Alliancing is a widely used delivery model for planning, design and construction of major projects and programme of works. Under an Alliance, the asset owner or owner and non-owner participants (NOP) enter into an Alliance agreement to deliver planning, design and/or construction works as one Alliance team.
The intention is that the owner and NOPs work together to achieve the owners’ and project objectives focusing on driving collaboration around shared risks. Further, alliancing is generally used where the owner and NOPs work together to de-risk certain aspects of the planning, design and construction process to deliver game changing solutions or outcomes that could not be achieved through a traditional contracting model. The fundamental difference between Alliancing and other delivery models is that risks are shared between the owner and the NOPs which creates a win/win approach to delivering the project or programme of works.
Key attributes of an Alliance include:
- Risk and opportunity sharing with budget variances shared between the owner and NOPs thus reducing the downside risk for the NOPs but likewise reducing the upside opportunity for all involved;
- Integrated organisational structure with its own governance separate from the owner and NOP’s with the best person for the role appointed in each position regardless of their home organisation;
- Collaborative working with a focus on high performance culture to deliver innovation and outstanding performance outcomes;
- Costs and budgets are prepared in an open book manner allowing full transparency for the owner around the breakdown of costs; and
- No fault no blame culture and commitment to work together in good faith to do what is best for project which guides all decision making on the project or programme of works.
Alliancing was born out of the oil and gas industry through British Petroleum (BP) in the 1990’s and has been adopted in major projects within transport and other infrastructure over past 20 years. During my early days in the mining industry, we adopted a similar model around joint venture operations to drive similar benefits to the above.
Alliancing has been controversial in some jurisdictions as it can be seen to be expensive and not always delivering value for money outcomes for its community and stakeholders. However, anecdotal evidence indicates that in certain risk scenarios and project circumstances, it delivers superior value for money and innovation compared with traditional contracting for the attributes identified above. For this to be achieved, they need to be set up the right way from the start based on key fundamentals that honor the alliance procurement model.
A great resource for owners and NOP’s to utilise to set their alliances up for success from the start can be In the National Alliancing Contracting Policy and Guidelines which is found at:
The National Alliance Contracting Policy and Guidelines have been developed to promote knowledge, best practice, and give rise to cost savings by creating a consistent national alliance contracting standard, whilst ensuring the existing benefits of alliancing are maintained. On this website, you will find a raft of valuable resources which include:
- Why clients choose the alliancing model
- How to develop a governance plan
- Setting up a Target Outturn Cost (TOC) process
- Language and acronyms around alliancing
- Designing your alliance charter and alliance principles to drive the right behaviours
- Detailed activities around each phase of an alliance
- Many more resources
These guidelines are an excellent place to start in making sure you are living Alliancing at its best and applying the fundamentals of alliancing in the right manner.
Some examples in our experience of where the Alliance model can be misunderstood or poorly implemented include:
- The heavy focus on culture and team development can subconsciously result in a passive environment where people are expected to fit in and get along if not focused on outcomes and high-performance principles – this reduces constructive challenge, problem solving and innovation which is critical to achieving outstanding Alliance outcomes;
- The unanimous approach to decision making can result in board members making decisions which are not in line with their delegated authority within their parent organisation if the governance plan and structures are not designed right from the start;
- Key Performance Indicators (KPIs) developed which don’t drive the right behaviours, deliver value for money for the community and effectively pay a bonus to suppliers for just doing a good job rather than delivering break through outstanding outcomes;
- Lack of understanding around shared risk amongst staff and leaders results in collaboration directed to the wrong areas and as such the benefits of the Alliance fail to get recognised;
- Technical disciplines and owner interface roles within owner organisations continuing to work in silos rather than collaborating on shared risks early and upfront to achieve outstanding solutions;
- Subject matter experts employed by the owner participant outside the Alliance working in a master slave manner rather with the Alliance rather than collaborating with the Alliance;
- Owners being unreasonable in transferring excessive risk to the Alliance or lacking commercial acumen in dealing with adjustment events and using the pain/gain share model to reduce their risk exposure;
- Alliance coaches entering the industry to deliver team development services without understanding the commercial model of Alliancing, the fundamentals of the Alliance procurement model or the shared risks between the owner and NOPs;
- NOPs seeking to protect their commercial position at the expense of best for project; this can be common with designers wanting to push their quota of people on the project to drive revenue targets, or contractors wanting to sweat the design fees like a traditional contract approach; and
- A lack of understanding around the governance structure of an Alliance and how it is separate to the governance of an Owner organisation.
Whilst Alliancing has been around for some time now, it can be mis-understood or incorrectly applied. It’s important that when embarking on the Alliance journey, that staff within both the owner and NOPs are trained in the model to understand its intentions and principles. We need to go back to the fundamentals such as the National Alliancing Guidelines to reset our approach to what will drive outstanding outcomes for all involved.
If you would like to learn more about Alliancing and the upcoming online courses offered by BRS please visit here:
