In this episode, we explore why contracts create structure and accountability, but do not by themselves protect complex programmes from supplier failure. In high-consequence environments, supplier risk often emerges through misaligned incentives, limited visibility, and weak governance rather than obvious contractual breach. The discussion explains why a supplier can appear compliant on paper while still damaging programme outcomes through immature deliverables, hidden fragility, or poor integration readiness. Using a defence-style programme example, the episode shows how governance, shared risk ownership, supplier health indicators, and timely escalation provide far more protection than contractual clauses alone. The core message is clear: contracts define recourse, but governance protects delivery.

Key references:

• Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics.
• Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. Academy of Management Review.
• Williamson, O. E. (1985). The Economic Institutions of Capitalism.
• Hart, O. (2016). Incomplete Contracts and Control (Nobel Prize lecture).
• Matinheikki, J., et al. (2022). Making agency theory work for supply chain relationships. International Journal of Production Economics.
• Kauppi, K. et al. (2024). “If only we’d known”: Theory of supply failure under two-party outsourcing arrangements. Journal of Supply Chain Management.
• Project Management Institute. Managing a procurement and the associated risks.
• Project Management Institute. Troublesome Suppliers, Issues, and their Management.
• Association for Project Management. A systems-based approach can improve outsourcing in government projects.