Contract Strategies for Major Projects

CHAPTER 10Who Should Control Contracting Strategy?

Within industrial owners there is no consensus about roles and responsibilities in contracting. The lack of clarity is not benign—it causes confusion and in some cases significant damage to capital projects. The following owner functions have some claim to control of contracting:

• The business sponsor
• The legal organization
• The procurement or supply chain management organization
• The capital projects organization
• An individual project team and its leader

The overlapping of responsibilities in these five entities has often resulted in turf fights and no one in charge of getting essential work done. The most common and heated of the disputes is usually between the procurement and projects organizations. In this chapter, I will argue that every function listed here can and perhaps should have a role in the contracting process for projects. The problem is that the best role is not always the role the function desires.

The Role of the Business Sponsor in Contracting

To be direct, the business sponsor of a project has no business in contracting. The business sponsor should not be selecting the contracting approach, should not be dictating terms and conditions, and certainly should not be deciding which particular contractors to select. Why? Because all of those activities require deep expertise that the business sponsor almost never has. With that said, the business sponsor has an indirect role in selecting contracting approach ...