In this episode of Navigating Major Programmes, Riccardo Cosentino sits down with fellow Oxford’s Saïd Business School alumnus, Shawn Modar, to discuss why mega projects go wrong and what can be done contractually to avoid failure. The pair delve into the role psychological contracts play in the Iron Triangle. Plus, Shawn shares his Oxford dissertation findings, including a prenuptial agreement analogy you don’t want to miss. “One of the interesting realizations that I had during this process is: Why would somebody intentionally not comply with their contract, knowing all those legal risks that are out there? And what I realized is when they're not complying with that written contract, they're actually complying with their psychological contract.” – Shawn Modar
In this episode of Navigating Major Programmes, Riccardo Cosentino sits down with fellow Oxford’s Saïd Business School alumnus, Shawn Modar, to discuss why mega projects go wrong and what can be done contractually to avoid failure. The pair delve into the role psychological contracts play in the Iron Triangle. Plus, Shawn shares his Oxford dissertation findings, including a prenuptial agreement analogy you don’t want to miss.
“One of the interesting realizations that I had during this process is: Why would somebody intentionally not comply with their contract, knowing all those legal risks that are out there? And what I realized is when they're not complying with that written contract, they're actually complying with their psychological contract.” – Shawn Modar
Shawn Modar has more than 23 years of experience in the engineering and construction industry, with the majority of that time being focused on construction claim analysis and dispute resolution. His primary focus is assisting clients in their efforts to substantiate or defend against claims for the recovery of time and additional costs, to avoid formal disputes, and to make informed decisions that result in equitable resolutions.
Key Takeaways:
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Riccardo Cosentino 0:05
You're listening to Navigating Major Programmes, a podcast that aims to elevate the conversations happening in the infrastructure industry and inspire you to have a more efficient approach within it. I'm your host, Riccardo Cosentino. I bring over 20 years of Major Programme Management experience. Most recently, I graduated from Oxford University Saïd Business School, which shook my belief when it comes to navigating major programmes. Now it's time to shake yours. Join me in each episode as I press the industry experts about the complexity of Major Programme Management, emerging digital trends and the critical leadership required to approach these multibillion-dollar projects. Let's see where the conversation takes us.
Riccardo Cosentino 0:54
Hello, everyone, welcome to a new episode of Navigating Major Programmes. I'm here today with my friend Shawn Modar. How are you doing Shawn?
Shawn Modar 1:03
Very well, thank you, Riccardo.
Riccardo Cosentino 1:05
So Shawn and I met, like many other of my guests, met at Oxford, where we're doing our master in Major Programme Management. And while discussing with Shawn in the past about his dissertation topic, and I felt it was appropriate and interesting topic so I asked Shawn to join me today to discuss about his dissertation. But maybe before we jump right into that, Shawn, can you, do you want to give a bit of a introduction, who you are, where you come from, and what's your experience?
Shawn Modar 1:44
Sure. And first of all, thanks for having me, I appreciate the opportunity to come and talk to you. So I have about 25 years of engineering construction experience, started in engineering, spent a few years doing design work, then got involved in the construction side of things. Some of that starting with working in the field, construction quality assurance, and then through various consulting companies got involved in a bit of project management, and then probably the last 20, 20 years or so have been kind of split between disputes and claims, as well as contract management.
Riccardo Cosentino 2:26
Very interesting. And you're based, you're based in the U.S.?
Shawn Modar 2:30
Based in Pittsburgh. Yes.
Riccardo Cosentino 2:31
Based in Pittsburgh.
Shawn Modar 2:32
Yeah. I've always been based in Pittsburgh, it's a nice home base. But I've traveled a lot for work. I've spent quite a few years working in Australia, North Africa, Canada, so quite a few different places.
Riccardo Cosentino 2:43
Yeah, and the contract you and I discussed this during during our master, you know, the contract managing disputes. It's a fascinating topic. It's a, you know, can be a difficult topic. And so that's why I wanted to have somebody with your expertise on the podcast, because, as we know, major programmes are very litigious or tend to be very litigious. So to get a perspective on that, and a deep dive on that topic was very interesting to me and probably to the listeners. And, but as we'll see, you have taken this topic and your dissertation in a slightly different, you took a different view and a different research topic, although it is contract and dispute, but you're really looking at a very specific, I guess, motivators on a certain approach to contract management. But anyway, I'm not going to spoil your thunder, maybe, can you tell us why you've chosen a particular area of research? And what lead you to that? And what is their particular area of research?
Shawn Modar 3:59
Sure. So my research really came from my professional experience. So, you know, the claims aspect of the industry is interesting. It's a very different perspective on the industry. And I think that it's been interesting to see dispute after dispute, you sort of see some common fact patterns that come out of those, you know, each one is unique, but it there's some underlying fact patterns that are there. And one that I've often noticed is, when you get into the disputes, some of the challenges are establishing legal entitlements to claims and under most traditional contracts, there are requirements to, for example, notify the other party, when they, when you think that they've made a change to the project, and you need to tell them, how much more it's going to cost, how much more time it's going to take in the idea that notice is really to give that party the opportunity to make a decision. They could decide to not do that portion of the work or they could decide had to do it in a different manner to reduce the cost or reduce the time. One of the repeating fact patterns that we see in the disputes is oftentimes those notices, which are important to establish that entitlement don't exist. And most often, the reason given for those notices, not existing has something to do with a relationship. So the response may be that we didn't want to upset the client by providing, telling them you know what was going on. Maybe it has something to do with the overall relationship with that client. Sometimes there's, you know, they're in the process of trying to secure work on other projects with the same client, and it's just not a good time to deliver that message. So we've seen that often enough that it's really over my career, it's been quite interesting to me to understand that process, and I've just always found that to be something interesting. And then fast forward to the program at Oxford. There was some discussion when we were talking about relational contracts and and some of the challenges that can happen if you're in a relational contract, and you're trying to act like you're in a traditional contract, that that can create risk. And that also works the other way that when you're in a traditional contract, and you try to act like you're in a relational contract, that creates significant risk. So there was sort of that point in Howard's module that I connected these two things, my professional experience that I've seen many times over the years, and that concept where you're mismatching the type of contract you're in and the behavior that you're expressing on the project. So I was interested, they really got me to go down that path to explore what's behind that decision making process.
Riccardo Cosentino 6:46
Yeah, I think, you know, I've read read your dissertation a few times and there's some interesting, some interesting concepts and I particularly like the connection or the link with the, you know, a prenup and when basically, you know you're afraid of raising certain topics, I think that plays a part as well from when we're finding your research that you don't want to, you don't want to signal of in the signaling is another, was another of your key findings.
Shawn Modar 7:19
Yeah, yeah. Signaling is a part of it. I think the simplest, the simplest driver or context to understand is, is really about a fear of delivering bad news. I think that's something that we can all relate to. Nobody likes to deliver. Not, I shouldn't say nobody, but most people don't like to deliver bad news. And I think that can be a significant driver. And you know, some of the research, I found it interesting to dive into that topic alone, you know, that they identify, you know, specific reasons why people, the people give to that as to why they don't want to deliver that bad news. You know, they're afraid of being viewed as a troublemaker or being viewed negatively, afraid of damaging a relationship, that they might think that there's really not any point in delivering the bad news because nothing is going to happen afterwards. They're afraid of retaliation as another example, or sometimes it's an interest of the others that you don't want to have a negative impact on that person. You don't want to cause problems for them. So as I read that research, and I heard all of those and see all of those reasons for that. It was really remarkable of how many of those were reflected in the responses from the people that I interviewed.
Riccardo Cosentino 8:39
Yeah. And then in reading your dissertation I think, as I was reviewing the literature review, it was interesting to find that this is actually not a topic well researched. I mean, I think claims and certain aspects of claims are well researched. But the reason or the reasons why notices or from our audience in the U.K. having, they're called early warnings. They're not, you know, the why those are now issued on a timely basis. If I'm not mistaken, that was not very well covered in the literature you did.
Shawn Modar 9:22
That's correct. And I was a bit surprised to see that. I mean, there is a lot of related research in terms of the benefits of relationship, the more mechanical aspects of managing a contract, and most of those focused on more of a systems, sort of a hard systems approach or reasoning as to why certain things weren't done. It's almost a lack of recognition or an inability for the system to process and generate those notices in a reliable way. But that's not really what we're talking about here. I'm looking at the intentional noncompliance specifically with the interest in relationships.
Riccardo Cosentino 10:03
Another, so I'm just refreshing my memory as we speak about with the writing of your dissertation. I think that there were two particular topic, you know, two particular reasons why notices are not issued on a timely basis. And I think you talk quite a bit about the psychological contract. Can we elaborate a bit more? Because I think that that's what the, I think that's what the prenup discussion comes in, but might be mistaken.
Shawn Modar 10:32
Yeah, the prenuptial agreements sort of discussion, that's sort of interesting. I mean, that was actually one of the first ideas that came to mind. You know, as I was thinking about what are the the possible reasons and that had to do I was thinking about the prenuptial agreement more about in the context of signaling that you know, that by, for example, by raising the topic of a prenuptial agreement with your partner, you may be signaling that you're concerned that something is going to happen. But it really turned out that the prenuptial agreement aspect of things, signaling wasn't the biggest piece of it, you know, there are really a couple of other aspects. One of them was that, you know, people don't raise the, the idea of a prenuptial agreement is really to make things operate more smoothly, you know, it's really a benefit to both parties. If you think about it, you know, in the event that something, something bad happens, but the reasons for not raising it were more around not understanding the benefits of it, or the potential benefits of it. And the other one was, was optimism, that early in a relationship, you never think anything's going to happen. But that's actually contrary to the statistics. So it was really those two aspects on the prenuptial agreement that were interesting. But the psychological contract, I think, really, I found was the best framework that I really put at the center of my conceptual model at the end of this, I did not have it there at the beginning. In fact, at the beginning, I didn't have that, I guess I did have that term psychological contract. But it was sort of one of many factors that I thought influenced, and it ended up at the, in the middle at the end. And really all we're talking about in a psychological contract, is just the unwritten agreement and sort of the ways of working, that individuals or groups of individuals agreed to. So it's not necessarily based on the contract. It's just based on an agreement, and the research on that is mostly focused on employee-employer relationships, individuals, you know, you have certain conditions of your employment. But when you get to work, and you start working with your supervisor, you have, you know, maybe it doesn't follow that exactly the way that it should. But you have an agreement, and it works that way. So that's the concept of the psychological contract. But I think it is actually quite applicable to the situation that we're talking about, large contractual relationships on larger projects.
Riccardo Cosentino 13:04
And why is the psychological contract important to understanding in the context of disputes? I mean, it, I believe it's important because it detect a certain behaviors between the parties that is, goes beyond what's written in the contract. And it's what we call a working relation, I guess, to a certain extent, so you're forming a working relation. And you know, this give and takes. And so you want to hold your side of the bargain in the unwritten, unstructured relation that you have formed with individual or individuals. And so that's why it's important. And that's why it's difficult at times to then reverse back to a more formal, more formal contract.
Shawn Modar 13:58
Yeah, I mean, it's definitely I think it's a very powerful contract, a very powerful part of the relationship. And that's one of the things I think is most interesting is really, I think, an example of humans reverting to you know, we're not transactional, a contract on paper is very transactional. And that's not how we typically treat each other and interact with one another. And I think the psychological contract is an expression of the way that we're more comfortable interacting with one another. And it's, it's quite a powerful thing. You know, one of the interesting realizations that I had during this process is, like one of my core questions is, you know, why would somebody intentionally not comply with their contract, knowing all those legal risks that are out there? And what I realized is when they're not complying with that written contract, they're actually complying with their psychological contract. You know, they're choosing to comply with that psychological contract and not the written contract. So it's not an, you know, it's not an irrational decision, it's just they're complying with a different contract, it's not the one that's written, it's the one that they formed with their counterparts in the working relationship that they formed.
Riccardo Cosentino 15:11
And obviously, I have a little bit of experience with disputes and dispute resolution. And obviously, the psychologic contract has a lot of advantages and can be very, very helpful. Until it's not helpful anymore. When the relation breaks down, when things actually get completely derailed and you no longer are well, is basically your psychological contract is removed, typically by your superiors or by your legal department that then forces you to enforce your rights and start enforcing the contract. And so, and now, I think we're probably asking you a question about more of a personal experience than the research. But how deleterious is that situation? You know, when you move in from psychologic, you know, you spend two, three years on psychological relation of psychologic contracty type relation, and then you end up in a former contract relation? I guess that's what made you start this in the first place? Because that's what you encounter all the time.
Shawn Modar 16:23
Yeah, it's very, it's a very difficult situation. And you know, when you're in that contract, and your psychological contract's sort of phased and you're not complying with a written contract, it's creating risk. But that risk doesn't really materialize. As long as the psychological contract delivers. And you're able to resolve issues and continue forward and finish the project under that scenario. It is that point where it switches from the relational type contract to the terms of the traditional contract, where the challenges come in. Because from the contractor side, who is usually the one providing the notices, they now may often be without, on a number of very large issues, without a basic fundamental component of their legal entitlement. Now, there's certainly, I'm not a lawyer, but there are certainly ways that I've seen that argued, as the way to get around it, but it's a real risk, you know, that's when the risk becomes real. But equally on the employer or the owner side, there are challenges there. Because even though you think you have a contract that requires that, that notice, for example, over the course of time, you've established a course of conduct. And again, I've seen legal arguments around that course of conduct that, you know, if you, you can't necessarily go along, for years, working under this relational type agreement, and agreeing a whole bunch of things without the notice. And then at the end, just decide that you would never agree anything if you don't have the notice. So it really creates risk on both sides. And part is what the disputes are about because now it's not, it's not clear cut as to who's entitled, parties have a very difficult time agreeing those things with one another. And oftentimes, it requires that third party, whether it be arbitration panel, a judge or whatever, that has to make that that decision, and that's the way it gets resolved.
Riccardo Cosentino 18:29
Interesting and fascinating. I'd like to take you because, so in my experience in these major programmes, I mean, I always hear, and, again, probably taking you away from your research, but just having exploring a particular topic, which is, you know, I think intuitively, it's always a relation that you start the project or the program under a relational type approach where you, you know, you're trying to resolve things amicably you try and develop a relation with your counterparts. And I've heard many times this strategy of, you know, in order not to upset that psychological contract there, you always try to almost bifurcate the contractual notices to the day-to-day relation. And you actually try to say, no, listen, I got to do this is, this is what I have to do under the contract. So I have to preserve my rights. But let's try to still continue this relations that we have, this working relation, let's try to see if we can resolve things even though I have, so I guess now, now, obviously, as a speaker, realize that I mean, that that is done, that approach is done to try and to preserve that psychological contract, even though you studied to enforce the contract.
Shawn Modar 20:01
I think, based on my research and experience, I think that's perhaps an ideal situation if you can do that. And the way I thought about that, in my research and sort of looking at the recommendations at the end is I would consider that sort of shaping that psychological contract. So when that is forming, there are certain things that need to get done. And if you can shape that psychological contract in a way that you were describing, where it's understood what that formal notice means, and that it has to happen. And it's actually a protection for both parties. In doing so that you can get that sort of built into the psychological contract that that is received in one way, but it doesn't impact the, as you said, day-to-day relation, because I think that that is, that's the way things get done. That it's those relationships that carry the day, I mean, it probably more often than anything else, I mean, you could put together the perfect claim document and identify every impact, draw the cause and effect and do the perfect analysis of everything. But at the end of the day, it's the relationship, the working relationship between the parties that actually gets the resolution.
Riccardo Cosentino 21:15
So okay, just switching gears. So in your, in your research, I think you explore obviously, the implications of not doing and I think you touched upon at the beginning, on, you know, what, what are the ramifications if you don't actually follow the contract? Or if you don't notify because I think it's important to contextualize that.
Shawn Modar 21:39
Yeah, so I think the biggest one is legal risk to entitlement. So there are, again, it, it varies by jurisdiction where you are by type of contract. You know, that's all things that the lawyers take care of, but generally, you could forego entitlement to compensation for major changes in the work or major delays, simply by not providing that initial notice and one of the tests on that, or one of the reasons why that's important or so significant if you don't provide the notice, is the argument is that it doesn't give the other side a chance to make a decision. You know, if they tell you that, they want to do some part of the project differently. They might not think it's a change, you think it's going to cost another $50 million to do it that way. And you just run off and do it, spend the 50 million and do it, and then you tell them at the end that it's 50 million. And they say, well, wait a second, if you'd told me it was 50 million at the beginning, I would have told you forget about it. I'm going to stay with what I had before. So you know, the number one thing I think is, is legal risk. You know, the second thing which I touch on just a little bit in my research is that lack of visibility that can result from not providing that notice, I think it enables some of the other topics that we often studied in our program like strategic misrepresentation, it enables those things to happen, because there's not a clear view, until the project is really far along as to what the status of the cost and the schedule are, you know, sort of that idea. I think we've heard the quote, I forget who was the person who said it, but it's, you know, basically, you're going to dig a hole so big that you have no choice to fill it in. But to fill it in. So if you can push off that recognition of you know, what the actual costs are, by, you know, not, not receiving notices just not making those sort of notices part of the way of working, I think it enables those sort of things. It's not the reason it's not the core, but it lets, it lets them happen.
Riccardo Cosentino 23:50
And just, I think I understand what entitlement is but maybe for some of the non-legal commercial folks on, they're listening, what is entitlement? Hopefully, I'm not putting you on the spot. I know you're not a lawyer.
Shawn Modar 24:07
I always preface that with them. That I'm not a lawyer. I mean, entitlement is essentially the right to claim additional costs or to get an extension on your schedule for a particular event. You know, it could be it could be a change, it could be a weather event, for example. You know, if there's a snowstorm, for example, the site's closed for a week, there would be a requirement to notify the other party that that event occurred, what impact that had on the work, how much time and how much cost. If you don't provide that notice, to make it clear to them that you were unable to work, you wouldn't be, you wouldn't have the right to claim that additional money or the additional time you just have to absorb it into the project.
Riccardo Cosentino 24:59
Thank you for that.
Shawn Modar 24:59
That's probably very poor, if there's any lawyers listening, I'm sure they're going to hate that definition, but.
Riccardo Cosentino 25:03
It is better than the one I would have given so. I have to say, I mean, as I was rereading your dissertation today to prepare for this podcast, I have, you know, I find it fascinating. And I think I want to give some praise to the, to the programme that we attended, because it makes us look at something as hard as legal claims from a people perspective, right? I mean, this just brings a completely, you know, you would never think of, okay, we got claims, and you just look a contract. But here, we really down to the psychological behavior of, the behavior of the people delivering the contract, it's fascinating, you know, major programmes as social science. And, you know, this was a great reminder that the power of the programme that we attended is that we're looking, we've been looking at major programmes as social, social sciences, from a social science standpoint, not from a hard engineering construction, commercial standpoint.
Shawn Modar 25:03
I couldn't agree more. And that was probably the one thing that attracted me to the programme the most is that perspective on the process, it wasn't about the hard science of engineering and project controls and schedules, it's about, it's about the people, and that was most fascinating to me.
Riccardo Cosentino 26:43
Yeah, what I find fascinating is that people on major programmes or just contracts in general, is they don't issue notices not out of negligence, but it's, are these behaviors, these psychological factors, that creates the situation, it's not is not a negotiation tactic, it's not, it's just trying to learn to preserve human relations trying to yeah, trying to build relations. Right? It's fascinating.
Shawn Modar 27:19
Yeah, yeah, I agree. I also find it interesting in some of my interviews, that oftentimes, those fears of communicating the bad news are perceived. No, I think there's a bit to consider as to whether those fears are real, is the other side really going to have an adverse reaction to it, but it's easy to tell yourself that they will. And it was just sort of that human nature of not wanting to deliver that news for a number of reasons even if some of those are more in your own head than reality.
Riccardo Cosentino 27:53
But to be honest, you know, I mean, of a construction project and construction in general, it's probably not the most psychologically safe environment. So, you know, I can totally see that, you know, I think there's a lot of merit in in that point is, you know, as I said, is not. yeah, not the most psychologically safe. So, delivering bad news is never, is never good. It's never good and particularly in enterprises associated with construction and infrastructure where it can be a little bit rough around the edges.
Shawn Modar 28:34
Yeah, absolutely. Yeah. There's definitely reality to it. And it can vary by level, or project or parties. But yeah, definitely agree.
Riccardo Cosentino 28:47
So, in your research, you know, we both, in our research, we always have to, you know, talk about what else could have been done? What other research could be done on top of the one that you've done? How could you build? How could somebody build upon your research? What was? What was your area for further research if you remember?
Shawn Modar 29:13
I think there are quite a few of them. You know, one of them that I recognize is that I have not, the prevalence of this occurrence is based on my personal experience. So I think one trying to understand, you know, from a statistical perspective of how often does this occur is this is this because because I actually see a filtered set of projects, you know, being that a lot of my work is around claims and disputes. I'm seeing projects that are already in a certain category of project before I ever get involved in them. So it would be interesting to understand more about, you know, across the industry, how prevalent are these behaviors? I think the other significant piece of this that would be Interesting to extend the research is to consider cultural variation. So I was focused, all of my people that I interviewed were North America based contractors, owners, mostly on the contractor side, but North America-based, you know, so that's happening within a particular system within a particular culture. And in some of them had experience at various points of their career in other parts of the world. And, you know, some of them pointed out that this is actually even more prevalent in places where the legal system is not so reliable, like parts of South America, where if you get involved in a legal dispute that's into the court system, it could be 10 or more years before that case, is resolved. So it's, you don't actually have the choice to fall back on that you really have to get it done with a relationship. So how do those sort of cultural factors influence these behaviors, I think would be another interesting extension of this.
Riccardo Cosentino 31:05
Yeah, that will be, what will be really interesting. What about Australia? Well, you said, you mentioned that you work in Australia, I'm assuming that's based on the Anglo-Saxon system. So probably similar to anecdotally, I guess, is actually done the research?
Shawn Modar 31:21
Yeah. Generally similar, I would say. I think Australia has some, some unique, I would say, market forces that happen there, you know, particularly as you get into the larger projects. I think the number of contractors that are big enough to handle the very largest projects within Australia are, it's not that many. So they have a little bit of a different influence on the market and the way things happen on projects. But otherwise, I found that mostly similar to my work in North America, in terms of the relationships between the parties.
Riccardo Cosentino 32:03
Interesting. Okay. Shawn, this was a fascinating conversation with a topic that is close to my heart, because I'm personally involved in disputes and claims and major programme. And so your research was very enlightening. And I want to thank you for sharing it with us on this podcast. And yeah, I want to thank you and just give you the last word and want to say goodbye or anything else?
Shawn Modar 32:35
Great. I just again want to say thanks as well for inviting me to do this. It's been a great conversation. And not only during this conversation, but many that we've had throughout the programme. I appreciate your insights on the industry as well. It's always helpful to kind of get other viewpoints on what we're seeing with similar topics.
Riccardo Cosentino 32:56
Excellent. And on that, till next time.
Shawn Modar 33:00
Thank you very much.
Riccardo Cosentino 33:02
That's it for this episode of Navigating Major Programmes. I hope you found today's conversation as informative or provoking as I did. If you enjoyed this conversation, please consider subscribing and leaving a review. I would also like to personally invite you to continue the conversation by joining me on my personal LinkedIn at Riccardo Cosentino. Listening to the next episode, we will continue to explore the latest trends and challenges in major programme management. Our next in-depth conversation promises to continue to dive into topics such as leadership risk management and the impact of emerging technology in infrastructure. It's a conversation you're not going to want to miss. Thanks for listening to Navigating Major Programmes and I look forward to keeping the conversation going.