Contracts as sources of innovation

Published: 02 Oct 2019 Average Rating: unrated

Author: Tim Cummins

'Trade is the spark that lit the fire of human imagination, as it made possible not only the exchange of goods, but also the exchange of ideas. Trade also encouraged specialisation since it rewarded individuals and communities who focus on areas of comparative advantage. Such specialists had the time and the incentive to develop better methods and technologies to do their tasks.'

That quote comes from an edition of The Economist, almost 10 years ago, reviewing a book by Matt Ridley that addressed the importance of human optimism (a major theme for IACCM this year, with further research to be unveiled at the IACCM Americas conference in November).

Contracts and trade

Contracts sit at the heart of trade. They are the 'boundary objects' that define roles and responsibilities, reward and consequence. In addition, as other recent research by IACCM confirms, they influence whether or not innovation and continuous improvement occur (report available on the IACCM website).

It is this culture of striving for continuous improvement that drives and provides incentive for innovation, enabling human aspiration to become a reality. However, such aspiration is rapidly undermined in an environment that is seen as punishing or risk averse – the characteristics of many of today's contracts. Assumptions of failure or disaster are frequently self-fulfilling. The IACCM research confirmed that those who place their primary focus on protecting against risk thereby discourage cooperation and limit the exchange of ideas.

A heavy responsibility

If indeed it is trade that sits at the center of our future success and, more broadly, our ability to prevent disaster (including, for example, from climate change), then the contracts community has a large and heavy responsibility to ensure it is not only removing barriers to innovation, but that it is also itself innovating in the methods through which trade occurs. We have a duty to ourselves and others to ensure that we contribute to the cultural and economic forces behind human progress.

“Thanks to the liberalising forces of globalisation, innovation is no longer the preserve of technocratic elites in ivory towers. It is increasingly an open, networked and democratic endeavour”, says Ridley. Contracts can – and must – create environments where openness, transparency and networked communication are encouraged and rewarded and where cultures of blame, risk allocation and punishment are avoided.

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NXB AB
2019-12-17 11:22:11

Agenda 2030 and public procurement driving it

Lately, I have come across strong initiatives in the Nordic countries that intend to drive Agenda 2030 and all it´s goals by embedding the content within the public pr...

• Fire and Emergency NZ • 2019-12-18 09:30:18

Hi Erik - personally I don't think that you are the last one to figure it out, and if I might observe, I believe that there are many others around the world trying to work out what it means for them.

There's two things I'd contribute to your thinking, which are caveated in the usual way (i.e. my views and not necessarily those of my employer) :
1. I think that there is a financial cost to the organisation in seeking to embed these. It's a discussion that I've found has meant that it's hard to get real traction - as whilst the requests for these initiatives come in, there has not been the additional funding provided to many Government organisations to get his going. Sure, it's argued that there are other benefits - often more widely outside of the organisation - but many organisations aren't winning the battle with their finance teams that could see this progress.
2. I have been impressed with the approach of the IRD team in New Zealand. From the presentations that I've seen from Karen Whitehouse and the team, they picked one of the UN goals that was most relevant to them, and looked to focus on that. I think this will be more effective than those who try to achieve too much by looking to incorporate too many of these goals into their procurement activities.

We've looked to take that thinking on board into our operations. Given our contracts are split into portfolios, the challenge for my team in 2020 is to get the business agreeing to an area of focus and measurements for each of these portfolios. These might be the same, or they might be different, but we're using that approach to get the business owners, as well as the leadership team to buy into it, so it's not us going it alone.

Like you, I would love to hear how others are approaching it - it's brave of you to start a topic by making yourself vulnerable, but I think that you're in good company.