Can you describe the process yielding successful results?
Dean Toomey: Infrastructure delivery alliances involve the owner, designer and constructor in a collaborative environment where all participants are driving toward shared outcomes. This combination of factors provides alliances a unique ability to leverage expertise from planning, design, construction, operations, maintenance and asset management. In turn, such a capability provides alliances with a significant opportunity to develop solutions with optimized whole-of-life outcomes.
The question is, how do you ensure that the ingredients come together to achieve the desired results? On the Logan Water Infrastructure Alliance, the team travelled to meet the operators in their environment, where possible used 3D visualization tools and took the time to explain to the operators how their previous feedback had been incorporated into the planning and design of the works.
The other key ingredient the Logan Water Alliance uses to unlock the value of the diverse inputs into the planning and design of works is to hold structured workshops at appropriate intervals. These workshops—known as Planning Opportunity and Risk Workshops (POAR) in the planning phase and Design Opportunity and Risk Workshops (DOAR) in the design phase—ensure constructor and operator input early in the delivery lifecycle and forge greater interaction between all the parties. The workshops are structured to include elements of value engineering and safety in design. On the Logan Water Alliance, the team conducted a POAR workshop on a large wastewater transfer project that had been planned prior to the formation of the alliance. The outcome was to reduce the capital value of the project from more than AUD 100 million to AUD 60 million,1 with significantly improved operational and maintenance outcomes.
Looking further at the Australian experience, can you cite other areas where alliance contracting has generated value?
Dean Toomey: Alliancing started in Australia more than 20 years ago. Over that time there have been a number of alliance variants developed—pure, competitive, hybrid—and a range of related collaborative models developed, such as delivery partner, risk allocated maximum price, new engineering contract, or NEC.
One aspect that is consistent with all the various collaborative models is the transparent approach to risk and opportunity [R&O]. The price, including the R&O allowance, is developed collaboratively. This ensures all participants have a much deeper understanding of the actual risk and opportunities, the mitigations and possible impacts. Most risks will be shared by the participants which eliminates the potential for one party to shift risk on to another party that may not be best placed to manage the risk. This removes ambiguity about ownership of specific risks and opportunities, as they are shared unless specifically stated otherwise. The shared ownership is a significant contributor to a main attribute of these models—there are very few formal “disputes” with collaborative contracts.
What culture change might the alliance contracting approach bring to projects in Canada as well as other countries?
Stephen Horsman: As water sector seeks to balance risk allocation with realizing economic efficiencies, the traditional design-bid-build and, more recently, design-build project delivery models often lack the collaborative environment that leads to overall project success through win-win outcomes. These more traditional project delivery models can lead to protectionist behaviors, where contracting parties lose sight of the broader project success factors as they seek to maximize or preserve their individual benefit.
An alliance-contracting model could favourably change the decision-making context for owners-operators, construction and design stakeholders. The process provides a shared understanding of what the project is trying to achieve. With alliance contracting, a single entity representing all stakeholders’ interests allows for change, minimizing adversarial zero-sum-game dynamics; instead an envisioned win-win, lose-lose outcome guides behaviour and decisions. Flexibility is introduced. This capability coupled with synchronicity, or, put another way, alignment of objectives, counteracts the emergence of unsurmountable bumps in the process and forges efficiency. Alliance contracting incentivizes relationship-building at the start, strengthening the foundation for productive relationships sustained throughout the project.
Trust is innately established through the commitment to common objectives and transparency regarding the success factors for each party—the owner, designer, builder and operator. An environment of transparency can preclude cost overruns or set the stage for innovative solutions that can help get back on budget quickly.
While this collaborative project delivery mindset is often organically embodied by successful project managers, without the structural change in the alliance contracting approach, the compilation of a truly collaborative owner-designer-builder-operator relationship is often left to chance. To set the stage for the alliance-contracting process in Canada, a major shift in the owner’s organizational procurement and governance approaches is required. For example, the alliance-contracting model invites outside entities into the owner’s organizational processes to become partners in the project, and with this shift comes a new language and terminology; effective communication within the enterprise is essential, as it takes a fair bit of organization to prepare for the shared decision-making approach that is to come.
Where do you see the greatest potential for real change as projects adopt alliance contracting?
Gurjit Sangha: It is difficult to overestimate the value of people dynamics and the multiplying effect of true collaboration. The right dynamics can be set from the get-go, to build trust more quickly with the owner-operator involved; the operators can voice their concerns and provide any helpful input early.
The alliance-contracting model’s use of common KPIs and success factors fundamentally shifts the motivation from the individual to the collective good. Where tension was previously applied through each party holding their cards close, now all the cards are on the table with all parties contributing to achieve the predefined set of common outcomes. The parties are incentivized to deliver great KPI results through a range of mechanisms, such as financial, additional work and ability to tender future work.
Having all parties at the same table supports ongoing direct client interaction, further developing trust over the project lifecycle. Where traditional delivery models have focused on risk transfer, the alliance-contracting model allows for collective ownership of project risks so that individual capabilities and strengths can be leveraged, as and when needed, to address potential or real risks events. This then eliminates the need for parties to carry overlapping contingencies, where parties seek to protect their individual interests.
With all parties “on the same team,” mutual understanding is gained through transparency, and there is greater focus on essential actions; every party is clear about the responsibilities assigned to each of the stakeholders involved. An integrated team makes it more likely that time is well spent for all stakeholders, provides greater capacity for cost savings, and facilitates the best outcome for project participants and end-users.