In our previous
article, we explored the origins of the NEC contract and why it became the focus of Richard Everitt’s undergraduate dissertation,
The Engineering and Construction Contract and Project Success. We touched on the findings of both the 1994 Latham Report and, more recently, the Australian Constructors Association’s report
Disrupt or Die. Despite being published almost 30 years apart, both reached a similar conclusion: the contract and procurement strategy adopted at the outset of a project are fundamental to achieving better outcomes.
The Latham Report put it simply:
“Implementation begins with clients.”
Every construction project is unique. Different stakeholders, funding arrangements, design complexity, market conditions, timeframes and risk profiles mean there is no single procurement model that suits every project.
Because the client or principal selects the procurement and contract strategy, they have the greatest ability to influence the way a project is delivered. In practical terms, the decisions made before construction even begins often determine whether a project succeeds or struggles.
The Three Measures of Success
Traditionally, project success has been assessed by three universal measures:
Procurement methods attempt to balance these three competing priorities. Greater certainty in one area will usually come at the expense of flexibility in another.
For example:
- If cost certainty is the primary objective, a traditional lump sum procurement model may be the most suitable.
- If speed of delivery is more important than cost certainty, management contracting or design and construct may provide a better outcome.
- If maintaining control over design quality is critical, a more traditional procurement route may still be preferred.
The challenge for clients is to determine which objective matters most before selecting the procurement strategy.
Procurement Strategy Is Really About Risk Allocation
The choice of procurement method is not simply an administrative exercise. It is fundamentally a decision about how risk will be allocated.
Whichever party is made responsible for achieving an objective, whether time, cost, quality or design coordination, will also carry the risk of failing to achieve it.
That is why procurement strategy sits at the centre of the construction process.
A project with an aggressive programme and incomplete design may expose the contractor to significant time and cost risk. Conversely, a client who retains design responsibility may preserve greater control over quality, but also accepts more of the associated risk.
The complexity of modern construction means that these risks cannot be eliminated entirely. However, they can be:
- Retained
- Transferred
- Shared
- Minimized
As Mills observed in 2001, successful projects are not those that avoid risk altogether, but those that allocate risk to the party best able to manage it.
Beyond the Iron Triangle
While time, cost and quality remain critical, they are no longer the only measures of success.
Today, construction projects are increasingly judged by additional factors such as:
- Safety
- Sustainability
- Stakeholder and community outcomes
- Collaboration and culture
The traditional “Iron Triangle” has therefore evolved. A project may be delivered on time and on budget, yet still be considered unsuccessful if it creates unsafe conditions, damages relationships, or fails to meet sustainability objectives.
This shift is one of the reasons why collaborative forms of contract, such as NEC, continue to gain attention. Its focus on communication, early warning, risk management and proactive decision-making is better aligned with the broader definition of project success that the industry now expects.
The Key Lesson
The construction process does not begin when work starts on site.
It begins much earlier, when the client decides:
- What the project is trying to achieve
- Which outcomes matter most
- How risk should be allocated
- Which procurement and contract strategy best supports those objectives
Get those decisions right, and the project has a far greater chance of success.
Get them wrong, and even the best team may struggle to recover.
The industry often focuses on what happens during construction. In reality, many of the most important decisions are made long before the first shovel goes into the ground.
