The Truth About Public-Private Partnerships

“The fact is that the majority of all long-term complex business arrangements underperform or fail because they are structured as a deal or a transaction as opposed to a strategic relationship between key stakeholders. Whatever name you give it, a transaction or a deal is still a deal.” – The (Real) Art of the Deal by Andy Akrouche, Relational Contracting Intelligence Blog, December 23rd, 2013

When I considered the response to a recent Toronto Star newspaper article that talked about the myth of Public-Private Partnerships or P3s, the only surprise was that many people were . . . well surprised.

In calling into question Infrastructure Ontario CEO Bert Clark’s position that P3s are an ideal way to pass off some of the risks associated with complex projects to the private sector, the article while accurate in terms of outcomes was technically incorrect.

What do I mean?

The promise or potential for P3s to deliver significant savings and improved outcomes for governments and the citizen’s it serves is in fact very real. Therefore the myth is not in the possibilities in terms of deliverables, but is in the areas of expectation and execution.

It is this latter point that requires closer examination and the development of an implementation process that is based upon open communication and collaboration.

Communication – More Than Just Talking

In an article written by IACCM’s Tim Cummins he has made reference to the paper “A Conspiracy of Optimism,” by the International Center For Complex Project Management.

The paper identified what it called “the conspiracy that leads executives on both sides of the table to lie to their trading partners and to create a combined version of the truth that leads to mutual delusion over what they can achieve, by when and for how much.”

This I believe forms the basis for the conclusions reached in the Star article, including the misguided suggestion that P3s are “against the public interest.”

The idea or premise of the P3s is not the culprit here, but the way in which we do business.

In his paper titled How to make your outsourcing & PPP initiatives successful, Jon Hansen made reference to the “transactional mindset” associated with most P3 initiatives.

While I will let you read that paper at your convenience, the key take away is that a transactional mindset means that the relationship between the primary stakeholders is viewed as one time interaction. This leads to what Hansen called a “win the business first, worry about making it work afterwards” approach, that ultimately undermines the relationship and eventual outcome.

To move beyond the misconception of P3 promise, we have to change the way in which we approach complex projects. In short, we have to adopt a relational as opposed to transactional mindset. This means that the public sector can work with the private sector to better manage certain risks, however said risks cannot be totally transferred or allocated to the private sector as the public sector ultimately remains accountable for outcome realization. There instead must be a sense of shared risk ownership and reward when working towards a mutually desired outcome. In other words, we must view our interaction with key stakeholders from the standpoint of embarking on a new and long-term relationship, in which all concerned parties work towards an outcome that is rewarding both individually and collectively.

It is only within this framework that open and honest communication can take place.

Collaboration Is An Act Of Will

In his book The Procurement Value Proposition, Robert Handfield wrote “integration across the business is not the responsibility of a few but rather a challenge that must be embraced company-wide.”

These are incredibly powerful words as they speak to the fact that collaboration takes a conscientious and concentrated effort on the part of all stakeholders both within and external to the buying organization. Or to put it another way, one cannot simply hope to become collaborative. There has to be a tangible and coordinated effort to create the means by which stakeholders can work together towards a shared outcome.

P3 connectthedots

This is where the creation of a Relationship Charter comes into play.

The Relationship Charter provides the strategic and operational framework for working together. It is within this charter that metrics, timelines and financial obligations, as well as quality are jointly managed.

Consisting of three parts: Shared Mission and Purpose, Joint Governance, and the SRS Open book financial management framework, the Relationship Charter is based on six foundational principles, which are as follows:

  • Act of Relating – and this is where “relational” comes from.  Connecting and linking in a naturally complementary way
  • Mutuality – Having the same or similar view or output each to the other
  • Respect – Recognizing each other’s needs, requirements, contributions, abilities, qualities and achievements
  • Innovations – Use of combined strength and synergies to deliver improved outcomes
  • Continuous Alignment – Making necessary adjustments to improve and achieve relationship objectives
  • Empowerment – Introduction of Joint management structures and processes at the strategic and operational levels to manage the realization of relationship objectives.

As highlighted in the above text, there is a methodology through which a P3 project can be effectively managed towards the desired result.  A vehicle if you will that enables stakeholders to proactively deal with both known and unknown variables that ensures the project remains on track and meets stakeholders expectations.

The creation and introduction of a Relationship Charter, will eliminate the purported secrecy and lack of public accountability, higher financing and consulting costs, and implied profit making on massive scale that was bemoaned in the Star article.

The introduction of a Relationship Charter also makes far more sense than the suggested throwing out the baby with the bathwater abolishment of P3 projects.



Turning Good Relationships Into Great Relationships by Andy Akrouche

“Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life.” ― James C. CollinsGood to Great: Why Some Companies Make the Leap… and Others Don’t


During a recent discussion following one of my seminars I was asked the following question; “If we are 2 years or 5 years into a 10 or 15 year transactional arrangement, can we still become relational and take advantage of the relationship-based paradigm.”

I thought it was a great question for many reasons.

To begin, when one thinks of defining the parameters of doing business, they usually think of it at the beginning of a new relationship.

This is of course logical in that when we build new relationships, we normally spend a great deal of time and effort to establish a framework for how individual stakeholders will work together.  This includes understanding individual stakeholder capabilities in relation to achieving a desired outcome.

Once that new relationship has evolved to the point that it seems to be up and running smoothly, we tend to turn our attention to other areas in which there is an immediate need.  After all, if it isn’t broke as the saying goes, why fix it.  Everything is good!

However, could it be better, or even great?

In this regard, I have always viewed relationships as an ongoing work in progress in which one never arrives but is in a state of constant progression.  This is a critical point to consider because change is truly inevitable.  What works today may not work tomorrow, and therefore you must always look for ways to improve upon the status quo, or the good.

That is why when I was asked the question “can we still become relational” – even after many years of working together, I said yes.

How To Make Good Relationships Great

So, how do you turn a good relationship into a great relationship?

It all begins with the collaborative convergence process through which stakeholders develop and operationalize the Relationship Charter.

The Relationship Charter consists of three main components: shared mission and purpose, joint governance and transparent financial management.  This last element, which I refer to as being the Open Book Framework or “OBF”, is critical.  Without financial transparency the viability of the relationship becomes impossible to assess, and therefore becomes vulnerable to competing agendas.

As a point of reference Jon Hansen, in his executive paper How To Make Your Outsourcing and PPP Initiatives Work, cites the U.S. Navy – EDS case study as an excellent example of what happens when competing agendas occur as a result of a lack of transparency.

A lack of transparency represents just one of many possible gaps, which can also include; differences or changes relative to client outcomes, changes in vendor business strategy or core capabilities, and misinterpretation of assumptions and contractual text relating to service levels and KPIs.

As a means to both identify and address these as well as other gaps, I utilize a Strategic Fit Assessment.

Blank business diagram with lots of room

What Is A Strategic Fit Assessment or SFA?

As part of the process for developing and operationalizing a sound Relationship Charter, the Strategic Fit Assessment leverages the Diamond-E Framework concept.

The Diamond-E Framework, which was originally proposed by Joseph N. Fry and Peter J. Killing in 1986, focuses on the internal group (organization), and the external components or elements of a relationship, in an effort to identify their alignment with the organization’s overall strategy.

My Strategic Fit Assessment, goes one step further than the Diamond-E Framework. When there is a misalignment or gap, otherwise referred to as a deficiency, the SFA can identify it as well as assess the impact of said gap on the Relationship outcomes.  The Stakeholders can then make the decision to either address the gaps while maintaining their adherence to the original objectives, or establish a new strategy through which alignment can be achieved.

Experience has shown that true alignment, is a multidirectional collective analysis that ensures that all stakeholders both internal and external to the buying organization are in sync with one another relative to the three main components of the Relationship Charter.

In this regard, the Relationship Charter serves a dual purpose as both a guide or reference point in terms of creating the needed alignment between stakeholders, as well as ensuring that said alignment is maintained in relation to achieving the best outcome.

When ongoing alignment is achieved good relationships, will become great relationships.


While familiarity purportedly breeds contempt, it certainly doesn’t lead to procurement fraud

I read with great interest Colin Cram’s recent post regarding both the prevalence and significant impact that fraud within the procurement process has beyond the original transaction itself.

While the Cram article focuses on how fraud and corruption are badly damaging the economies of many African countries, there is no doubt that its overall effect from a global perspective are also significant. In essence, and to varying degrees, no country is immune in terms of vulnerability to fraud – Canada included.

Before I get into the specifics regarding the origins of the fraud problem, and how to effectively deal with it, we have to address a long standing myth.

The Myth of Familiarity

Many organizations – especially those within the public sector – equate the familiarity of building a close working relationship with supply partners will somehow undermining the integrity of the procurement process. In short, and in a misguided effort to ensure purported fairness, a transactional approach to business relationships is pursued.

The transactional orientation of our business relationships and the subsequent oversight models we use to manage them, actually creates a greater opportunity for fraud, as opposed to preventing it. The reason is simple . . . a transactional mindset leads to a myopic focus on the bid and acquisition process. This includes our methods for assessing and managing risk, as well as value for money accounting, which in my view are pre-procurement incubators for potential fraud schemes.

Once the deal is done, the oversight model then narrowly seeks to enforce compliance with the terms of the contract, while ignoring the underlying elements that would raise the red flags necessary to both identify and deal with fraud before, as opposed to after the fact.

Within this context, familiarity is not the culprit in terms of creating an environment for fraud. It is instead the starting point that leads to the level of transparency and ongoing collaboration that is necessary to combat it.

This is a critical point in that research clearly shows that 90 percent of reported fraud occurs after contract award. This includes:

  • False or Inflated invoices through layers of subcontracting
  • Kickbacks subcontractors to contractor employees
  • Change order process
  • Undisclosed payments

Therefore, when a relational as opposed to a transactional approach, is incorporated into the initial procurement process, the framework for complete visibility is established right from the start. This includes the creation of a governance model in which stakeholder interests are identified, understood and proactively managed as part of the acquisition, versus outside of it.

The Relationship First Approach

With the Relationship First approach, complex business arrangements are structured and managed as a highly collaborative, adaptive system that leverages change as a strategic advantage.


Not a game of Battleship . . .

What this means is that the process of implementation or execution is jointly managed through the operationalization of a Relationship Charter that provides accurate insight and intelligence into the relationship from both a strategic and operational level. The Charter’s mechanisms for continuous examination of the underlying process for planning, deliverable generation, performance management and continuous improvement are what makes this possible.

When the inevitable changes occur such as shifting objectives based on previously unknown or unanticipated factors, there is now an opportunity to see it and address it, in a open environment of mutual understanding and shared interests. In essence, everyone operates under an open book framework.

An Open Book Framework

As the name suggests, the open book framework is a transparent model for ascertaining the derivation of price at any time during the course of an extended or long-term relationship. It is based upon a true insight into real-time costs, cost objects and incentives, all of which are managed on a joint “team” basis involving all stakeholders. (Note: With the Relationship First approach, the joint team to which I am referring is actually called the Joint Integrated Team, as it consists of individuals from each stakeholder.)

Full Transparency

Full Transparency


Taking a relationship first approach to complex business arrangements does more than just provide the tools to gain needed intelligence into the quality of business processes and pricing.

Unlike audits and fraud investigations – which are always after the fact – the approach about which I am talking actually prevents fraud before it occurs. This is achieved through increased client – vendor collaboration (and familiarity) within the procurement process itself.



To learn more about my University of Ottawa Telfer Seminar click on the image below:


Also, check out my book . . .

Relationships First (Mar 2015)


The Myth Surrounding Executive Buy-In

I recently came across an article in IndustryWeek titled The Politics of Improvement: The Challenge of Getting Company Leaders’ Buy-In.

While there are obviously certain degrees of politics in every facet of everyday living – I have never been a fan of the term “buy-in”. In fact I have a strong distaste for its implications, as it suggests that to get what you want, you somehow have to resort to a slight of hand con game, in which you manipulate someone into doing something they would not otherwise be inclined to do.

I am talking about buy-in in the context of complex program and contract management where, more often than not, significant time and money is spent massaging business cases and business arrangement constructs so as to secure acceptance.

This is the antithesis of true communication and collaboration. In other words, and contradictory to a battle of strategic wills in which one convinces another that theirs is the right way to go, in a relational approach to forwarding an initiative idea, transparency between all stakeholders is the key.

Now some of you might shake your head at this point and acknowledge that while honorable, my thinking is more reflective of a non-existent Utopian world. You might even go so far as to suggest a degree a naivety in relation to how the real world operates.

Fair enough, but here is one reality that no one can afford to ignore; approximately 90% of all complex contracting arrangements fail to deliver the expected outcome. So while adept strategic positioning and negotiation might get you to the starting line, it rarely if ever results in the combined teams winning the race.

Unfortunately, when initiatives go off the tracks, the focus is often on purported breakdowns at the execution stage, and the subsequent assignment of blame.

Like Building A House On Quicksand

Think of it in these terms; if tradesmen build a house on a foundation that is set on quicksand, and the house sinks, is it the fault of the tradesmen who did the work? Did they somehow use improper building techniques or substandard materials? If you bring in a new set of tradesmen and switch to different materials, will the ultimate result change?

The fact is that the failure of the house (or initiative) had been determined long before the building or execution phase began. It started on the architect’s drafting table.

This is the point that brings us back to the buy-in deception as I will call it.

In a true relational approach, in which there is a mutual benefit that is both recognized and agreed upon by all stakeholders, you begin to lay the solid foundation for future success. The ultimate success to which I am referring is not based upon a onetime political mastery or slick negotiation technique. It is about structuring the relationship based on a continuous process of convergence created by an open and logical structure progressing through 4 critical stages. These stages are as follows:

  1. Harness or Capture True Knowledge and Insight of all stakeholders positions, needs, interests and priorities
  2. Filtering the Captured Knowledge to create a baseline of joint objectives
  3. Structuring the Relationship Framework through a collaborative convergence process
  4. Executing the Program

In both my book and upcoming seminars I talk about each phase of the above relational approach. With this model, buy-in is a natural as opposed to artificial progression of a collaborative process, leading to a mutually beneficial outcome.

This being said, over the next few posts I will provide a high level overview of each of the four stages referenced above.

In the meantime, to learn more about my seminar click the Telfer image below:


Also, check out my book . . .

Relationships First (Mar 2015)


Strategic Sourcing And The Road To Transformational Leadership

In his recent post titled Who Are Procurement’s New Leaders, Jon Hansen referenced a reader comment that “business strategy and traditional procurement strategy are often misaligned.” As a result, “necessary leadership talent must synthesize the best . . . and discard the obsolete to create something new.”

In my experience the “new” to which the reader referred must be centered more on mindset or rather organizational culture, and the related change in approach it can bring about in terms of strategic relationships.

Let’s look at the purported transition to a strategic procurement practice.

Being strategic has taken on an added new dimension of importance. However, most people who have made or are making the transition to “strategic procurement,” have done so within the framework of the very same adversarial models that have undermined supplier relationships in the past. So, just because there is a new awareness of importance, does not mean that one becomes strategic from a practical execution standpoint.

The same can be said when it comes to relationships, or being relational.

To become truly relational, an organization has to do more than talk about it. It has to extend itself beyond the T&C’s of a contractual enforcement model. When one is relational, the usually inward focused strategic thinking, is actually extended to include the vendor or vendor community through a continuous system of relational governance. Unfortunately, this type of engagement has been limited to a select few.

If we are to see real traction in terms of the transformation of the overall procurement practice to one that is based on being truly strategic, the catalyst for change has to go beyond a response to exceptional circumstances or rare “one of” scenarios. In other words, the procurement practice has to become relational.

The Minnesota Bridge Project

While the approach to rebuilding the collapsed bridge in Minnesota a few years ago is a great example of relational thinking, it was induced under circumstantial pressure, and therefore hasn’t become a scalable model or standard by which all complex acquisition are guided in the state. Despite its success, the apparent lack of scalability in terms of the approach or model that was used in this instance is noteworthy, because it is not viewed as being an adoptable standard across the board. Therefore it is what I refer to as being a model by exception.

The real question is why?

Once again, and in principle, the Minnesota bridge project incorporated a number of important elements that focused on a collaborative approach to meeting a challenging objective. Unfortunately, it was viewed as a process that fell outside of the accepted norms that has traditionally governed complex procurement acquisitions. This meant that the circumstances dictated its use as opposed to representing a real transformation from the standpoint of the state’s overall procurement practice. Or to put it another way, the model used to successfully drive the Minnesota bridge project was transactional as opposed to being relational. It simply incorporated relational elements into what was ultimately viewed as a special transaction.

As a result change – real change, has not occurred. This means that the state has not become strategic or relational in its procurement practice, and therefore has not been transformed.

For a real transformation to take place, leadership must first recognize that a change is needed. Then, leaders must assume the lead role in making the transition from a transactional model to one that is relational.

For this to occur, the ability to standardize the relational approach beyond a transactional event requires a clearly defined road-map.

The road-map to which I am referring, will provide the leadership team with a clear outline as to how they can move complex acquisitions from the intended objective stage through to a successful outcome.

In my next post, I will go into greater detail as to how this standardized road-map can be created and implemented on a large scale, industry-wide basis.

Transformational Leadership


Why 2015 is the year of the Relationships Management Officer

I recently listened to an interview involving Pete Wharton, IBM’s Commerce Solutions Product Marketing Leader.

During the segment, Wharton indicated that IBM’s plan was to “create an ecosystem of technology partners to extend IBM’s service capabilities to its customers.”

The interviewer then made the statement that it sounded as if IBM was “trying to corner or corral the cloud,” by “unifying a segmented world through a very active partnership acquisition strategy.”

While acknowledging that he had never thought of it in that context, Wharton fully agreed with the interviewer’s perspective. Yes, IBM is focused on acquiring relationships with key partners as opposed to acquiring and assimilating companies, as a means of becoming the dominate player in the cloud.

The interviewer then asked what I considered to be the most important question; “how is this collective and collaborative cloud going to be governed?” Is IBM going for what he referred to as being an “influence without assimilation model,” where each partner maintains total autonomy, yet derives benefit from the centralized coordination of diverse experiences and shared expertise?

While Wharton liked the influence without assimilation approach through a central coordination of stakeholder capabilities, he deferred to senior management relative to the specifics of the governance model itself.

The importance of the centralized coordination of diverse experiences and shared expertise based on a clear objective is something that I had recognized a long time ago. In fact, it formed the basis for creating, the Relationships Management Office or RMO model that I have, over the years, successfully implemented time and again.

The Relationships Management Office; The New Governance Model Standard

What are your goals as a ministry, agency and private or public sector organization? Once you establish the why, you then have to focus on how you will manage the relationships to achieve said goals.

It is the job of the RMO to not only understand your goals but to provide, through coaching, capacity building training and support services, the means by which you will establish and manage collaborative, insight based infrastructures for delivering improved outcomes. This includes the creation of Relationship Charters – something about which I have written at length in previous posts.

Think of it in terms of an agent-based approach to managing relationship-driven outcomes.

For those who are unfamiliar with agent-based models, it is a method for taking into account the actions and interactions of autonomous agents (both individual or collective entities such as organizations or groups) with a view to assessing their effects on the system – or in this case initiative – as a whole.

Or to put it another way, the RMO office proactively seeks to identify the best partners or stakeholders individually, within the context of better facilitating their role in the greater or collective outcome.

In this regard, the management of complex relationships extend beyond simple oversight, to include improved insight into how individual capabilities and interests can be combined to achieve a mutually beneficial result.

It is also within this context that I believe that 2015 may finally become the year of the Relationships Management Office (and Officer).

Achieving certainty: How to create a culture for collaboration by Andy Akrouche

The sole purpose for creating a contract is to establish a path of certainty that will guarantee a successful outcome.  In short, if I do “A” and you do “B” we should achieve “C”.

Unfortunately, there is no such thing as absolute certainty in the real world.  As a result, even a well crafted contract with clearly defined terms and conditions will fail if it does not accommodate the need to adapt to the inevitable changes that occur over the life of the agreement.

When I talk about changes and adaptability, I am not referring to compliance relating to the terms of the contract itself.  What I am talking about is the practicality of recognizing and responding to external factors that were not identified in the original contract, and therefore fall outside of the framework of the existing agreement.

Once again, and using my long journey analogy, you may have chosen a particular route to get from one place to another based upon known factors such as distance and time.  In this regard, you anticipate the length of time you will be on the road, and at what points you will have to stop along the way to refuel.

But what happens if during the actual journey you encounter bad weather or discover that the route you had originally planned to take has an unexpected detour or, you experience car trouble.  What do you do?

You adapt.

For example, with bad weather, you will likely delay your journey and spend time at a rest stop along the way until it blows over.  This may mean that you will take longer than expected to arrive at your destination but, you will ultimately arrive safe and sound.

Seems simple enough.  Even though you did not expect to encounter bad weather when it hit, rather than pushing through with potentially dire consequences in an effort to adhere to the “original” plan, you adapted to a new reality or set of circumstances.

This demonstrates both experience and maturity.

Within the context of a contract, there is usually little if any room for such flexibility.  This is because we are locked into its terms, even if said terms do not reflect the unexpected events of the real world.  In those instances where one party is late on a deliverable due to unforeseen circumstances, they are more likely to be penalized, even if said delay benefits the entire project in the long run.

As a result, using contracts to manage relationships does not reflect relational maturity.

What Is Relational Maturity?

Relational maturity in its most basic form is present when there is a desire on the part of all stakeholders to participate as productive and useful partners in a long term arrangement.  However, this desire needs to be accompanied by the establishment of a solid management structure created within a truly collaborative organizational culture.

In other words, and rather than employing a top down command and control model of management in which there are thick layers of oversight centered around compliance management in relation to contract enforcement, the relationally mature organization takes a different approach.  This includes recognizing and responding to change from the standpoint of achieving the best outcome, even if said change means expanding upon the original engagement parameters.

With the relationally mature organization, such expansions or adjustments are not undertaken through an onerous change management process.  Nor are there risks of a partner being penalized for acknowledging unanticipated issues.

Instead, a relationally mature organization having established the necessary systems and processes to facilitate the collaborative approach to problem solving, are able to proactively manage change while keeping the desired outcome clearly in site.  Similar to Jim Collins’ autopsies with blame approach, which he identified as being one of the key differentiators with the companies who have made the transition from good to great, the relationally mature organization seeks solutions as opposed to either assigning blame or enforcing adherence to terms and conditions that are no longer relevant.

To get to this point of productive partnering or relational maturity, a new model of engagement is needed.


The New Model For Achieving Certainty

The relational model to which I have referred throughout this series is centered around a core concept of establishing a charter that becomes the strategic and operational framework for the relationship.

It represents a departure from how we have traditionally viewed relationship sourcing and management, which in the past has been based primarily upon a contract compliance or enforcement mechanism .

While changing a company’s culture is not an easy task, it is nonetheless essential for success.  This means that the internal organization (Program Owner), as well as the partner or partners service capabilities need to be properly aligned and enabled for the joint relationship structure to work.  By this I mean that on one hand, a mechanism is needed to translate business objectives and priorities into performance goals for the relationship.  On the other hand, there is the need to support and process relationship requirements and take the necessary measures to enable them.

The basic internal organizational framework needed for effective relationship delivery management involves establishing and operationalizing the following management structures:

  • Relationship Approval and Review Board – (RARB) – An executive committee representing lines of business, procurement, delivery, finance and legal responsible for achieving corporate objectives through strategic relationships.
  • Relationship and Delivery Management function (RDM)– an organization reporting to the RARB responsible for the administration of the relational approach including, but not limited to, standards, coaching, joint governance secretariat, change management, relationships budgeting process, operational reviews and relationships portfolio management.


Even though complex business arrangements are by definition intricate and diverse, beyond this basic management structure, success is ultimately based on people.  More to the point, people working together to achieve a mutually beneficial goal within an operational framework of shared values and open dialogue.  As such, becoming relationally mature is a journey that requires the presence of the following key elements:

Leadership – recognition at the executive table that delivery models of today rely on partner capabilities, which include a high degree of agility and responsiveness that can only be achieved through adaptive relationships as opposed to transactions or deals.

Business operations – proactive implementation of the model, which includes the institution of the RARB, RDM and the Relational Governance structures referenced in both this as well as previous posts.

Education – continuous education programs for individuals involved both directly and indirectly with the initiative to ensure that the structures and processes to facilitate the creation of high performing relationships are understood.

Incentives – establishing incentive based HR programs to promote collaborative behavior within the organization and across all participating organizations.

Communication – relentless communication program supported by strong and continuous messaging from the top.