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NEWSLETTER ARTICLES From the archives...

WHAT IF? - ISSUE 16

Robb Walker

Recently I met with an attorney to review a Design/Build agreement from a General Contractor.

We started with the first clause, which stated, “The Design-Builder and the Architect/Engineer agree to work together on the basis of trust, good faith and fair dealing…”

That seemed like a great start until counsel advised me that I should not agree to this clause because it could be “too risky.” Why? Because the phrase “trust, good faith and fair dealing” could potentially create legal liability by implying a professional standard of care above and beyond the legal minimum requirement! In other words, our legal system, and our obsession with protecting ourselves from blame, may actually prevent us from agreeing to work together in a way that would essentially mitigate the potential liability. This is insanity.

I recently read a quote from a distinguished European businessman who stated that the defining characteristic of American business (and Americans) is that we always need to find and place blame.

“Mindshift,” the group of construction and design industry leaders behind Rex Miller’s influential book “The Commercial Real Estate Revolution,” has concluded that approximately 50 percent of the cost of buildings built in the United States today is wasted. Stephen Covey, author of “The Speed of Trust,” has stated that transactional costs between parties that trust each other are 40 percent less than transactions based on trust.

How did our industry (and our society) reach this point? How much do waste, mistrust, and adversarial relationships cost us on a “per square foot” basis?

It is tempting to draw a conclusion that the problem is the lawyers, however this overly simplistic view overlooks the reality that the legal profession (and other professions) are under the same pressures to avoid exposing themselves to blame (we call it “risk”) as is everyone else. The problem is OURSELVES.

Rex Miller has described the way we build as “a dysfunctional system spawned by a faulty methodology in the middle of a dying paradigm.” He explains, “The basic dynamic at work is escalation. This occurs when one party perceives the other’s action as threatening or harmful and becomes defensive. The opposite party then sees these actions as threatening or harmful and responds in kind.” And so it goes.

This dynamic and the resulting transactions are driven by fear. Miller posits that lack of trust is the result of the way we approach construction projects and assemble teams through ruthless competitive bidding. I agree, however I believe that it is also the result of our own fears of being the first to “blink” by taking the “risk” of trusting someone.

This is not to say that to trust requires a leap of blind faith. Establishing trust should be a rational business process, however it does require that we do our homework. We must be willing to do the hard advance work necessary to qualify a person or organization that we may be interested in doing business with, and to understand and evaluate their integrity, intent, competence and track record before deciding to trust. Ronald Reagan once described this approach as “trust, but verify.” Trust has to be in place before a successful business relationship can commence.

Imagine a world in which buildings cost 30 to 40 percent less to build. How would it impact your business, your community, and your quality of life? Might it be worth risking trusting somebody (or declining to do business with someone you cannot trust) to achieve these gains?

Nothing can change until someone has the courage to attempt to make the changes that they believe in. KMA’s focus for 2013 is on moving back towards a simpler and more productive way of business based on personal relationships and mutual trust. We invite you to join us.

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