Alliancing is a new and increasing popular alternative project delivery method. The old transactional relationships of traditional contracting are turned on their heads for a new relational way of working where all partners are equal and share proportionately in the project risks and rewards. In the construction industry are we ready to realise the benefits of this collaborative way of working or are we too adversarial/transactional and destined to be locked into an endless cycle of boom and bust?
What is alliancing? The new NEC 4 Alliancing Contract defines it as:
“an exciting procurement direction for many clients, particularly when considering a highly complex project with an emerging scope. The potential benefit of using this contract includes a much deeper collaboration between all project partners, bound by common interests and reducing the potential for dispute.”
Where did it originate? Alliancing first appeared in the oil industry when, in the 1990s, BP were seeking a way of reducing costs and cutting risks in the North Sea in order to complete globally. Later it was adopted in Australia where it proved a better way of working on large scale, complex infrastructure projects compared to traditional contracts. More recently the Netherlands, Finland, Sweden, Norway, New Zealand and the USA have adopted forms of alliancing.
In the UK the new NEC4: Alliancing Contract was launched in June 2018 specifically for project delivery using alliancing. All parties to the contract are equal partners and are engaged early under a single contract. Partners have an equal voice and share proportionately in the risks and opportunities of project delivery including performance related rewards.
Examples of alliances in the UK include the Anglian Water @one Alliance. “A collaborative organisation of consultants and contractors working together to deliver more than half of Anglian Water’s capital investment programme.” By 2020 Anglian Water aim to deliver £1.2billion across 800 projects through their @one Alliance.
The three cornerstones to successful alliancing:
One Team – the project is delivered by an integrated team of specialist, equal partners which includes the client. It is not under the supervision of the client.
One Voice – each partner nominates someone to sit on the project Alliance Board which oversees strategy, agrees the work within the alliance, makes decisions and resolves any disputes.
One Outcome – the partners bear the risks and opportunities together. They make decisions based on what is best for the project. They share the pain/ gain equitably based on how well the alliance delivers the project.
Why consider alliancing? There are many reasons contractors and consultants would want to use alliancing including gaining entrance to new markets, reducing business risk, increasing flexibility, learning from partner organisations and improving business performance. For owners/clients benefits include better communication, less risk, active (not reactive) problem solving and better communication. This means greater certainty on project costs, quality and programme.
What are the risks? It is thought around 20% of alliances end in dispute with 40 – 60% not achieving their goals. It appears that the adversarial attitudes and behaviours developed in our industry over decades are difficult to leave behind. Unless these change we won’t be able to gain the full benefits of collaborative working.
What next? If you are considering alliancing, or wish to maximise your alliancing outcomes, it is vital you select the right alliance partners, select the right people for the alliance, create the vision, establish an effective governance structure, build teamwork, foster a high performing culture and, above all, build trust through collaboration and communication. Alliances can provide an exciting base on which to grow the industry based on trust and collaboration, it will just take a bit of help to get there.
Eleftherios (Lefty) Panayiotou
Director | Management Consultant
16th July 2019