Contracting in the Changing World of Projects is a 2-day seminar during which knowledge on how contracting approaches and strategy are linked to business value will be shared. Contracting strategy is an important element of any project execution plan. Owners are tasked with selecting appropriate and effective contracting strategies for their capital projects. However, owner teams often lack data and a process to guide this selection. IPA’s contracting research over the past 20 years shows that the misalignment of contracting strategy with project specifics is often the root cause of project failure. In fact, problems with contracting strategies add 20 percent to cost and 18 percent to schedule relative to those projects that make more effective use of contract types.
This program illustrates the results of in-depth IPA research into evaluating, selecting, and developing appropriate and effective contracting strategies for capital projects. The findings presented for discussion in this program are based on the analysis of thousands of projects of various size and type executed around the world. Contracting in the Changing World of Projects is officially registered with PMI, which allows attendees to easily claim 16 PDUs upon completion of the course.
Seminar Content and Organization
The material in Contracting in the Changing World of Projects, which consists of eight separate modules, will be covered in two days. Each module will cover a specific topic with material being presented in a variety of ways. Important research findings will be presented through lectures with supporting presentation material and readings and active class discussions. A case study will be presented that enables the participants to develop a project contracting strategy for a sample project. This exercise includes building a complete contracting matrix for the sample project that addresses all four dimensions of contracting strategy: division of scope, phases included, contract formats, and selection criteria.
The specific course modules for the Contracting in the Changing World of Projects course are as follows:
Introduction
Instructors provide an overview of the IPA Institute and its link to capital project consultancy and parent company, Independent Project Analysis (IPA), before sharing the purpose of and motivation behind the course: IPA data show that problems with contracting strategies are often the root cause of project failure. An outline of the course modules and learning objectives is presented before sharing important information about IPA’s methodology, databases, and research.
Module 1: Contracting Overview
Contract elements and contracting strategy are clearly defined in the context of capital projects, and the relative importance of contracting strategy in project performance is explained. The four dimensions of contracting strategy (scope division, phases included, contract format, and contractor selection) are presented and will be discussed in detail in later modules. The module concludes with introducing a contracting plan development process that will provide the framework for the case study exercise throughout the course.
Module 2: Starting Point – Project Environment
The purpose of this module is to describe the first step in developing the contracting plan – establishing the project environment: the business and project objectives, the scope of work to be completed for the project, and the current contractor market conditions. This module describes how all of these elements combine to play a role in developing the most appropriate contracting plan. Specifically, data are presented that help the participants recognize the importance of clearly defined business and project objectives as well as the relationship between clear objectives and contracting strategies. This module then outlines how the project scope drives contracting strategy and lists specific considerations. The module ends with a discussion on historical and current markets for contracting services and procurement and how the current market influences the available contracting strategies.
Module 3: Starting Point – Owner Characteristics and Risk Analysis
This module continues the discussion of establishing the project environment regarding the owner characteristics that must be evaluated prior to selecting a contracting strategy and the ways that risk analysis exercises can affect the contracting strategy. The module ends with learning to apply the Owner Characteristics Evaluation Checklist.
Module 4: Developing the Contracting Strategy – FEL, Scope, and Phase
Once the project environment has been clearly defined, the next step is to begin actually developing the contracting plan. This module begins this phase by first describing the basic elements of a stage-gated system and how it intersects with developing the contracting strategy. The module then shifts to the industry practices for contracting, the first phase in the capital project cycle, Front-End Loading (FEL). The roles of owners and contractors during the definition phase are explored. This module provides more detail of the first two dimensions of contracting – selecting how the project scope will be subdivided into different contract tracks and selecting the phases that will be included in specific contracts. IPA’s research findings and issues associated with contractor continuity from FEL into execution are also presented.
Module 5: Developing the Contracting Strategy – Contract Formats
The focus of this module is the third dimension of contracting – contract format. First, basic options that are available for contract formats are identified, followed by a discussion related to the relationships between contract formats and project results based on IPA’s contracting research. Contract incentives and their impact on outcomes are also examined.
Module 6: Developing the Contracting Strategy – Selection Process
The final dimension of contracting, contractor selection, is presented in this module. The module begins with outlining the typical options available to owners for sourcing contractors. IPA’s research on selection criteria is then presented, particularly around why selection based only on low cost leads to poor results. Practices are then provided for owners to effectively implement alliance contracts.
Module 7: Developing the Contracting Strategy: Contracting Project Management and Terms and Conditions (T&Cs)
This module explores two major organization/management issues facing industry: the use of Project Management Contractors (PMCs) to supplement owner teams and alternatives and considerations for construction management (CM). Specifically, risks associated with PMCs are summarized, and strategies that owners can implement to help mitigate those risks are identified. Available contracting models and considerations for CM are also described. In addition, critical T&Cs topics are addressed that owners must get right. A discussion on the concept of risk pricing is then followed by a list of specific strategies that owners can apply to reduce contractor risk premiums.
Module 8: Implementation
The final phase of the contracting plan development process is implementing the contract. Effective implementation includes strong project controls, knowledge of mitigating claims, understanding when termination may be necessary, and items to consider when closing out the contract. Each of these elements of implementation is addressed in this module. Specific project controls Best Practices are provided as well as practices to manage the risk of contractor claims.
Seminar Wrap-Up
Instructors recap the material that has been presented and review scope splits, phases in the contract, contracting format, and contracting selection. Various factors that may affect your level of influence in selecting a contracting strategy are discussed, along with elements to consider when the opportunity for influence exists. Education path forward options are presented before wrapping up with individual participant course evaluations and certificates.
Course Benefits
Contracting in the Changing World of Projects will improve the understanding of the relationship between contracting practices and outcomes for those who attend. The contracting program will provide a set of practices and tools that will allow participants to align the contracting strategy, alliance arrangements, and incentive plans with business objectives. Participants will learn how contracting practices affect outcomes. Improved knowledge of the link between contracting strategy and capital effectiveness will allow for better alignment with business needs. Class size will be limited to allow for in-depth discussion of the material presented. Participants will receive presentation slides and appropriate reference and supporting material.
Target Audience
All who consider contracting an important element of success in capital effectiveness will benefit from this program. This program will aid those involved in selecting and implementing contracting strategies and will benefit managers of individual projects who establish the contracting approach for their projects. It will also provide insight to contracting approaches for those who manage the whole project system and look to establish system-wide approaches to contracting.
Claiming PDUs
Contracting in the Changing World of Projects is officially registered with PMI, which allows attendees to easily claim 16 PDUs upon completion of the course. Simply visit the PMI Continuing Certification Requirements site and submit the PDU Activity Reporting Form (Provider Number: 2767 / Activity Number: INS-CON-2). For those claiming PDUs through other education organizations, please note that the duration of this course is 16 hours.