Relational Contracting: Driving Maximum Value

Access this expert-led webinar instantly, available anytime on-demand.

Included in All-Access Membership
Live Webinar - no upcoming date
Customer Satisfaction Guarantee Learn with confidence. If you're not happy, we'll make it right. That's our guarantee.

Purchase Options

Select an attendee quantity to add to cart.

Recorded Webinar Only

$219.00
or

All Access Membership

The Aurora All Access Membership is designed to provide you with the training that you want when you want it. You will have 100% access to every live webinar, on demand webinar, professional alert, and podcast that Aurora Training Advantage offers with no additional cost.

Learn More About Our All Access Membership
$599.00
All Access Membership

Contracts have gaps.  They are incomplete.  Plus, many contracts are drafted by lawyers, for lawyers, in a way that only a lawyer can understand.  As a result, many of the contracts we use are incomplete and ineffective as we pursue value and try to mitigate risk.  However, a more effective approach is available, and it has become increasingly popular in the past few years – the relational contract.

This session will provide insights into relational contracting by co-author Jim Bergman, whose recent book on the subject contains insights which Noble laureate Oliver Hart describes as “pathbreaking”.  How does a relational contract differ from a traditional transactional contract?  What are the key elements of a relational contract?  What is required of the parties to make a relational contract successful?  These, and more questions, will be addressed in this insightful session by one of the leading practitioners of relational contracting. 


Your Benefits of Attending:

  • Establish a solid understanding of relational contracting.
  • Understand when a relational contract is viable and when it is not.
  • Develop insight into the contract language which differs relational contracts from transactional contracts.
  • Hear the personal insights and experiences of a leading practitioner of relational contracting.
  • Uncover the cultural barriers preventing relational contracting from succeeding and how to overcome those barriers.
  • Create a foundation for more effective SOW's, SLA's and KPI's.
  • Learn a proven process that enables relational contracting to deliver greater value.

Join Jim Bergman as he shares his expertise on relational contracting and how it could take your contracts to the next level.

  1. Introduction 
  2. Key Benefits 00:02:05
  3. Topics 00:07:32
  4. How Does a Relational Contractor Differ From a Traditional Contract? 00:10:09
  5. Traditionally, Two Ends of The Spectrum 00:10:18
  6. Allocating Risk and Reward Through Contracts 00:11:40
  7. The Results Vs. Resources Decision 00:12:51
  8. Relational Contracting - A Hybrid 00:18:24
  9. What Are The Key Elements of A Relational Contract? 00:24:24
  10. The Written Terms and Conditions, Including SOWs, SLAs, and KPIs 00:24:46
  11. Written Terms Which Are Not Onerous, Nor Unfair 00:31:02
  12. Tenets Of Strong Relationships 00:41:57
  13. Social Norms 00:42:49
  14. Speaking Of A Charter 00:45:52
  15. Enterprise Mission, Vision, Values 00:50:17
  16. Ten Elements 00:50:46
  17. Gain Sharing/Pain Sharing 00:55:53
  18. What Is Required of The Parties To Make a Relational Contract Successful? 00:57:08
  19. Culture 00:57:19
  20. Collaboration 01:00:37
  21. Trust 01:01:28
  22. Focus On Relationship 01:02:20
  23. Communication Plan 01:03:06
  24. Project Management Tools 01:04:45
  25. Executive Sponsors and Stakeholders 01:09:46
  26. Steps to Creating and Sustaining a Relational Contract 01:11:11
  27. Form Team 01:11:27
  28. Step 1: Lay The Foundation for Partnership 01:12:40
  29. Step 2: Co-Create a Shared Vision/Objectives 01:12:59
  30. Step 3: Adopt Guiding Principles 01:15:56
  31. Step 4: Align Expectations and Interests 01:16:43
  32. Step 5: Stay Aligned 01:17:56
  33. Measures and Metrics on Relationships 01:18:01
  34. Are Relational Contracts Enforceable? 01:20:51
  35. Yes! 01:21:032
  36. Expectations are Enforceable 01:25:30
  37. Rocks - The Clauses 01:27:36
  38. Pebbles - The Relationship Tenets 01:28:03
  39. Sand - Social Norms 01:28:15
  40. The Amount of Water 01:28:44
  41. How Do We Know We Need Relational Contracting? 01:30:16
  42. Value Leakage 01:30:38
  43. Unmanaged Risk 01:31:55
  44. Defects In The Relationship/Contract 01:32:12
  45. Diminished Trust 01:32:41
  46. Disenfranchised Stakeholders 01:33:17
  47. Seeking a Competitive Advantage 01:33:46
  48. Fostering Innovation 01:34:05
  49. What Are The Benefits of Relational Contracting? 01:35:26
  50. Key Benefits - Time, Money, Quality  01:35:32
  51. Key Benefits - Innovation 01:36:22
  52. Key Benefits - Reputation 01:36:39
  53. Key Benefits of Today’s Session 01:37:49
  54. Questions? 01:39:21
  55. Speaker’s Closing Words 01:39:37
  56. Presentation Closing 01:40:59

  • Jim Bergman

    Jim Bergman

    Jim is an experienced contracts attorney and procurement professional with international management consulting experience in the procurement field in the USA, UK, Europe, China, India, SE Asia, the Middle East, Africa and Australia. He has experience working in both the public and private sector on [...]

    View Full Profile

ATAPU Credit

Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in purchasing.

ISM Credit

Institute of Supply Management

This program may be used for Continuing Education Hours (CEH) toward recertification for programs offered by the Institute for Supply Management®, including the Certified Professional in Supply Management® and Certified Professional in Supplier Diversity®.

  • Binary Analysis 00:13:27
  • Collaboration 01:00:51
  • Contract 00:09:26, 00:11:39, 00:14:26, 00:17:54, 00:32:53
  • Key Performance Indicator (KPI) 00:24:49, 00:27:38
  • Reciprocity 00:42:06
  • Relational Contracting 00:01:41, 00:02:47, 00:09:26, 00:24:37, 00:32:39, 01:11:22
  • Risk Allocation 00:11:53
  • Risk Registers 01:06:25
  • Scope of Work (SOW) 00:24:46,00:27:49
  • Service Level Agreement (SLA) 00:24:47, 00:27:49
  • Stakeholders 01:10:09, 01:33:21
  • Supplier 00:12:04, 00:14:59, 00:45:39
  • Supply Chain Management 00:35:46
  • Total Quality Management (TQM) 00:02:55
  • Value Leakage 01:31:02

Binary Analysis: Binary analysis is a type of code review that looks at files composed of binary code and assesses their content and structure, all without the need for access to source code.

Collaboration: A method of purchase whereby, in buying similar commodities, buyers for two or more departments exchange information concerning planned purchases in order to minimize competition between them for commodities in the same market.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

Key Performance Indicator (KPI) : A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets.

Reciprocity: The practice of exchanging things with others for mutual benefit, especially privileges granted by one country or organization to another.

Relational Contracting: It is a contract whose effect is based upon a relationship of trust between the parties.

Risk Allocation: Risk allocation is the process of identifying risk and determining how and to what extent they should be shared. Most owners understand that risk is an inherent part of the construction process and cannot be eliminated.

Risk Register: A risk register is a document used as a risk management tool and to fulfill regulatory compliance acting as a repository for all risks identified and includes additional information about each risk, e.g. nature of the risk, reference and owner, mitigation measures. It can be displayed as a scatterplot or as a table.

Scope of Work (SOW): The Scope of Work (SOW) is the area in an agreement where the work to be performed is described. The SOW should contain any milestones, reports, deliverables, and end products that are expected to be provided by the performing party. The SOW should also contain a time line for all deliverables.

Service Level Agreements (SLA): A service level agreement (SLA) is a formal document that defines a working relationship between parties to a service contract.

Stakeholders: A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers and suppliers.

Supplier: A supplier is an entity that supplies goods and services to another organization. A supplier is usually a manufacturer or a distributor. A distributor buys goods from multiple manufacturers and sells them to its customers. Similar Terms. A supplier is also known as a vendor.

Supply Chain Management: In commerce, supply chain management, the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfillment from point of origin to point of consumption.

Total Quality Management (TQM): Total quality management consists of organization-wide efforts to "install and make permanent climate where employees continuously improve their ability to provide on-demand products and services that customers will find of particular value."

Value Leakage: The difference between the value expected from a contract and the value realized in its implementation during its lifetime.

Customer Satisfaction Guarantee
Invest in your future with confidence! Our Customer Satisfaction Guarantee eliminates all risk, letting you focus purely on mastering new skills and advancing your career. If you're not completely satisfied, we'll ensure you are. Your satisfaction is not just a promise; it's our guarantee.

Frequently Asked Questions

Relational contracting is an approach to business agreements that emphasizes the ongoing relationship between parties rather than rigid adherence to contract terms. Unlike transactional contracting — which focuses primarily on price, deliverables, and penalty clauses — relational contracting prioritizes mutual goals, trust, flexibility, and long-term value creation. In a transactional contract, each party optimizes for their own benefit within the letter of the agreement, which can lead to adversarial dynamics and value leakage over time. Relational contracts instead incorporate shared governance structures, open communication protocols, and mechanisms like gain-sharing or pain-sharing to align incentives. They rely on both formal contract language and social norms — behavioral expectations that govern how parties work together when the written contract is silent. This approach is particularly effective for complex, long-term engagements such as outsourcing arrangements, strategic supplier partnerships, and public-private projects where rigid transactional terms would be counterproductive.
A well-structured relational contract includes several essential components that go beyond standard transactional terms. First, it defines shared vision and goals — what both parties are trying to achieve together, not just what each side will deliver. Second, it establishes governance frameworks including joint steering committees, escalation procedures, and change management processes. Third, it incorporates performance frameworks such as SOWs, SLAs, and KPIs that reflect mutual success rather than one-sided compliance metrics. Fourth, it includes gain-sharing and pain-sharing mechanisms to align financial incentives with performance outcomes. Fifth, it articulates behavioral norms — the rules of engagement for communication, dispute resolution, and adaptation to change. Finally, relational contracts often include a relationship management section covering regular joint reviews and continuous improvement commitments. Together, these elements create a contract that functions as a living operating model rather than just a legal document.
Gain-sharing is a financial mechanism in relational contracts that distributes cost savings, efficiency improvements, or revenue gains between contracting parties when performance exceeds baseline expectations. The goal is to align incentives so that both the buyer and supplier are motivated to innovate, reduce waste, and improve outcomes — rather than the supplier simply delivering to minimum contract standards. A typical gain-sharing arrangement defines a baseline cost or performance level, then specifies how any improvements above that baseline will be split. For example, if a supplier finds a way to reduce operational costs by $500,000, the contract might split that 50/50 between both parties. Pain-sharing works in reverse — if performance falls short or costs increase, the financial burden is shared according to an agreed formula. These mechanisms encourage transparency, collaborative problem-solving, and a shared mindset that drives significantly more value than punitive penalty-only arrangements common in transactional contracts.
Value leakage occurs when a contract fails to capture or sustain the full value it was designed to create — resulting in cost overruns, underperformance, relationship breakdowns, or missed opportunities. Common causes include misaligned incentives where one party benefits at the other's expense, poor change management leading to scope creep, inadequate communication structures, and over-reliance on penalty clauses rather than positive collaboration. Transactional contracts are especially prone to value leakage because they treat every deviation as a new negotiation rather than a shared problem to solve. Relational contracting prevents value leakage by building in continuous improvement processes, joint governance, and incentive alignment from the start. Regular relationship health reviews, transparent data sharing, and a cultural commitment to collaboration help both parties identify and address value leakage early — before it compounds into major financial or operational damage over the life of the contract.
Relational contracting is most appropriate when a business relationship involves high complexity, long duration, significant interdependence, or substantial mutual investment. It works best in situations such as strategic outsourcing arrangements, long-term supplier partnerships, public-private partnerships, major IT implementations, and facility management contracts where rigid transactional terms would quickly become obsolete or create adversarial dynamics. If the cost of switching vendors is high, if the work requires significant customization or co-innovation, or if both parties need to adapt frequently to changing conditions, relational contracting provides the flexibility and trust infrastructure to sustain value over time. Conversely, transactional contracting remains appropriate for commodity purchases, short-term engagements, or highly standardized services where price and specification are the primary drivers. The decision should factor in total relationship value, strategic importance, and both parties' willingness to invest in governance and collaboration.