Why collaboration is difficult

The Fabric of Collaboration

I once worked as an exec lead on a $1bn proposal, we had a group of companies that knew that each had its own strengths because of their core business, their brand and their nationality. It was a team. We worked hard to leverage from the strengths that each company brought to the team but at the same time we realised that we had to create a common bonding identity so that the vertical strengths of the companies were braced by an orthogonal connection as a team. Since you end up with horizontal and vertical strengths I like to call this the “Fabric of Collaboration”. Now as we all know a weave or fabric is a powerful structure, we all know that everything from cloth to chain mail, glass fibre to carbon fibre is based on such a weave and it is strong.

A weave or fabric is better than vertical threads

A weave or fabric is better than vertical threads

At the bidding stage this fabric of collaboration worked really well, we had team identity passes, lapel badges and we presented ourselves to the customer coherently as that team, we never mentioned our parent companies. The customer knew of them of course since this was important to create a perception that this was a team made from strong components, a fabric made of strong threads.

During a bid there is an exceptionally clear and common purpose, ‘ to win’, this purpose is very tangible and it sits unmovable on the distant horizon as a destination to aim for. During bid production, questions and answers the team acts seamlessly, gaps in resourcing are filled almost as if by magic as the teams pull together for the common purpose. People help each other, perform tasks outside their area of responsibility and produce exceptional work over sometimes long hours. People are in good spirits, they keep their eyes on the prize.

Eyes on the Prize

In this particular example we became preferred bidder and went through an intense period of contract negotiation, really nailing down the performance of the solution and service , the timescales and of course the price. Many weeks were spent adjusting very complex cost models and integrated schedules until finally we reached an agreement with the customer and we won! There followed a short but intense period of celebration, it was a fantastic achievement and everyone involved deserved a pat on the back. Fantastic, what next?

The Dawning of Commercial Reality

The contract that we had developed, negotiated and won was at the head level. The perfectly seamless and badgeless team we had all worked in in reality had to be signed legally by the prime. Our team of companies which had worked so collaboratively during the proposal did in fact have a hierarchy. The next step was of course to determine the scope of work for each company that formed the team and to formalise the individual contracts with the prime. Of course the costings for each company were in the joint cost model we had developed and negotiated with the customer so the pricing was already hierarchical, the boundaries of the scope of work was less clear.

There followed an intense period of work where the prime had to issue the scope of work to each subcontractor, because thats effectively the hierarchical structure we had. So this is a scope of work effectively against a fixed price where the solution is not completely developed.

Each subcontractor then has the undivided attention of their commercial director, for each subcontractor it is important not only to get the revenue from the workshare but also their target margin, which was of course was built into their inputs into the consolidated cost model. So we have fixed:

  • Revenue
  • Profit
  • Timescale

But the fine detail of scope has to be agreed.

Scope Tension and Tearing the Fabric

In this case the customer wanted the programme to be mobilised quickly and placed a milestone payment on the prime to get all of the subcontractors scopes of work agreed and to get them on contract. Very sensible from the customers perspective.

Under the surface though the only thing that can give is scope of work. The commercial tensions from each subcontractor, now no longer in a team dynamic, means that they are not going to perform more scope than they are being paid for. The consequence of this is a straining of the once perfect fabric which creases and tears. In my fabric analogy where it creases, there is scope ‘overlap’ between subcontractors and where it tears their is a scope ‘gap’. Gaps and overlaps may not be seen by the prime initially but they are there below the surface and they become very difficult to fix once apparent.

Gaps and Overlaps

Lets think about a gap first. It becomes apparent during execution that the subcontracts with the prime have a gap in scope. It is an identified piece of scope that has fallen between the cracks. Now in the bid/collaborative stage this would not have been an issue, the team would have ensured that the gap was healed. In this commercial stage however all subcontracted parties stare at the gap and say, if you want us to do that it’s an increase in scope and it will cost $X. Of course more than one subcontractor may have the capability to fill it and there may be a cost $Y and $Z. Now the prime is also a commercial organisation and in this example has management contingency but not enough to fill the gap so resorts to leveraging the ambiguity in the less than perfect statement of work. Immediately this creates a stand-off and all of the good work done in forming a team comes under strain.

Sometimes is obvious who should fill the gap but commercially all parties want to fill it

Sometimes is obvious who should fill the gap but all parties want to fill it

Now think about an overlap, this is where it turns out that the scope of work overlaps to some extent for two or more subcontractors. So it has to be decided which subcontractor gets to perform the work and obviously none of them want to concede because this will affect their workshare in terms of revenue and profit. So again there is tension and the fabric is strained. I have seen cases where this is so difficult to resolve commercially that both parties continue to be paid.

Whatever happens attempting to resolve these gaps and overlaps creates tension, diverts energies and creates rifts between all parties ultimately impacting the performance of the overall programme.

Getting back to Collaboration

In this example collaboration worked really well in the bid phase because each party had equal status, the team was seamless and great work was performed.

When it came to execution there was a prime/sub hierarchy,  scope changes caused tension and the programme performance suffered.

So how do you get collaboration and the great work in a bid phase to continue into programme execution?

  • One simple answer would be to suspend any commercial boundaries in the same way as is done during a bid but this is hard when the numbers are significant. Each company has shareholders to consider.
  • Another answer, pertinent to my example, is to get the scope right so that everything dovetails together perfectly but this is hard because at the outset there are lots of unknown unknowns/risks.
  • We could create a central risk contingency pool which can be drawn on by mutual consent when scope gaps become apparent.
  • We could create an environment based on the core business of each team member where we can agree in advance which parties should be called upon to fill gaps by playing to their strengths.
  • The Service Integrator Model is in vogue and can work for large programme across multiple suppliers but it really relies upon the commoditisation of suppliers with exceptionally regularised scopes of work such that they become plug and play. See my post on the Service Integrator Model

There is no simple answer in a complex programme and not resolving the gaps and overlaps effectively becomes one of the major causes of programme failure. See my post on Why Programmes Fail

How would you solve this issue from your experience? Leave me a comment.

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6 responses to “Why collaboration is difficult

  1. Hi Keith.

    Great article.

    Being quite young in my career but still having 4-5 years experience I have been involved in project management on a small scale (contracts up £100k). Working more as a discipline lead than overall high level project management role. I would suggest that depending on the size of the scope gap, would it not be covered in the contingency or risk pot that was created as part of the bid? Failing that would it not have to be taken as a collective “hit” on the profit margin?

    Or could you have something written in the contracts regarding scope gap? That it will be dealt with collectively across all the parties regardless of where the gap lies?

    Last but not least. How was the scope gap missed? Error identifying the spectrum of the scope or has the client not detailed the area of the scope correctly, is there a chance for a claim for an extension in scope?

    It would be interesting to know how it was resolved?

    • Richard, thanks for the comment. You are absolutely right, in my example there was some central risk contingency held by the prime however they were reluctant to release funds from it to fill the gap because they had pared it back to the minimum during commercial negotiation and they feared it was not enough.

      The route they took instead was to look for ambiguity in the statements of work and to try to claim that the gap was in fact included, this lead to disputes with their subcontractors and eventually a total failure of the excellent collaborative behaviour that had been build up over 12 months of bidding and negotiating.

      The lesson here is never to rush the preparation of the statements of work (SOW), try to make sure that they fit together like pieces in a jigsaw puzzle and to ensure that there is some contingency in which to manoeuvre when the gaps reveal themselves during execution. The prime also needs to maintain trust with his subcontractors and demonstrate integrity because this is hard won and easily lost.

  2. Hi Keith, Thanks for this great blog. I too worked on this program. You have mentioned the need in a large fixed price program for overall clarity about scope, clear subcontractor statements of work and for effective risk and opportunity management. I agree all of these are necessary. However in addition to these things, I believe it is important to consider the overall impacts of “fixed price” versus “cost plus” in creating appropriate behavioral alignment. One of the reasons why “cost plus” contracts are used extensively in some countries is because they create a situation where the commercial impacts on suppliers of changes in program scope or quality requirements are minimized. Both the prime contractor and any subcontractors share a common interest in aligning scope, quality and schedule requirements with the customer’s needs. Although the end customer’s cost position is not protected, the supplier consortium behaves responsively, is readily able to adapt to changes and deliver to the required scope, quality and schedule requirements. These are often more important to the end customer than cost because they enable the customer to achieve their business goals that far exceed the cost of the program. Although suppliers who only take on “cost plus” work could over time start to behave like children running out of pocket money, not behaving responsibly with the initial budget and expecting their customers to behave like indulgent parents, there are established commercial mechanisms for establishing controls to keep suppliers in check. Just as children whose parents are strict with them learn that they lose pocket money if they play up or a profligate with the money they have been given, suppliers under cost plus contracts quickly learn how to align their behaviors with their customers requirements. From a customer perspective “fixed price” contracts are generally much harder to manage, because to protect their commercial positions suppliers necessarily need to behave more like teachers telling their pupils what lessons are coming up. Supplier influence on the delivery road-map naturally takes precedence over alignment with evolving customer needs. So to summarize, two of my main learning points from this program were that:
    1. customers need to consider carefully whether placing contracts for large programs on a “fixed price” basis is actually likely to deliver the business outcomes they are seeking – or whether they are actually increasing their own overall business risks by attempting to use “fixed price” contracts to transfer delivery risks to suppliers;
    2. suppliers in the pre-contract phase for “fixed price” programs need to consider carefully whether they are doing enough to educate their customers about the potential lack of alignment between customer requirements and supplier behavior that are likely to arise from this form of contracting.
    I am fairly sure that if the customer for this program had fully understood their own business risks and how the “fixed price” basis of contracting was likely to cause lack of alignment between their requirements and behavior of the supplier consortium, it would have been possible to build into the top level contract and into the sub-contracts better commercial mechanisms to align supplier behavior with customer needs.
    I look forward to reading your views and those of others on this interesting subject.
    Best regards,
    Tim Williams

  3. Tim, thanks for your kind comments. I think you are absolutely right on this one, ‘fixed price’ does drive behaviours such that the ‘minimum compliant solution’ is delivered and it also runs into behavioural difficulty when all of the programme unknowns reveal themselves and relationships are strained. Of course ‘cost plus’ was what we had in the UK back in the 70’s but again this can drive bad behaviours where the contractor treats it like a ‘gravy train’ and being late and over budget becomes the norm. I think that on this particular programme a hybrid approach with ‘fixed price’ at the head contract with the prime holding some contingency for unknowns with ‘cost plus’ for the subcontractors would have yielded an interesting dynamic and perhaps a different outcome.

  4. Keith,

    Your first bullet on how to get around this issue arising is to suspend any commercial boundaries. One way that this has been achieved by other groups of organisations is to set up a joint venture. In a well structured JV, benefits accrued are shared in proportion to the investments made and the risks taken. Whilst the organisation will still be required to overcome the gaps and creases, these will be inside the business and the team can remain more as one.

    Given the investment required to set up the system infrastructure for this contract and the very different roles between the build and the longer-term operatations, I can see that a JV may have been as difficult to set up as properly created SOW, but in hindsight, do you think that a JV should have been set-up as the better option for delivering and running the contract?

    Yours,

    Ian

    • Hi Ian,

      Thanks for your comment. I think a JV with shared risks and rewards would have worked a lot better in principle. It’s a great shame we didn’t try something like that, it may have perpetuated the excellent collaborative behaviours we benefited from during the bid and contract negotiation phases. However JV’s take time to set up commercially because each company tries to minimise its risks and maximise its reward. The other thing that can be problematic in a JV is ‘who takes the lead’ and ‘who dictates processes and procedures’, I have seen multi £m JV’s fail because too much energy and time was spent effectively trying to invent a new company around the JV by taking best of breed processes from the constituent companies.

      Best regards

      Keith

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