The Garrison Report #2005-1

A Needed Change is Partnering - Part 2: Collaboration

Last month the author promised to discuss an alternative viewpoint. The author had intended to explore Arizona State University Professor Dean T. Kashiwagi, Ph.D.'s "Best Value Procurement" program. However, as a result of emails and discussions the author has recently had on partnering, the author has concluded that an important clarification should be inserted at this time before moving forward.

First, the author recognizes that there is a great deal of dissatisfaction in the construction industry with the idea of partnering. The author believes that a majority of this feeling is due to the fact that what people often call partnering in the construction industry is anything but partnering. In other situations, the partnering process was done poorly. Finally, in other situations, partnering was probably not the best method of contracting construction services.

More importantly, the author has concluded that the term partnering is not the best term for the changes he is recommending. A more inclusive name for the changes being advocated is "collaboration". While partnering falls within collaboration, collaboration goes much further. Therefore, the author wants to emphasize the "positive impact derived from the synergy of collaboration".

While partnering is a formal type of relationship, collaboration is simply the working together in search of a common goal or vision. In a transactional mentality, each party attempts to maximize his or her benefit from the transaction, which leads to confrontation and an adversarial relationship. In contrast, collaboration is about developing an attitude of cooperation and trust.

During a collaborative relationship - the various stakeholders work together to first increase the size of the pie. This is important because only by increasing the size of the pie, can each of the stakeholders earn a larger piece of pie, or in business terms - greater profitability. The only way relationships can be sustainable over the long term is to create a win-win environment for all the stakeholders. In comparison, in the transactional environment the stakeholders are fighting over an ever-shrinking pie.

In part, this is because the transactional environment focuses on price. The more the buyer focuses on price - the less profitable the service becomes for the provider. But this doesn't create a win for the buyer either, because this process continues to drive down quality. Despite the fact that many buyers are complaining about quality, they continue to try and win in a transactional environment. Unfortunately, they are doomed to failure.

Some people want to argue that they are forced to compete on a low bid basis, because their work consists of public works projects or companies that require competitive bids. Obviously, in these situations a full partnership is unlikely. However, this doesn't mean that collaboration can't or shouldn't be used to benefit both stakeholders.

In essence, we need to lower the confrontation within the construction industry by joining forces to work together. This is what collaboration is all about. Collaboration can occur over the full range of projects - from highly competitively bids up to negotiated design-build projects. The author is the first to agree that partnering is not the solution in all situations, but in the right situation it can be very successful. A typical example is where a buyer negotiates a design-build contract because of a tight schedule. There are many successful examples of this type of project.

However, collaboration can work on the other end of the spectrum too. For example, the President of a road-building contractor told me the following story. His company bid on highly-competitive project and received the bid the hard way - he was the low bidder! The problem was at their bid price it was going to be a very low profit project. The President realized that schedule was important to the municipality - in fact, they had significant bonuses for early completion. The President told his people to work with the municipality and do everything they could do to maximize the bonus. The result was they finished ahead of schedule.

The surprising thing to the President was they made a higher profit than was in the bid and that was before the early completion bonus. The result was a very profitable project and a happy customer. Yet, this wasn't the contractor's best benefit. Other municipalities contacted this company and asked if they would design-build their next project because they wanted to take advantage of their aggressive schedule. In this example, collaborationlead to further collaboration and even partnering.

In essence, collaboration can be used in all aspects of our business - not just with the client. Everyone can work together to create a more positive situation. This includes contractors working with their employees. This includes general contractors working with their subcontractors and vendors. This includes the contractors working with the design team. Of course, we don't want to forget the contractor working with the buyer. All of these relationships offer opportunities for collaboration.

In this context, Dr. Kashiwagi's "Best Value Procurement" approach certainly falls undercollaboration. Everyone understands that contractors would love to negotiate their work with customers without any competition. Each contractor probably believes it can do an outstanding job for the customer. However, contractors must recognize that most customer do not have the ability to select the best contractor for their situation. This is where Dr. Kashiwagi rides in on his white horse to save the day. Briefly, his process focuses on the bidders past performance and matches them up with the buyer's specific needs. In other words, Dr. Kashiwagi matches up the buyer with the "best valued" contractor for the buyer's needs. This creates a situation where collaboration can be maximized for the benefit of both parties.

There are three ingredients necessary for successful collaboration - they are: the ability to produce results, intimacy, and a common vision. The ability to deliver results goes beyond the ability to construct a building - it includes helping each other to maximize the project's potential benefits for each. Intimacy is about "understanding" the other person's intimate needs so they can at least be part of the equation. This creates a WOW environment and creates the excitement of collaboration.

Finally, the stakeholders must share a common vision, because unless all the stakeholders share the same vision it is impossible to work together on the mutual goal. As the author has stated before, the key to a common vision is the establishment of a Strategic Goal ©, which the author defines as a "project outcome that is mutually agreed upon and creates a win-win environment for all stakeholders."

In conclusion, everyone needs to think of collaboration as a positive force that provides a competitive advantage and increases the value received by all participants. The level ofcollaboration obviously depends on the circumstances, but it should be clear that in virtually every situation there is room for greater collaboration and the resulting benefits for all stakeholders. In future newsletters the author will explore collaboration further. In next month's issue the author will explore how Dr. Kashiwagi's "Best Value Procurement" approach fits into the equation.

 

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