A Simplified Overview of Traditional Contracting
In Part I we noted that those professionals normally responsible for formulating and administering service contracts follow a process based on a long history of tradition and practice, and governed by well-established contract law. A simplified workflow of this process is shown in Figure 1. More often than not, the objective of the "Negotiate Contract" stage is to arrive at a fixed price for a fixed amount of work. This is especially true for government or large corporation contracts.
Figure 1: Overview of a Typical Contract Process
In such cases, it is up to the acquirer to define requirements well enough for potential suppliers to estimate the amount of work involved with a reasonable level of confidence. Unfortunately, acquirers do not always recognize this necessity. This leaves the supplier with three options: asking the acquirer to reconsider; building in a high level of contingency; or accepting an unreasonably high level of risk. If the acquirer cannot do the "Define Requirements" work in-house, they can either hire an outside party to do it, or refer back to earlier contracts for which they did do definition work.
For example, suppose you want to negotiate a contract to construct a public building. If you do not have qualified staff on your payroll, you can hire an architect. This architect would go through a sequence of steps to ascertain your requirements, determine the constraints of the chosen site, propose alternatives for the size and appearance of the building's shell, and then move on to develop functional layouts -- all with your progressive concurrence as the client. Note that it is the shell of the structure that will largely determine the eventual cost of the physical construction, and enable the various specialists that follow to be reasonably confident of their costs.
Once hired, the architect would expect to stay on board with the project if you decided to go ahead with construction. It would be unusual for the architect not to do so, although there is no actual guarantee you will engage him. Chances are you would also negotiate the rates for his prospective work before the contract is awarded.
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