Contracting for major projects: eight business levers for top management

摘要

The management of major projects invariably involves the design of contracts between the client and one or many specialized contractors. The design of the project contract has a major impact on the economic success of both parties and on the behavior of the parties in their attempt to maximize their upside or protect themselves from a downside. Considering the impact of the contract, top management of the respective parties should be involved in supervising contract negotiations and design. However, available literature treats project contracting as a technical issue to be delegated to technical project managers and legal experts. In this article, we propose eight key levers of the business deal encompassed by the project contract. We argue that structuring these properly will provide a sound fundamental business logic and incentive framework for the project, around which a myriad of detailed considerations can be structured and delegated. Thus, our eight levers represent the key issues upon which top management should focus in shaping the contract for a major project.