Unlock project potential with collaborative contracts

Rekha Thawrani, OBE and Global Director of NEC Contracts, explains why the industry is moving towards collaborative contracts that can deliver better outcomes for everyone involved.

The construction industry faces a perfect storm of challenges. Designing and building against a volatile economic backdrop while racing towards net zero targets demands innovation, sustainability and efficiency like never before.

Many in the sector already understand the value of trusted supply chain relationships, nurturing these partnerships from project to project. Collaborative contracting takes this further – either strengthening existing approaches or catalysing the change needed.

The collaborative advantage

Traditional contracts can create problems from day one. Characterised by one-sided terms and impenetrable legal jargon, they can pit parties against one another in adversarial relationships. Worse still, they’re typically signed, filed away, and only resurface during disputes. This approach simply isn’t fit for purpose for the modern construction industry.

Collaborative contracting offers a fundamental shift: a partner-based approach where contracts establish effective project management championing shared goals, risk and responsibility. Nobody is left exposed. The difference begins with language – these contracts use plain, simple terms that everyone can understand.

A living document

Clear language matters because collaborative contracts are living, flexible documents used throughout a project’s lifecycle – not relegated to a drawer until something goes wrong.

Collaborative contracts are also adaptable. Modular structures and optional clauses allow tailoring to specific project needs, including different pricing options for sharing risk, such as target cost contracts. Provisions also address specific challenges such as inflation and changes in law.

These contracts work at programme or contract level through collaborative framework agreements such as FAC-1 or the NEC4 Framework Contract, alongside separate delivery contracts. Crucially, collaborative principles must extend across the entire supply chain. Adopting a consistent suite of contracts, such as NEC4, ensures everyone involved benefits from collaboration.

Managing risk effectively

Perhaps the most significant departure from traditional contracts is how collaborative agreements handle the unforeseen risks that plague construction projects.

The goal is to minimise the impact on cost and programme timelines while delivering the required quality. NEC4 contracts, for example, include an early warning process requiring parties to flag risks immediately and work together to mitigate their impact.

Project delivery teams benefit from clearly identified roles and actions, with procedures ensuring effective management. Central to this is the requirement for an up-to-date, detailed programme providing an accurate record of completed work and future intentions across all parties.

Strategic value, not tactical cost-cutting

The pre-construction phase offers opportunities for early contractor involvement, which is pivotal for successful delivery. Look for collaborative contracts with mechanisms helping parties to find the optimum combination of cost and quality for sustainable solutions.

Within the NEC suite, Secondary Option X29 enables clients to embed specific climate change requirements and targets. Performance tables with financial incentives motivate suppliers to achieve measurable targets on greenhouse gas emissions and other environmental criteria.

View value management as strategic, not a one-off cost-cutting exercise. The collaborative framework established by NEC contracts encourages continuous improvement throughout the project lifecycle.

Investment incompetence

Collaborative contracting requires different competencies and methodologies. Training is essential – an initial investment ensuring long-term results. For commercial projects, the return on investment is often swift and significant. Train with trusted providers offering everything from introductory sessions and specific contract training to fully assessed, accredited courses for project managers.

Research into collaborative contracting practices this year revealed compelling results:

• 49% of respondents strongly agree that collaborative contracts lead to higher efficiency and improved quality

• 85% reported fewer disputes and more streamlined resolution processes

• 80% cited improved environmental performance

• 82% felt positive about the wider adoption of collaborative contracts.

The path forward

The construction industry is modernising, and a less adversarial approach to contract delivery must be central to this transformation. Contracts are fundamental – they set the tone for cultures and behaviours, outlining effective project management practices that ensure the best outcomes.

The appetite for collaborative contracting is strong, the results wholly positive. Why? Because these contracts have the power to transform the industry. The NEC suite of contracts is globally recognised and endorsed by governments for reliable, high-performance project delivery. 

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