When it comes to developing a contracting strategy for a project, owners would like to have a minimum number of contractors to avoid having to deal with interfaces. At the same time, contractors often wish to expand their scope as an opportunity for development. This often leads to overextended contractor scope compared to their competency, creating delivery challenges for the project. In our new White Paper 2021-11 ‘How Contractor Capability Should Be The Main Driver for Contracting Strategy Development’, we explore this issue, showing that it is more important to focus on actual contractor capabilities even if this leads to a larger number of contractors that need to be coordinated.
Contractors that do not master their scope are significant threats to the actual execution of the project and its success. The owner will need additional supervision and could find itself in the need to guide or even get involved in the actual delivery to compensate for areas of contractor weakness, while not being organised and resourced to do so.
If there was a single rule to follow in terms of contractual strategy, it would be that it is essential to hire contractors on scopes for which they are competent (and their competency is proven by their track record). Hiring contractors on scopes for which they are inexperienced is a sure recipe for failure.
Competency includes a proven track record in terms of HSE, and the actual demonstrated usage of best-in-class HSE practices, which should be a decisive criterion. It is also important to understand that the notion of competency when it comes to the construction phase also requires adequate experience in the specific country, its rules and habits; and of the site conditions (for example, arctic projects require experienced contractors for those specific climatic constraints). In brownfield projects, competency also includes experience working on the specific site under site requirements, therefore long-term maintenance and improvement contractors are often the most competent for the tie-ins of new units.
The contractor competency rule would look quite straightforward and reasonable enough however experience shows that it is too often not followed, often due to various stakeholder pressures such as financing or project governance. Still, experience shows repeatedly that it is better to coordinate a number of contractors competent on their scope rather than to over-extend scopes beyond their abilities. Punctual consortiums as a way to push down the coordination activities are not either a good solution if the consortium participants don’t have the experience of working together or a proven coordination capability. At the end, the contracting strategy will be defined by the actual contractor market at the time of launching the project. Read our new White Paper 2021-11 ‘How Contractor Capability Should Be The Main Driver for Contracting Strategy Development’ to understand more about this essential issue.
If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2021-11_how_contractor_capability_key_contracting_strategy_v1.pdf
