Establishing the right delivery framework is a requisite for carrying out increasingly complex infrastructure projects. Alliance contracting, also referred to as integrated project delivery, has proved successful in Australia over the past 20-plus years; insights from the Australian experience can guide application of this collaborative contracting method in other areas of the world.

In the following Q&A, WSP water-sector experts explore how alliance contracting has paved the way for projects to succeed in Australia and how it can enhance projects in Canada toward delivery of vital water services.  The article concludes with a look at the Logan Water Alliances program in Australia.

^{WSP experts: Dean Toomey
Director, Water, Australia; Gurjit Sangha
Vice-president, Water and Wastewater, Canada; Stephen Horsman Manager, Water, Western Canada}

What are the core elements of alliance contracting and how does this approach compare with traditional forms of contracting?

Dean Toomey: With traditional forms of contracting, each party to the contract is assigned separate obligations, and risks are also generally allocated to one party or the other. With alliance contracting parties share obligations as well as risk and opportunity. 

This sharing results in an alignment of interests between all participants in an alliance, working within a contractual framework where the commercial interests are aligned with actual project outcomes. The sharing of risk and opportunity is generally in equal proportions between the owner and the non-owner participants [NOPs], such as the contractor and designer. The NOP risk and opportunity are typically capped at the value of their corporate overhead plus profit. This arrangement ensures there is financial incentive to deliver the project within budget, or according to target outturn cost, with the owner and NOPs either winning or losing together. 

There is typically an incentivised key performance indicator [KPI] regime in place that identifies non-cost attributes of the project, such as stakeholder satisfaction, environmental outcomes, quality, safety, and performance, that are key to the successful delivery of the project. The inclusion of these KPIs ensures a balanced view of success, which extends beyond cost alone.

A cornerstone of the alliance model is that all participants work as part of an integrated team, with continuous transparency. For example, the NOPs’ corporate overhead and profit is based on audited financial accounts.  The KPI regime is typically developed by the combined team, and performance is jointly measured and scored. This joint process, from the start, assists all participants to gain a deeper understanding of what success looks like and how it will be measured.