Posted by: Gilad Lev-Shamur | July 14, 2011

Contracts Series – Part 1: Can we create an unbeaten contract?

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“verbal contract isn’t worth the paper it’s written on”

Samuel Goldwyn

 

Every PM know this feeling. The uncertainty before signing an important contract. Did I forget something? Did I protect my interests?   Did I set an appropriate change process which will keep me from bankrupt when changes will start to pop up, as they always do? and so on…

As it happen in most modern organizations, you will get the help of a procurement department which has an expertise in this area. But as the accountable to the project success, you will want to make sure you are backed-up. You do not want surprises.

Most PMs become obsessive collectors of documents. You collect during the years any document that describe requests from the contractor, set him limitations or enforce some actions. And when I say any, I mean it.

It became absurd. You find yourself adding documents from past projects, just because you do not want to be the one that remove them, you add documents just because one line, you add documents that you do not fully understand what they mean just because someone else did it and you change lines in your contract that has double meaning or write the same thing over and over just to clarify your point.

We do all this work just to find, after the project started, that we missed something. Can it done differently?

In his column  ” In Praise of the Handshake “ (Harvard Business Review ) Dan Ariely give us a challenge: If we cannot create an unbeaten contract (as any experience PM will tell you), do we have another way? According to Ariely, we have.

Instead of trying to put all our rules in it, is it possible that  in case of a conflict it will be solved according to the accepted practice in this area?

We just need to define what accepted practice is.

According to Ariely, a common social norms or values can lead people to the same solution (If A happen we for sure need to do B). So how we make sure that we and the other side are at the same page?

The solution might come from another publication by Dan Ariely: “Predictably Irrational “. Ariely called us liars. We do not exaggerate, but when we got the chance we will probably slipped. One of the ways to prevent such things, is to mention us the social norms we are obligate too.

So here is an idea: keep your contract short. Put in it only the necessary things. In addition, prepare an ethics and norms document which every side will signed. Another way is to do business with people who are formally obligate to the same social norms and ethics like you. For example, all certified PMPs signed the “code of ethics“. Doing business with another PMP supposed to let you play in a game with known rules.

It is sound idealistic in some way, but is the other way let you feel safe?

Good luck!

 

Gilad

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