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Guide to risk
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5 |
Guide to risk managementConsideration of the objectives of key suppliers |
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Objectives of key suppliers |
5.1 |
Consideration of the objectives of key suppliers in seeking to become involved with a particular project is often overlooked as is their assessment of what they see as the key project risks and how they intend to deal with them. The assumption is often made that they will be entirely motivated by profit. Whilst this will remain an underlying motivation, the chances of successful collaboration are greatly enhanced where both client and key suppliers have objectives that are mutually compatible. As a fairly obvious example: if a pharmaceutical client requires a prestigious new headquarter building it may do better to consider potential suppliers with experience, and aspirations to improve their expertise in the design and construction, of office premises, rather than using suppliers whose experience and aspirations relate to process plant or factories. Alternatively, a client wishing to develop a trading estate on the outskirts of a northern town may not be best served by choosing suppliers based in the south who have previously been engaged by the client only on prestige office developments. |
5.2 |
In a competitive situation, where a client is seeking to find out which potential supplier's objectives most closely match his own, care needs to be taken to avoid asking questions in the presence of other potential suppliers (a straight answer is unlikely to be forthcoming where one's competitors are listening!). Clients should therefore consider requesting a written explanation of individual suppliers' objectives in relation to the particular project. This might at least focus minds on the broader aspects of the client – supplier relationship. |
5.3 |
Where time and circumstances allow, it may be helpful for potential suppliers to prepare their own value hierarchies setting out their main aim, secondary and tertiary objectives in becoming involved with the project. This may enable a greater understanding of their objectives and allow the selection of a team whose objectives best fit with those of the client. |
Discussions of client's objectives |
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5.4 |
Subject to the caveat in paragraph 5.2 above, the discussion of the client's objectives should (in all but the smallest of projects) involve some form of verbal presentation by or on behalf of the client with the opportunity offered for immediate feedback or requests for clarification from potential suppliers. In this way a client may learn very quickly if there are any fundamental problems with the achievement of its objectives. |
Drawing up a partnering charter or project protocol |
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5.5 |
Once selection of the key suppliers has taken place, it may be useful for the parties to consider drawing up a partnering charter or project protocol. This is designed to record their mutual objectives and set out how they intend to deal with each other during the project. Any such document should be signed by all parties as an indication of their agreement with, and support of, the principles expected. Such documents will not usually be intended to have binding legal effect (in the sense of creating rights and obligations that can be legally enforced). This is largely because the document will usually be expressed in terms of aspirations rather than enforceable minimum standards. The preparation of a partnering charter or project protocol will often act as a useful means of bringing the parties together before embarking on the preparation of a risk register. |
5.6 |
Parties should be aware of the first instance decision in the case of Birse Construction Limited v St David Limited [1999] BLR 194 which took the view that, although clearly not legally binding, a partnering charter was "clearly intended to provide the standards by which the parties were to conduct themselves and against which their conducts and attitudes were to be measured". These comments signify that courts will take account of partnering charters when considering whether parties have behaved in a way consistent with their terms. Two consequences follow: one, it is important that partnering charters or project protocol expressly state that they are not intended to be legally binding; and two, if parties are entering into a partnering charter or project protocol, they are best advised to use a form of contract that is not inconsistent with the partnering principals expressed in the partnering charter or project protocol. The "Be" Collaborative Contract recognises the usefulness of drawing up a project protocol and makes clear its non binding nature whilst underpinning a collaborative approach between the parties. |
5.7 |
A workshop designed to agree the mutual objectives of the client and key suppliers should ensure that there is as much to be gained by any one party as all other parties in achieving the declared objectives. For example, consideration of possible incentives or benefits for the main supplier should also consider possible incentives and benefits for his supply chain. |
5.8 |
An example of a project charter or protocol listing example project objectives devised by and signed up to by all parties involved in a particular project is set out in Appendix 2. Whilst this provides an example of the sort of issues that may be dealt with, it is included simply as guidance: it is important that the participants to the particular project draw up their own project charter or protocol, expressing their own aims and commitments, in their own words. |
5.9 |
It is essential that, during the workshop to draw up a project charter or protocol, all risks are openly discussed and that there is a mutual understanding as to how these will be dealt with, both in terms of the responsibility for managing individual risks in accordance with a risk register and a fair allocation of some or all of those risks under the contractual arrangements between the parties. |
5.10 |
The chapter that follows describes how to actively manage and minimise the occurrence of a risk item regardless of how the allocation of cost and time consequences is determined. |
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