The Importance of Contract Alignment to Drive Construction Productivity
One of the primary reasons why construction productivity continues to severely lag behind comparable industries is the role of the traditional construction contract.
For too many projects, contracts are negotiated with misaligned incentives, creating undesired root problems that affect the entire project.
In this type of scenario, each party comes to the table squarely focused on protecting their own interest from a cost and timeline standpoint. While the financial and schedule implications are critical for a construction project, what’s more important is ensuring that proper measures are taken to enhance productivity.
For productivity to flourish, all parties need to be focused on achieving contract alignment that supports the needs of the project.
Why Are Contracts Often Misaligned?
Traditional construction contracts are often misaligned because the perceived needs of each party are placed ahead of the actual needs of the project.
Instead of each party focusing on how they can support collective problem-solving, the contract usually weighs heavily on protecting each party’s interests, resulting in mismatched risk allocation and unattainable profit margins.
Certainly, when dealing with large scale construction projects, there needs to be a fair amount of protection for each party. However, in today’s fragmented construction industry, companies are too focused on self-preservation at the expense of doing what’s right for the project to drive productivity.
The industry must shift to a more team-oriented approach that is built on trust and credibility. Companies need to pursue relationships with other companies who have a proven track record of creating the most value for each project.
How to Achieve Construction Contract Alignment
The best approach to achieve alignment is to structure each construction contract to support collaboration.
What does that look like?
- Agree on objectives and align the incentives.
- Identify the misaligned behaviors during planning discussions with critical conversations.
- Develop communication checkpoints to assure alignment of behaviors to incentives.
- Establish monitoring methods that are simple, direct, and directly aligned to objectives.
These functions should not take place in silos. All parties need to bring resources, technology, data, communication, and mechanisms to the table to establish the most efficient process to support the construction project.
As a result of this approach, the construction contract should reflect the aligned capabilities, goals, and objectives of all parties to support productivity.
Why Should You Work with AMTS to Support Productivity?
We do not believe in the traditional behavior of forming contracts based on maximizing our profit, but rather based on aligning objectives.
Our company works to remove the walls, agendas, and deceptions that have often plagued the construction industry. Through this approach, we develop construction contracts that are centered on collaboration, communication, and productivity to drive profit.
If our approach fits your company, we want to work with you by leveraging our capabilities in construction management, project management, or facility solutions to support your project.
To get started, contact our team today. We look forward to speaking with you.