of English common law, as well as influenced by a traditionally antagonistic climate that exists between employers and contractors in their home country.

These factors have contributed to a contracting culture favouring adversarial behaviours over cooperation. This pattern of behaviour is so deeply embedded in contracting practice that it continues even when a collaborative contract and risk-sharing is adopted (e.g. for Terminal 5 at London Heathrow).

Barrier #3

Self-interest trumps win-win solutions

The inherent uncertainties and complexity of construction projects expose project parties to risk and vulnerability. Conventional contracts with uneven risk distribution and fixed price compensation models tend to accentuate these risks and vulnerabilities. When inevitable crises occur on construction projects, it is only too human for project players to protect their own commercial positions. But with increasing self-interest, trust erodes very quickly, and willingness to collaborate diminishes.

How to overcome these barriers?

As we know, often, the first step to improvement is awareness. Understanding what drives these unhelpful behaviours – be it conventional contracts, the legacy of legal structures, or a human tendency to retreat to self-interest – helps establish new strategies that break down these barriers.

These strategies involve;

structures and tools that support project collaboration
(such as the ECITB’s Project Collaboration Toolkit )
collaborative contracts that are based on risk-sharing
coaching project members to develop and adopt collaborative skills and behaviours

If you are interested in collaboration and want to make a difference on your projects, join colleagues and me from industry in a series of upcoming FREE webinars where we will address these and other points.