Moving away from adversarial relationships towards greater collaboration has a wide range of benefits. Here, Rekha Thawrani OBE, Global Director, NEC Contracts looks at the use of collaborative contracts in the construction industry and what might be holding back their widespread adoption.
One of the challenges our industry has faced for decades is that traditional forms of contract tend to create an adversarial environment where there is often a focus on apportioning blame rather than finding solutions when something does not go to plan. This frequently leads to disputes, delays, and increased costs, which ultimately benefits no one.
In contrast, collaborative contracts emphasise cooperation, trust, and the attainment of shared goals. They do this by ensuring a fair allocation of risk and responsibility and providing mechanisms to ensure transparency and information sharing between the parties. For example, central to collaborative contracts is the concept of ‘early warnings’.
If any of the project partners becomes aware of any factor that could affect time, cost or quality, they are required to notify the other party or parties immediately. A solution to the issue can then be agreed together and implemented quickly. This more open and equitable approach to projects has been shown again and again to lead to reduced costs, fewer disputes, improved efficiency and enhanced sustainability.
While their use has been growing steadily in recent years, the benefits of collaborative contracts have long been appreciated. The first version of the NEC contract, which was launched in 1993, was developed in response to the recognition that adversarial relationships were holding the industry back. The Latham and Egan Reports on the construction industry, published in 1994 and 1998 respectively, both advocated greater collaboration and a move away from adversarial relationships.
There is evidence that those in the industry are increasingly recognising the benefits it can offer. NEC Contracts recently published a major research report looking at the factors that are driving change in the built environment, including increased collaboration.
The report, Transforming Construction: Smarter, greener, together, found that when asked about the benefits of using collaborative contracts, 78% agreed it improves costs, 81% that it leads to higher efficiency, 82% said greater innovation came from their use and 80% that it leads to better environmental outcomes. Additionally, nearly eight in ten respondents (78%) said they lead to fewer disputes or simpler resolution processes.
Given the wide array of perceived benefits of collaborative contracts, it’s unsurprising the research also found the majority of those surveyed would welcome more collaborative approaches. In fact, 82% said they would feel positive about more widespread adoption of collaborative contracts, including 45% who said they would view it very positively as it would significantly improve the industry.
This was even higher among the architectural community as 96% said they would welcome more collaborative contracts, including 60% who said they feel very positive about it.
Despite this, it is a fact that adoption does not match the level of positivity shown by those working in the industry. Overall, only 8% said collaborative contracts were used on all the projects they work on and only 59% said they had worked with them at all. However, this was significantly higher among architects, with 73% indicating that they have worked on a project that utilised collaborative contracts.
This gap between attitudes and reality is stark and indicates that there are significant factors holding back their use. As such the research looked at the barriers that organisations face to adopting collaborative contracts.
Training was identified as one of the primary barriers, selected by 43% of those surveyed. This was even higher (54%) among those from architecture businesses. This is an issue that is relatively easy to overcome if businesses are motivated to do so as there is a range of collaborative contract training options available, aimed at different roles within the industry.
However, there are also more deep-rooted barriers that need to be addressed, such as a culture of reluctance to change and a perception that traditional contracts work better, despite decades of evidence to the contrary. These are issues that were identified strongly in the research. Overcoming these barriers will require education on the benefits and leadership from across the industry.
The use of collaborative contracts needs to reach a tipping point where they become the industry norm and this process has already started with major client organisations such as Network Rail, the NHS, Transport for London, United Utilities and a wide range of UK universities all adopting collaborative contracts on projects of all sizes.
Increased cooperation, trust and transparency between project partners, facilitated by truly collaborative contracts, has the potential to deliver significant benefits for projects, individual organisations and the industry as a whole. Greater openness to moving away from traditional contract approaches is needed to bridge the gap between the appreciation of the advantages and implementation.