building a relationship

There is one fact that must be recognised: good relationships are usually a core component to the delivery of a successful operational phase on a PFI project.

However, what is meant by ‘good relationships’; what is meant by a ‘successful project’; and whether relationships are the primary ingredient to success or not, are perhaps more salient questions.

Certainly, to state that good relationships are the most important aspect in relation to performance is a fallacy – it is a myth. Performance is about the ability to meet the obligations of a contract – no more and no less. And then the quality of such performance is only as good as the contract. Absence of ‘deductions’ or the existence of good ‘liquidity’ only means that the contractor’s cashflow is going well. Whilst not based on analysis, but my gathered experience, limited deductions in the operational phase may occur, despite poor performance, for the following reasons:

• Fear by the promoter of making hard decisions
• Lack of understanding of or training in the performance mechanisms
• Lack of resource to properly impose and police the contract mechanisms
• Complex, confusing or ambiguous specifications and mechanisms
• Poor performance overlooked through misdirection.

Now, good relationships are important. We live in a world where our immediate human interactions influence our place in the world; our perspective on that world; and generally whether we derive happiness or not. In delivering a contract, good relationships must only relate to a situation where both parties are seeking to, as far as possible within their contractual and commercial boundaries, make the contract work. And, when problems occur, ensuring that they are dealt with in a knowledgeable and speedy manner.

Good relationships are not ‘key’ however. One may not personally like the other party, but a respect may exist, and a desire to make the contract work. Mutual respect is perhaps a better term. A ‘good relationship’ suggests that a winning smile will overcome contractual shortcomings. But one can never lose sight of making both sides of a contract work, ie fully resourced and empowered contract administration, with properly constructed and delivered contractual obligations.

What I would suggest is absolutely key, is properly trained and supported staff at the coal face on both sides of a contract; who understand the contract. So what is a successful operational phase? Success depends on your perspective. Are you the sponsor, the contractor or the promoter? Success all round (or win-win) requires all parties to address their obligations fully, with knowledge, transparency and commitment. Otherwise, success for one may be at the expense of another. Having said that, you have to be careful to protect your interests should others fail.

As the recession maintains its vice-like grip, the classic tendering dilemma will be a continual concern, ie the client selects the cheapest (yes, even after the quality and compliance assessment) and you run the risk of not getting what you wanted in the first place; even if clear in the brief. This is the understandable result of the need to survive in a tough world, where cash struggles to circulate, and people are fighting for their jobs. Clients must be careful when deciding who their preferred partner is.

Similarly, the ‘promoter’ or ‘client’ is now facing an administration dilemma. The cuts in the public sector are such that the ability to manage contracts or monitor performance may become more difficult. For example:

• Attending meetings with suitably experienced staff
• Getting the support of experienced specialists
• Resource to achieve contractual response times
• Simply too busy to properly engage and consider events as they arise
• The proper monitoring, policing and application of performance standards.

A key concept and selling point of the PFI procurement route is the performance mechanism, providing the continuous incentive to the services provider or contractor to deliver high quality services. And if the performance mechanism is not imposed suitably, then there is a risk that the quality of services will erode. So, in addition to ‘respect’, the diligent and reasonable application of the performance requirements and associated commercial mechanisms is essential.

To conclude then, I most certainly do not espouse relinquishing politeness and respect. And the absence of negative traits in the contract parties is also important. The parties must not be vexatious, vindictive or evasive. We have all worked with those who purposefully misunderstand to get the upper hand, and such posturing does not help. A clear and firm purpose and vision, whereby each party is working together, and trust can be established must be the goal. Respect, diligent application and a desire to work hard together to resolve issues are then the core components of delivering good performance – presuming the existence of a well written contract. A good team and high quality advice is essential.

Eddie Davies (eddie.davies@capita.co.uk) is Director Technical Advisor Services at Capita Symonds. Further information at: www.capitasymonds.co.uk/technicaladvisor