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Why and how formal relational contracts will improve your next corporate real estate outsourcing deal
Corporate Real Estate Journal,
11
(2),
173-185
(2022)
Abstract
Relational contracting is not new. But the concept of formal relational contracting is new, especially in the corporate real estate/facility management (CRE/FM) arena. This paper shares the latest research and thinking on relational contracts and explains how using a formal relational contract can boost collaboration and trust with your CRE outsourcing partner. Since the early 1960s, pioneering legal scholars such as Stewart Macaulay and Ian Macneil began promoting the value of the softer ‘relational’ side of contracts. In fact, Macaulay’s original 1963 article on the topic would become the most-cited article in contract law. These pioneers shone a light in the legal and economic fields that fostered intense interest. Still, the concept of using relational contracting practices and relational contracts has never really taken off, specifically in CRE/FM agreements. We believe the time has come for formal relational contracts to take centre stage, especially in light of the need for flexibility and collaboration due to the COVID-19 pandemic.
Keywords: corporate real estate (CRE); facilities management (FM); relational contracts; outsourcing; Vested; Vested outsourcing; contracting; collaborative contracting; Oliver Hart; Stewart Macaulay; Ian Macneil; COVID-19
The full article is available to subscribers to the journal.
Author's Biography
Kate Vitasek is a faculty member for graduate and executive education at the University of Tennessee’s Haslam College of Business Administration. Her award-winning research has been featured in six books, including Vested Outsourcing: Five Rules That Will Transform Outsourcing and Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships. Her most recent book — Contracting in the New Economy: Using Relational Contracts to Boost Collaboration and Trust in Strategic Business Relations (with David Frydlinger) — has been widely endorsed as a pioneering approach for bringing the theory of relational contracts to practice.
David Frydlinger is an attorney at Cirio Law Firm in Sweden and an adjunct faculty member at the University of Tennessee where he leads the collaborative contracting executive education course. He is a Vested Certified Deal Architect and has over 15 years’ experience in drafting and negotiating outsourcing and other complex commercial contracts. David is also the author and co-author of several books, including Getting to We – Negotiating Agreements for Highly Collaborative Relationships and Contacting in the New Economy: Using Relational Contracts to Boost Collaboration and Trust in Strategic Business Relationships. He holds a master’s degree in sociology.
Magnus Kuchler is a partner at EY Advisory Services based in Stockholm, Sweden, where he leads EY’s outsourcing advisory practice and EY’s global work as a University of Tennessee Vested Center of Excellence. He has over 25 years’ experience as an outsourcing adviser and has led 125 facility outsourcing projects in over 60 countries. Magnus is a thought leader and pioneer for CRE outsourcing, becoming EY’s first certified deal architect and leading 16 Vested outsourcing deals. He was also first in Europe to implement a request for partner process.
Alexander Lundin is a director at EY Consulting Services in Sweden and an adjunct faculty member at the University of Tennessee, where he leads the Vested executive education course. He has over ten years’ experience in complex facilities outsourcing projects (transactional and relational approaches), as well as inhouse facilities management transformations. He is also a Vested Certified Deal Architect and leads EY’s global Vested Centre of Excellence group.
