Recognize and Manage Risk

Many types of project carry high levels of risk for clients and contractors alike. As well as commercial, financial and legal risk, there is political risk for those who take (or fail to take) decisions on projects with impacts on the community, the economy and the environment, and professional risk both for the contractors who take part in the design and implementation of projects and for the client personnel who are responsible for contracting and managing their services.

Clients who know how to prepare effective specifications will have identified and assessed those aspects of the work that will have a critical bearing on its outcome or expose the contract to particular risk, and they are likely to have written safeguards into the specification to minimize, or at least contain within tolerable levels, those risks that can be foreseen and are amenable to control. Questions to keep in mind include the extent to which the client may wish to transfer risk to you, how acceptable you would find this and the extent to which risk transfer can be reflected in your price for the work. In some instances, the tender documentation will include risk ownership tables in which bidders are required to identify risks for which they are prepared to accept full or partial responsibility. If you are invited to negotiate, signing the contract will mean that you accept the transfer of risk.

No work situation can be made totally proof against disruption: events may well occur that no one could reasonably have foreseen or be able to do anything about. Political or institutional changes may force a shift of emphasis or direction in the work; the project may meet external opposition from pressure groups; if client responsibilities are shared with other organizations or external sources of funding, divergences of view between the parties may slow its progress; complications may arise in the physical environment of the contract that may delay its schedule and incur additional costs. But it should be possible, when the bid is being planned, to think ahead about the problems that might arise and help clients design them out of the contract. So far as your role in the contract is concerned, the circumstances most likely to expose contracts to risk are resource deficiencies and ineffective working relationships.

Resource deficiencies

You and your client will face problems if the personnel assigned to the work turn out to be lacking in terms of their number, capabilities, experience or attitude, or if they are poor at communicating their findings. One individual's inadequacies can easily jeopardize the performance of an entire contract. Can you afford to accept that risk? How well do you know the people you are asking to work on the contract? Have you met them and talked to them, or are they just names and qualifications on paper? Have the members of a team worked together before? If they have successfully produced benefits for other clients in comparable assignments, this needs to be substantiated and emphasized.

Contracts often run into problems simply because people make mistakes. Your bid should, if possible, include evidence that the people named in your team are competent to perform efficiently the tasks for which they are proposed. Include in their CVs precise references to the work they have achieved on similar contracts. If an individual's responsibilities will involve, for instance, survey design and analysis as part of a public consultation programme, think about including in the bid examples of survey forms he or she has developed; if the person is to have essentially a training role, include examples of relevant training materials he or she has prepared.

Another factor that may raise concern is the possibility that the experts who are named in the bid may also feature in bids to other clients or may not become available at the required time or may be subject to competing work demands. To counter this problem, the bid specification may require you to include a statement of commitment to field the nominated personnel, together with a signed undertaking from each team member to accept the work proposed by the firm if it is awarded the contract. Even where the bid specification does not include this requirement, a statement of commitment can reassure the client that your approach to resourcing the work is practical and conscientious.

If you are proposing to feed part of the work to subcontractors, clients may have concerns that the people you take on may prove variable in their output, quality, motivation or availability. Identify firms or individuals to whom you propose to subcontract a significant proportion of the work - say, where the value of the subcontracted work would amount to more than 20 or 25 per cent of the total contract fee. Confirm that their engagement will be on the basis of back-to-back contracts, ie you will be accountable to the client for their performance just as if they were your employees. Include the CVs of the key subcontracted staff who would be involved in the work; and describe the quality management procedures you will apply in monitoring their performance. It can also be useful to make the point that you will ensure they receive adequate guidance on the client's expectations about quality and delivery.

Before you define an arrangement with subcontractors, check who their existing clients are. Conflicts of interest might prejudice your bid.

Ineffective working relationships

When clients believe that contractors have not delivered the results they had hoped for, there often turn out to have been failures in communication and a lack of mutual understanding at key stages in the definition and performance of the contract. The contractors may have seemed to be learning their job at the client's expense, expecting the client to do the thinking for them, or perhaps merely analysing data at a basic level rather than bringing a deeper perspective to the work. When the job was completed, the results may not have appeared relevant or practical.

With hindsight one can see that difficulties could have been avoided if contract responsibilities had been better defined, if the contractors had gained a clearer view of the client's priorities and if both parties had built a more effective working relationship. It is essential for contractors to approach their work in a spirit of professional partnership aimed at helping the client organization achieve its objectives; and it is important that a bid projects convincingly a commitment to developing and sustaining not merely a constructive relationship, but one that offers the client the maximum benefit, optimum value and minimum risk.