Construction projects, in particular deep foundation projects, are commonly complex and risk-prone. Extensive rework is often required to revise designs and construction methods, invoking variations clauses in contract documents, which can result in disputes, time delays and cost overruns. Conservative clients often draw up one-sided or rigid contract documents, which increases the chance of disputes and delays. Instead of logical risk allocation, passing on risk becomes the contractual motto. Several types of balanced construction contract formats are available today. While FIDIC type of formats are being chosen by more progressive clients, the emphasis is still on client-centric models by commonly loading the ‘particular conditions’ in the client’s favour. Even where alternative dispute resolution systems such as reconciliation negotiations, arbitration, mediation and mini trials are available, they are invoked only after disputes arise. There is also considerable recourse to arbitration and time-consuming judicial interventions, militating against mutually beneficial approaches. Often, contracts are based on basic distrust rather than collaboration. In such a transactional atmosphere, the recently developed Lean Construction (LC) approach brings a breath of fresh air with a collaborative, relational approach. LC essentially aims at avoidance of wastes and employing effective principles such as continuous improvement, collaborative working and respect for people in the projects, apart from other good techniques. Integrated project delivery, alliance contracting, target value design, lean project delivery, etc, are some contract management methods followed in the Lean approach, which aims at collaboration between the client, contractor and, possibly, the consultant. These approaches also promote efficiency by ensuring increased and continuous interaction between all the agencies involved. Common contracting formats Typically, three broad agencies are involved in a project’s organisation: client, (design) consultant and contractor. The last should really be called ‘constructor’, as it realises the actual construction. The conventional name is contractor but the term often attributes unsavoury connotations to this agency. The design responsibility may be with the client or the contractor (the two ‘parties’ to the contract), at the choice of the client. There are many ‘risks’ associated with the development of a project that can be essentially classified into time and/or cost risks. Depending on the framework of the contract, these risks are borne by one of the parties, in various manners depending on the type of the contract, but rarely jointly or following the efficient dictum: each risk is to be borne by the agency best suited to bear the same. The two main broad streams of current transactional contracts are: Design-and-build contract: Here, the contractor develops a preliminary design for estimating the cost to submit a lumpsum bid. Usually, only limited data is available, even for the underground portions. The time required for a proper investigation is normally not available and it would be wasteful for all bidders to undertake their own detailed investigations before bidding. Invariably, it is stipulated that ‘actual’ underground conditions as discovered during execution would only govern the design and construction methods, with the risk falling on the constructor, who has to develop the detailed designs post bidding. Usually, this is a lumpsum contract, with the contractor bearing the quantities (and hence the cost) risk. Apart from possible variations in quantities due to changes in design, cost factors also arise owing to changes in construction methods and equipment required. Item rate contract: Here, the client develops the designs and bill of quantities before bidding. If subsurface conditions turn out to be different during execution, the client revises the design, taking the quantities risk. Contractual problems may arise if ground or other conditions vary during execution, calling for a totally different design, method or equipment requirements, with changes in time and cost. In both cases, there are high possibilities for disputes if actual circumstances turn out to be different from those envisaged earlier. A rarely adopted contracting form, Cost-Plus-Fee, is usually risk-free for the constructor, but with considerable risks for the client. Options and drawbacks Here are some courses open to clients and possible drawbacks of the same: ‘Laissez faire’ – taking a chance to go ahead with available initial data, particularly for underground conditions, and take a chance with the constructor later. This approach is fraught with the usual problems. Same as above, but with the client being fair by compensating for extra costs incurred by the consultant and constructor in case of different underground conditions. However, this may still involve disputes. Going in for detailed initial geotechnical and other investigations and checking out the comprehensiveness of the data with design/construction engineering consultants, before going out for bidding. This could possibly be too time-consuming. Completing the entire engineering and drawings before going out for bidding, based on comprehensive geotechnical and other data. This is time-consuming and limits optimisation possibilities. Forming a team with a consultant and a constructor and developing the project from the beginning within a target value, and completing construction in an optimised manner to required quality, cost and time. The last alternative appears to be the most rational but is the least adopted. LC concepts and practices LC is based on effective principles such as maximisation of value for the client/project, minimisation of wastes, continuous improvement, respect for people and collaborative working, with an accent on optimising the whole, focus on process and work flow using ‘pull’ concepts against ‘push’ concepts for the flow, and so on. This approach is essentially based on trust and collaborative working, all the time maximising end client value. The basic concept of waste avoidance in LC is achieved by identifying value streams in various parts of the work and analysing them to eliminate needless activities and improving efficiency and value for the client. All work is done with total collaboration among all stakeholders. Apart from the main constructor, the various supply chain partners and subcontractors (sub-constructors) should also be brought into the team for effective collaboration. Some of the tools used in this concept are Last Planner SystemTM/ Collaborative Planning System, 5S, Value Stream Analysis, Work Sampling, Location-Based Management Systems and Lean Design concepts, such as Big Room, Choosing By Advantages, BIM, Set-Based Design, A3 Working, and so on. Efficient contracting paradigms in LC concepts Based on these principles, an effective modality for integrating the various stakeholders involved in delivering a project, called the Relational Contracting System, has recently come up. A Relational Contract is one whose effect is based upon a relationship of trust between the parties involved towards achieving a common objective, leveraging fully the respective strengths of the parties. The explicit terms of the contract overlie the implicit terms and understandings that determine the behaviour of the parties. One example is the Integrated Project Delivery system (IPD), which is working well in many countries. The main concept is that all involved stakeholders, including key vendors and subcontractors, are involved along with the client and designers as a single, collaborative, integrated team. The project organisation (various partners at different stages), operating system (rights and duties, interaction methodologies), and commercial terms (the contracts) binding project participants must be well-defined. It integrates people, systems, business structures and practices into a process that harnesses the talents of all participants to reduce waste and optimise efficiency through all phases of design, fabrication and construction. Some key aspects would be: Continuous involvement of the client and key designers and constructors from initial conceptual designs till project completion Business interests aligned through shared risks and rewards, including financial risk dependent on project outcomes Joint project control by the client and key designers and constructors Equitable multiparty agreements, with explicit definitions, without the conventional implied terms Limited liability among the client and key designers and constructors. This system eliminates possibilities for conflict as the whole team works as one, with total transparency. The total emphasis is on value for the client, which nurtures continuous improvement and a quest for the best. A variation of this is Target Value Delivery (TVD), a management practice used throughout all phases of design and construction to deliver projects within a fixed budget, while meeting the operational needs and values of the client. The driving force of TVD is to increase project value at every stage while decreasing production cost for all members – designers, planners, supply chain partners and constructors. The key team is assembled during the planning stage itself and the design and construction engineering are developed in a holistic manner with maximum innovation and dovetailed working so that the final design emerges with maximum constructability and within the target cost. Based on the results, a detailed design is developed, along with optimum construction engineering to get the maximum value for the project and with minimum time and costs, collaboratively and transparently, using LC tools. All designing and planning is concurrent, instead of being iterative and circular, minimising waste of time spent on engineering and planning and optimising the whole design jointly, instead of in parts. Instead of considering the superstructure and the foundations separately or developing design and construction methods independently, an integrated model is followed and optimised for the best structural design, construction methods and appropriate materials. TVD aims to improve the workflow by encouraging constant communication between all partners throughout the project’s development, constantly setting goals for each other before the project is approved, by maximising value for the client and minimising waste (time, money, human efforts) for all partners. Alliance Contracting (AC) envisages the joint execution of a project by the client and constructor, possibly also looping in the consultants and main vendors into the project management and execution team, working as a single, composite entity. This total transparency brings in more commitment and efficiency, while employing a robust contracting system covering all the pains and gains. Another highly efficient system is the Lean Project Delivery System (LPDS) developed by Dr Glenn Ballard, a pioneering Lean expert, which efficiently integrates all systems, processes and partners through all stages of the project development using various Lean concepts. Advantages and methodologies of Relational Contracting A collaborative approach is encouraged and the respective strengths of all partners are exploited to a maximum extent for common benefits towards achieving the agreed goal in the best possible manner with the least effort and cost. It is a win-win situation for all, and avoids needless waste of time and energy in litigation and contractual disputes, and ensures project completion within the budgeted time and cost with best possible quality and safety. The contract may have two parts. The operational part would lay down the respective roles of each party, depending on individual strengths, an organisational/decision-making structure and interaction modalities, and overall project objective, target timelines and target cost. And the contractual part would lay down methodologies for cost sharing, inputs required from various parties and their value evaluations, possible penalties for violations and formulae for overall sharing of risks/pains and gains, non-disclosure/secrecy clauses, mutual non-poaching of staff clauses, etc. The actual format would generally depend upon the parties involved and their mutual familiarity, trust and values. Typical problems and suggested remedies Any new practice is difficult in the beginning but a determined client agency can always pursue an ideal process relentlessly and continuously. The TVD approach may be easier done in the private sector where freedom exists to form a team right from the beginning. The client may initially form the team based on previous experience with trusted, like-minded agencies. Alternatively, the client could call for prequalification and intent-to-collaborate bids to select team members. Common and individual agreements may have to be signed ab initio to define roles, liabilities and pains and gains. Onboarding sessions with training in Lean concepts may also be necessary to build teams and align goals. While this may sound difficult, with practice the process would become practicable. However, public-sector clients may find this difficult because of CVC (Chief Vigilance Commission) guidelines. That said, they could form, say, three different teams initially with a common investigations agency, encouraging the competition to come up with the best target cost and award the work to that team for the final push. It is, of course, very important to train all involved in the basic and applied concepts of LC and hold workshops to develop collaborative working principles for the entire team. The future with Relational Contracting The use of this Lean approach will lead to innovative and optimised solutions, collaborative working, less futile disputes and overall value creation in the longer run. When purpose, concept, data collection, design, planning and construction are tackled wholistically for project realisation, the best solution would emerge with the best value for the client with the least cost and time, rather than solutions that tackle different stages of project realisation in an isolated manner. Various contractual formats in use should be ranked in terms of key parameters and compared to Relational Contracts before choosing the format for any project. The way forward Projects, particularly those involving deep foundations, are susceptible to problems arising on account of actual (underground) conditions being different from those envisaged earlier. Consequently, projects based on conventional contracting formats are likely to encounter delays and cost overruns owing to contractual disputes between the client and execution agencies. The Lean Relational Contracting formats, based on principles of collaboration, trust, continuous improvement and improving client value, are an ideal solution. The IPD concept ensures seamless integration of the best efforts of all parties to strive towards achieving the best possible solution with the least efforts. Similarly, the TVD concept induces the entire project team to work towards achieving the best possible solution within a commonly agreed target cost. Alliance Contracting opens out possibilities for total collaboration between the client and the constructor. The Lean project delivery concept takes project execution to a much higher level. With good planning, targeted training and a strong will from the client, it is possible to identify a team of consultants, constructors and supply chain partners and weld them into a mutually agreeable and equitable contract to develop a common platform to achieve the objective.