1. Interaction is a model of implementation, not a form of contract
While execution center and turnkey are two different forms of contract, interaction is only one execution model.
Most often, interaction is carried out as a turnkey contract where the contractor has responsibility and risk for the detailed design.
If the industry were to manage to come together on a common, standardized contract for use in interaction — an interaction contract — it would be possible to say that interaction is (also) a separate form of contract. Norsk Standard made an attempt some years ago, but the experiment was shelved in 2017.
2. Interaction is not an unambiguous term
There is no legal definition of “interaction”.
If you search for synonyms of “interaction” One finds concepts such as “balance”, “agreement”, “community”, “interaction”, “companionship”, “cooperation”, “interaction”, “cohesion”, “cooperate” and “solidarity”.
One must be able to establish that “interaction” is a positively charged term, and the same goes for the synonyms.
Since “interaction” Lacking a legal definition and, moreover, having a number of synonyms, one can hardly demand that everyone put the same understanding into the term.
As we will return to later, there is also no standardized contract for use in interaction, and there are also several ways of conducting interaction.
In sum, it must therefore be taken into account that all persons who meet in connection with a building or construction contract where interaction is, or may become, relevant, will have different perceptions of what interaction is.
This variation will not only make itself felt at the individual level, but also at an organizational level.
In other words, it is not a given that the builder, contractor or consultants in a project have the same understanding of what interaction is, much less what is expected.
Accordingly, the parties to an interaction should agree on what is meant by “interaction” in the project on which they are to embark. The developer will presumably have written a part about this in his offer description, but the parties should also discuss this in depth in a suitable forum such as the start-up meeting.
3. Different phases of a construction or construction project
It is customary to divide a project into several phases.
The coarsest division is into two phases, namely design (phase 1) and execution (phase 2).
In a more fine-mesh division, the design phase is usually divided into three parts, namely 1) clarification of needs, 2) concept development/selection and 3) preliminary project leading to a function description.
If a project is carried out as an execution center, the detailed design will also be included in the design phase.
In turnkey contracts, which are most common today, the detailed design is carried out in the execution phase (phase 2).
4th. In what phases is interaction carried out?
Today, interaction is primarily used in Phase 1, and preferably in connection with the preliminary design and development of functional and performance descriptions, respectively.
The phase of requirements clarification and drafting of a sketch project should primarily be staffed with representatives of the builder/project owner, future users of the project and key advisors.
Since it is mainly the contractor's expertise and experience in the implementation of projects in phase 2 that one wants to draw on, contracting a contractor must be initiated when the sketch project is (sufficiently) finished.
Once the preliminary project including function and performance descriptions has been completed, you have all the materials needed to contract a general contractor before the implementation of phase 2.
At this point, the parties in Phase 1 will also have prepared a calculation of what the projected works will cost.
For some, it would be quite natural to consider the interaction to include phase 2 as well. When this happens, the calculation is used as a starting point for establishing a target sum, and then various incentives are used to ensure in the best possible way that the final cost does not exceed the target price.
In such cases, the works are carried out on account with a pre-agreed mark-up.
In Norway, however, it is not so common to continue the interaction to phase 2, but rather to conclude an ordinary turnkey contract with a fixed price.
Most builders want to be completely free in their choice when they decide what should happen in Phase 2. Usually (always) there are special contractual provisions stipulating that the developer may choose to terminate the cooperation after the end of phase 1, that the developer may request the general contractor a price for phase 2 that (assuming) should be as close as possible to the calculation or that the developer is free to draw up a tender basis and send it to the market as an open or limited tender.
As we return to in the article collection regarding research reports, there is much to suggest that most builders want to continue the cooperation with the same contractor in phase 2, as in phase 1.
It is also from these reports that we have knowledge that most interactions are conducted only in Phase 1, but not in Phase 2.
5. “Takes Two for a Tango”
It will always be the builder who makes the decision on how a project should be carried out, and on that occasion whether interaction should be used.
If we look at the builders as a uniform group, one can naturally question how qualified this group really is to make such a decision.
There isn't one answer to that question, and a key reason is that the builders are not a uniform group.
Before we write more about the builders, we will briefly establish that the contractors must probably be said to be more qualified to carry out a project in collaboration, than the builders are. Contractors will — consistently — have significantly more experience with building and construction projects as such, than the builders have. Secondly, it is precisely the desire to draw change on the contractor's implementation competence that motivates builders to interact in Phase 1.
With this said, it is important to clarify that there are many, large, multistage builders with considerable expertise and experience with both construction and construction projects and with interaction.
The largest multiple-use builders are probably found in the public sector, and we are aiming in particular at Statsbygd, Forsvarsbygd, Statens Road Administration and New Roads.
In addition come the county councils and the largest municipalities. Several of the municipalities have also outsourced the building function to municipal enterprises such as Oslobyggk KF and Drammen Eiendom KF. These actors have at any given time very many ongoing projects, or projects under planning.
There are also several (and large) multiple-time builders in the private sector, of which housing construction teams and some housing developers are typical examples.
However, apart from the largest of these we have now mentioned, there are few builders who have their own staff who can interact on an equal level with the contractors — at least if one assumes that both parties are reasonably equal in terms of expertise.
The point of interaction is that one should be reasonably equal.
The purpose of a building or construction project is that the developer must meet more defined needs and in this regard — as a minimum — get a functional description drawn up that ensures just this.
Consequently, the builder must be able to interact in a proper way in Phase 1. If he is not able to do this in a qualitatively good way, the interaction will probably not work. One may run the risk of the builder delaying the entire process in an unfortunate way because he is unable to make the necessary decisions. Alternatively, one can envisage a builder who, in effect, abdicates and entrusts all of the pre-design work to the contractor, but without the latter looking after the builder's interests as a qualified builder would have done.
We'll get into these moments later, but point this out to emphasize that interaction requires a lot from both parties — “It Takes Two for a Tango”.
6. Why choose interaction?
It seems to be a common denominator with many who speak out about the benefits of interaction that one reduces the likelihood of legal disputes.
If you look at existing case law there is much to suggest that this is correct. On the other hand, interaction can also have the unintended effect of mixing responsibilities. In this case, both parties will realize that the procedural risks are too high and that for this reason disputes are not brought before the judiciary. If so, the risk of legal disputes has been largely reduced by choosing interaction, but the disagreement will still be there.
In the Concept report (from 2016) it is highlighted that too many imply interaction “that the parties have common goals” that one interacts “actively” and that the collaboration “built on trust”. Our summary of the report can be found here.
In Concept report no. 63 and 74, it is quite clear that the builder's motivation for interaction is that already in phase 1 the contractor's knowledge and experience in implementing projects is brought in. The summaries from these two reports can be found here and here.
It is not difficult to see that as a builder you will be able to optimize solutions, achieve higher quality and shorten the construction time by bringing in an experienced contractor in the planning phase.
In continuation of this, we refer to Concept Report No. 74 where it is stated on page 29 that in the 105 interaction projects that formed the basis of that study, it was most common to carry out interaction in phase 1, but not in phase 2.
No analysis is given as to why it was (is) so, but one hypothesis may be that the builder wants the greatest possible degree of precomputability in Phase 2. By choosing an ordinary turnkey contract with a pre-agreed contract sum, one gets a form of predictability.
Further to this, we will highlight another statement in Concept Report No. 74 p 46 where it is stated that the builder's motive should not be reduced costs. The strength of the interaction model is instead “to maximize utility within a given cost framework, and reduce uncertainty for all involved by involving them at the appropriate time in the process”.
If we were to attempt a summary, it would be that interaction is selected in phase 1 to achieve an optimization of the project through the contractor's knowledge and expertise formed through the implementation of various projects in phase 2. Interactions are not chosen to achieve cheaper solutions, but solutions that are qualitatively better.
7. Which projects are suitable for interaction?
We have read a number of articles and statements that may indicate that some are of the opinion that interaction works for all types of projects.
It's hard to disagree with that -- at least if one hasn't clarified what the individuals put into the concept of interaction.
At the same time, we would like to highlight that the literature is generally positive in its mention of interaction, and that, of course, may have a connection with the fact that the term as such has a positive meaning.
We consider interaction to be resource-intensive for the developer, and this is especially true in phase 1.
This advocates the choice of interaction in projects of a certain economic size so that the additional consumption of resources can be defended.
At the same time, it is not the case that every project imposes such high requirements for design and implementation that the contractor should (must) be involved in the preparation of the preliminary project.
One should take into account in that regard that contractors are not primarily concerned with using their best people for bill work in a design phase. First of all, they want these to be out in projects where they generate profits for the business that far exceed the hourly rates paid to the designers.
As we will return to later, the carrot for an entrepreneur invited to participate in Phase 1 will be the probability of completing Phase 2.
If the project is relatively clear, not particularly complicated technically, and the design in Phase 1 can be carried out in a relatively predictable manner, all parties may be best served by a traditional implementation model including an ordinary tender.
These are points that we believe can be anchored in the Concept reports.
Concept report no. 61 p. 81 mentions that both builders and contractors perceived the interaction model as attractive “in projects of high complexity and unpredictability, such as rehabilitation projects and listed buildings”.
At the same time, the researchers behind Concept Report No. 74 argue that one may not take advantage of “the interaction models to the fullest” while they open that “the models are sometimes chosen indiscriminately”, see the report's page 4 at the bottom.
To summarize, we believe it is right to reserve interaction for larger projects purely in terms of cost, projects that place great demands on the parties due to high complexity or which for other reasons are considered unpredictable or demanding for the builder and his team of advisors.
In other and more generic projects, we believe the builder will be best served by a traditional execution model.
8. What are the characteristics of a good interaction?
We come back to the statement that it is “folks it depends”, and we totally agree with that.
You do not get a good interaction if the management is bad, if someone in the team works to provide their own employer with suboptimal solutions or a negative culture is formed where you blame others and do not take responsibility for yourself and yours.
However, people are also important in projects that are carried out in the traditional way.
We believe it is also important that the framework conditions for the interaction are in place, and that these are built according to the objectives that the developer and the contractor have set themselves for the interaction.
With framework terms, we aim for a wide range of aids. The provisions of the contract should be as unambiguous as possible. These should also be adapted to the individual project.
Furthermore, incentive schemes should be established that build up to the objectives of the cooperation.
One should think carefully about risk factors and how to address them if they materialize.
We often see that unforeseen circumstances that materialize in Phase 2 could have been avoided or at least identified if some more effort had been put into Phase 1. On the other hand, those participating in Phase 1 rarely have any incentive to be extra vigilant in order to avoid, if possible, unforeseen situations in Phase 2. Accordingly, it is conceivable that schemes should be considered in which those who project in Phase 1 are included in incentive schemes that will only be applied after Phase 2 has been completed.
In all the Concept reports we have written summaries of, the importance of so-called “soft values” is highlighted. This is about good and trust-based management, about transparency, about focusing on learning and continuous improvement, about good culture, etc.
In our view, the contract should contain provisions that build upon, and support, the values that one wants to characterize the interaction. In addition, the interaction must be led by people who are confident in the role, and who are willing to take on a role where one has to be far more involved with those one leads than is perhaps usual.
At the same time, one must be prepared for the fact that the teams of the various actors will consist of many different types and people. One must respect that all actors in an interaction are commercial, and all the peoples participate in the interaction to represent their employer or employer.
Consequently, interaction should be facilitated in a recognition that everyone participates in order first of all to serve their own interests, and secondly to a common goal.
This should be acknowledged.
We believe that arrangements should be made that help reinforce individuals' motivation to contribute constructively to the good of the project. Such arrangements should include elements of “whip and carrot” and it should apply to everyone — both at the overall level and at the individual level.
