Managing risks through Systematic Contract Control (SCC)

What is Risk Based Systematic Contract Control (SCC)?

Risk Based Systematic Contract Control (SCC) is a contractmanagement approach that focuses on controlling risks that interface with two or more parties. In practice, the client typically oversees various contractor work processes that may affect the scope of the contract. The increase in the application of SCC review is related to the growing complexity of infrastructure projects in the Netherlands. This application takes place within various contract forms, but often occurs in contracts where the contractor has more responsibility for design aspects of a contract.

The reason for this? On the one hand, today's complexity requires contractors to take advantage of practical experience gained and provide innovative solutions. The UAV-GC 2005 contract form (of which SCC testing is often a part of) offers the necessary flexibility for this. On the other hand, in this complex environment, clients strive to delineate as many potential risks as possible within the contract.

Defining risks and proposing innovative solutions are diametrically opposed. After all, opportunities inevitably involve risks. In this context, how can opportunities be maximized and risks controlled? This blog covers the solution to this question: Applying communicative risk management within SCC assessment.

Increased confidence through the application of communicative risk management in SCC.

While SCC contract management is fundamentally a method of managing risk, the outcome is not always guaranteed. The key lies incommunicative risk management, where risk management is not a static list, but a shared responsibility of all parties involved. Visualizing risks and holding brainstorming sessions, encouraged by tools such as our RiskChallenger software, contribute to this. The risk file is the cornerstone of any SCC review planning process. Predefined work processes related to the scope are linked to risks with a shared allocation (OG-ON rest/ON-OG rest), with the work processes related to the most important risks forming the basis for review.

Better review through a more thorough risk identification process

Communicative risk management contributes to an improved risk identification process which then leads to more realistic expectations (=more trust). Parties often tend to identify and assess risks from their own point of view. In risks with a shared allocation, parties therefore benefit from the insights of the other party. Non-obvious causes, consequences, or control measures thus come to the table. In other words, "communicative risk management promotes proper depth in the risk file in the context of SCC review." Identifying risks at an early stage through a communicative approach promotes trust, because the parties can share expectations about the management of these risks at an early stage. "Less hassle and an improved relationship."

If the communicative approach is lacking then there is a risk that review will take place solely based on the reviewer's gut feeling. While this may seem intuitive to the reviewer, on the one hand, repeatedly testing incorrectly can lead to deterioration of the relationship, as the contractor may experience distrust. Distrust can lead to a lack of transparency, communication problems and even deliberate disregard or manipulation of SCC procedures. This reduces the contractor's opportunity to come up with innovative solutions because the focus has shifted to hedging rather than adding value. On the other hand, incorrect testing can also lead to incorrect assumptions about meeting desired quality requirements.  

Better end results

Lack of communication and cooperation between client and contractor can cause crucial information and insights to be lost which worsens risk management.  A communicative riskmanagement process allows risks to be shared and expectations clarified, preventing potential conflicts. Within SCC testing, an escalation ladder is often used where insufficiently scored work processes are first discussed through interaction before other means such as escalation or even fines are applied.  When both parties are transparent, the choice can be made to solve problems with interaction rather than with the threat of fines. As a result, parties adopt a less hostile attitude which leads to a better outcome.

In short;

In summary, communicative risk management within contractmanagement ensures less 'hassle' with the contractor (through better expectations), better testing (good risk identification process), AND a better end result (in both design aspects, as well as the management of risks)!

Do you also want to maintain a healthy business relationship and a better bottom line? Learn more about how the RiskChallenger software can make your risk management process more communicative.

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