We are of the view that any owner or adviser trying to stick the contractor with, for example, the risks of ground conditions or changes in legislation is acting irresponsibly and demonstrates a complete lack of successful major project experience.
Concern with unnecessary waste is similar in the United Kingdom where in January Gareth Davies, the head of the country’s National Audit Office, said that the UK is wasting tens of billions of pounds on badly run projects.
Alliancing has been a problem. It is a procurement option where the common features are unanimous decision-making protocols, sharing of all project risks and rewards, and a no disputes/no blame system. It sounds good in theory but adds to time and cost in practice.
In 2009 Victoria’s Department of Treasury and Finance published a study into alliancing in the Australian public sector. One of its reasons was that non-owner participants (contractors in particular) have a strong preference for alliancing over other traditional delivery methods. Most contractors would privately agree this is a very naive justification.
An experienced British commentator has wisely described alliancing/partnering as having a very limited place for suitable technically complex projects of long duration to allow the project team to bend and move with unforeseen change where innovation is required.
The national alliance contracting guidelines from the Australian Department of Infrastructure and Transport say that projects suitable for alliance contracting generally have one or more of these characteristics:
. The project has risk that cannot be adequately defined before tendering;
. The cost of transferring risk is prohibitive;
. The project needs to be started before risks can be fully identified and/or scope can be finalised;
. The owner has knowledge, skills, and capacity to influence the delivery of the project;
. A collective approach to managing risk will produce a better outcome.
Probably only the Canterbury earthquake recovery would qualify.
We very much doubt that a major highway is within that category, and we believe that the significant time and cost over-runs at Transmission Gully and the Pūhoi motorway extension could have been reduced with traditional procurement.
Alliancing adds significantly to the cost of a project with often no value for the client. It has been well described as synchronised swimming with sharks.
Major employers in Australia and New Zealand have now pulled back, emphasising in their current procurement policies the position of alliancing as only one of many suitable techniques.
Recently with the substantial, difficult and remedial works required for State Highway 25A NZ Transport Agency Waka Kotahi very successfully adopted a design build procurement approach with time and cost efficiencies.
Alliancing and other forms of partnering are not the preferred form of contracting in Asia, Europe, the Middle East, the United States, and the UK.
Rabin Rabindran recently returned from operating out of Singapore for three months. Design-build and other traditional forms of contracting were common themes. Alliancing was hardly heard of.
The alternatives to alliancing such as building to the owner’s design; design-build, incentivised target-cost contracts; fixed-price contracts with risk-sharing around specific elements such as cost-escalation; and so on have worked well for infrastructure projects around the world.
These alternatives can quickly fall into disrepute if unnecessary draconian clauses are included which place absurd obligations on the contractor such as risks over which it has no control.
Derek Firth and Rabin Rabindran are construction lawyers. Between them they have worked on billions of dollars of infrastructure projects in New Zealand and in many other countries.
