Major infrastructure projects and programmes are exceptionally good at managing traditional risk and opportunity.  We establish detailed risk and opportunity registers. We quantify cost and schedule exposure. We manage safety risk rigorously. We monitor design risk, construction risk, stakeholder risk, environmental risk and commercial risk.  We establish controls, assign owners, develop mitigations and regularly report movements to project leadership and governance boards.  Yet one of the risks most capable of derailing a complex project or programme is rarely managed with anything approaching the same discipline:

Relationship risk.

This is particularly interesting in light of recent research from the Project Management Institute (PMI), MIGSO-PCUBED and University College London examining the delivery of major infrastructure projects across multiple countries.  The report draws on 60 qualitative interviews with senior leaders across major infrastructure projects in the United Kingdom, Spain, France, Germany, and Australia and is validated through academic research with University College London.

One of the central conclusions is impactful but should perhaps not be surprising to anyone who has worked on a major project or programme of work which is inter-organisational relationships are a critical determinant of infrastructure performance.  The research recommends that project owners deliberately design relationships early, develop commercial models that reward collaboration, use leadership as a delivery lever, invest in relational capability and perhaps most importantly, treat relationship breakdown as a project risk.  That last point deserves much greater attention.

Relationships Are Not a “Soft” Issue

For too long, relationships and culture have sometimes been treated as the softer side of infrastructure delivery.  Engineering is considered technical.  Commercial management is considered rigorous.  Programme management is considered disciplined.  Relationships are somehow considered interpersonal.  This distinction does not survive contact with a complex project or programme of work.

Consider what happens when relationships between key organisations and individuals deteriorate.  Information stops flowing freely.  People become increasingly defensive.  Problems are escalated rather than solved.  Emails replace conversations.  Meetings become positional.  Commercial teams protect organisational interests.  Bad news travels more slowly.  Decisions and approvals take longer.  Innovation declines.  People begin documenting positions rather than solving problems.  Eventually, disputes and claims emerge which impact on programme and trust.

At that point, what started as a relationship problem has become a:

• Cost problem;
• Schedule problem;
• Commercial problem;
• Trust problem;
• Governance problem; and ultimately a project or programme performance problem.

There is nothing soft about it.

Relationship Failure Has a Burn Rate

There is also a commercial dimension that infrastructure leaders sometimes underestimate.  Major projects or programmes of work have enormous daily burn rates.  Hundreds or thousands of people may be working across the owner, designer, constructor, advisers and supply chain.  When an important decision is delayed because organisations cannot agree, the project does not stop spending money.  Design teams continue working.  Construction resources remain mobilised.  Consultants continue charging.  Management teams continue meeting.  Programme consequences begin accumulating.

The commercial cost of dysfunctional relationships therefore rarely appears as a line item called “poor collaboration.”  Instead, it appears elsewhere:

• Extended design periods;
• Duplicated work;
• Additional management;
• Slow approvals;
• Excessive assurance;
• Additional cost managing interfaces;
• Contingency consumption;
• Rework;
• Claims;
• Schedule slippage; and
• Staff turnover.

The project pays for poor relationships even if nobody ever calculates the invoice or claim.

We Should Manage Relationship Risk Like Other Major Risks or Opportunities

If relationship breakdown can materially affect cost, programme and outcomes, there is an obvious question:

Why don’t we manage relationship risk with the same discipline as design, safety and commercial risk?

This does not mean putting “relationships” on a risk register and believing the problem is solved.  It means identifying the relationships that are genuinely critical to project success.  For example:

• Owner and delivery partner;
• Designer and constructor;
• Project director and commercial director;
• Project leadership and governance board;
• Alliance partners and key stakeholders;
• Project and key stakeholders;
• Alliance and partners;
• Project and operations;
• Major package contractors and subcontractors; and
• Project and home organisations

Then ask:

What happens to this project if this relationship stops working effectively?

That is a risk and opportunity question.  And it deserves a risk and opportunity response.

Relationship Risk Needs Leading Indicators

One reason relationship problems become expensive is that organisations often identify them too late.  By the time a formal dispute occurs, the relationship may have been deteriorating for months.  The warning signs usually appeared much earlier.  They include:

• Slow decisions;
• Increasing escalation;
• Reduced transparency;
• Surprises at governance meetings;
• Defensive commercial behaviour;
• Repeated unresolved issues;
• Declining trust between leaders;
• Poor-quality challenge;
• Silo behaviour;
• High leadership turnover; and
• Increasing reliance on formal correspondence.

These are not simply cultural observations.  They are leading indicators of project risk.  Sophisticated and intelligent projects and programmes should monitor them accordingly.

The Commercial Model Shapes the Relationship

The PMI research also reinforces another important point: relationships cannot be separated from the commercial environment in which they operate.  You cannot tell people to collaborate while rewarding them for doing the opposite.  If the commercial model encourages organisations to optimise their own position, transfer every possible risk, protect information and monetise ambiguity, leaders should not be surprised when those behaviours emerge.

This is why collaborative contracting requires much more than workshops and behavioural charters.  The commercial model, governance arrangements and behavioural expectations need to reinforce each other.  Commercial architecture creates behavioural consequences.  Every procurement and delivery strategy should therefore ask:

What behaviours will this commercial model encourage when the project comes under pressure?

That final phrase matters.  Almost every project can collaborate when things are going well.  The real test of the commercial model and the relationship is what happens when:

• Cost increases;
• The programme slips;
• A major risk materialises;
• Scope changes;
• Or somebody makes a mistake.

That is when the true culture of the project becomes visible.

Relationships Need to Be Designed Early

Another important lesson is that relationships should not be left until mobilisation.  By then, many of the conditions shaping the relationship have already been established.  Procurement itself sends powerful behavioural signals.  What does the owner reward during selection?

• Lowest price?
• Technical capability?
• Leadership?
• Transparency?
• Collaboration?
• Commercial thinking?
• Problem solving?

The people selected to lead the project are equally important.  The technically strongest project director is not automatically the strongest collaborative leader.  Complex projects require leaders capable of:

• Constructive challenge;
• Commercial judgement;
• Managing ambiguity;
• Working across organisational boundaries;
• Resolving conflict;
• Listening;
• Making timely decisions;
• Creating psychological safety; and
• Balancing organisational interests with programme and project outcomes.

These capabilities should be assessed during procurement rather than discovered after contract award.

Governance Boards Need to Govern Relationships

There is an equally important implication for Project Boards, Alliance Leadership Teams and Project Alliance Boards.  Boards often receive extensive information on cost, schedule, risk, safety and technical performance.  They should also understand the health of the relationships upon which delivery depends.  This does not mean adding another twenty-page dashboard.

It means asking better questions.  For example:

• Where are relationships currently creating friction?
• Which interfaces are not working effectively?
• Where are decisions becoming unnecessarily difficult?
• Are problems being raised early enough?
• Where is trust declining?
• Are home organisation interests starting to override project interests?
• What difficult conversations are currently being avoided?

Those questions can reveal project risk considerably earlier than another retrospective KPI.  They can also unlock opportunities which have a significant positive impact on project success.

Collaborative Contracts Do Not Remove Relationship Risk

There is also a trap for alliances and other collaborative delivery models.  Organisations sometimes assume that because they have selected a collaborative contract, relationship risk has largely been addressed.  It has not.  A collaborative contract creates the architecture for collaboration. It does not create collaborative behaviour.

People still arrive carrying organisational incentives, previous experiences, commercial pressures, personal styles and different expectations.  This is why alliance establishment, leadership alignment, behavioural charters, coaching and ongoing alliance-health reviews matter.  They are not peripheral activities.  They are risk and opportunity treatments.

From Relationship Management to Relational Capability

The bigger opportunity is to move beyond simply managing individual relationships.  Major infrastructure owners need to develop relational capability.  That means becoming systematically better at:

• Selecting collaborative leaders;
• Establishing integrated teams;
• Designing effective governance, ways of working and operating models;
• Creating constructive commercial tension;
• Resolving conflict early;
• Having difficult conversations;
• Sharing information transparently;
• Making decisions across organisational boundaries; and
• Repairing relationships when they inevitably become strained.

This capability becomes particularly important as infrastructure delivery moves toward increasingly complex ecosystems involving owners, delivery partners, designers, constructors, operators, financiers, advisers and multiple tiers of the supply chain.

The more interconnected the delivery model becomes, the greater the potential cost of relationship failure.

The Question Major Projects Should Ask

Perhaps the simplest way to change the conversation is to ask one question at the beginning of a project:

Which relationships must work exceptionally well for this project to succeed?

Identify them.  Design them deliberately.  Establish expectations.  Measure their health through a simple board balanced scorecard with traffic lights.  Intervene early when they deteriorate.  And ensure governance boards understand them.  Because relationships on major projects are not simply about whether people enjoy working together.  They determine how quickly information moves.  How honestly problems are discussed.  How effectively conflict is resolved.  How quickly decisions are made.  How intelligently risk is managed.  And ultimately how successfully the project performs.

If relationship failure can derail cost, programme and outcomes, relationship risk is project risk.  It is time we started managing it that way.