CONTRACTING FOR PROJECT MANAGEMENTachieve a common (the owner) objective. It is through the project contracts that the owner creates the project organization and mploys�legal persons (the contractors) to work on their projects. Therefore it is through the contracts that the owner should try to motivate the contractors to achieve their objectives, which is best done through a win搘in game. Thus when developing a project contract strategy the owner should choose a contract type that develops an appropriate social relationship between themselves and the contractor, and provides incentives to motivate the contractor to achieve their objectives. Because projects are temporary organizations they entail risk and uncertainty (and sometimes opportunity). Thus to provide an appropriate incentive the contract needs to recognize this risk and include appropriate safeguards to protect the contractor (and indeed to enable the owner to share in the exploitation of any opportunities). The contract should be designed to encourage the owner and contractor to act rationally together to achieve their common objectives and the best outcome for both, within the context of the expected risk. However, that rationality is almost certain to be bounded by human frailty (Williamson 1996). It is bounded by the project participants�inability to precisely and unambiguously:���communicate with each other; process information to interpret events; foretell the future.Therefore, not only does the contract strategy need to provide incentives and safeguards to deal with the risks as envisaged in advance (ex-ante incentivization), it must be flexible enough to deal with unforeseen circumstances as they arise; the ex-ante contract is unavoidably incomplete. In order to maintain a climate of mutual cooperation, the contract needs to be adapted to these circumstances through mutual agreement and cooperation, not through one party using them to make gains over the other party. The contract needs to provide a flexible, farsighted ex-post governance structure that: 1. Allows adaptations through mutual agreement. 2. Provides a communication structure to identify how the project is progressing, and to identify any problems that may arise so that they can be dealt with in a cooperative fashion. 3. Continues to provide an incentive for the contractor to deliver the client objectives. 4. Does this without either party feeling the need to resort to the law (which automatically is a lose搇ose scenario �the inning�party just losing less than the other).36
