Contract Negotiations Are A Further Opportunity To Both Create Additional Value And Agree A Mutually Beneficial Risk Reward Structure Essay

3021 WordsOct 6, 200913 Pages
Introduction For many companies it is necessary to employ contracting as a means of acquiring goods or services that are required to satisfy a business need. For many project managers this acquisition of external expertise necessary for the successful outcome of a project is their main experience of contracting. Choosing and negotiating the right kind of contract that will ultimately realise the success of a project is an ability that all project managers should have at their disposal. It is ironic that due to the very nature of many contracts – especially ones that are overly defensive or protective in their language and design – the contract itself can negatively impact projects. Such contracts can reduce the likelihood of the respective parties engaging in a positive way that benefits all concerned, but it doesn’t always have to be that way. The type of contract negotiated coupled with the skills of the contract negotiators can have a great bearing on the overall success of the project and the future business relationship of the parties involved. This paper intends to show that the negotiation of equitable contracts based on a mutually beneficial risk reward structure can create additional value for all parties concerned. The goal of a contract The Project Management Body of Knowledge defines a contract as a mutually binding agreement that obligates the seller to provide the specified product, service or result and obligates the buyer to pay for it. It is important however that contract negotiators don’t become overly focused on the legal and commercial terms of the contract to the exclusion of all other considerations. According to Whittingham (2007), the structure and language of many contracts is primarily concerned with the rights and obligations of the contracting entities, especially in respect of liabilities and

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