Nr21 Project Alliance Agreement
Both parties, but especially the owner, should understand and accept that the contractor is entitled to a customary margin (benefit plus overhead) that would be increased and/or even cancelled if the project performance increases. In addition, contractors report a certain business community and the net margin they want to achieve with the project. With the open book policy this is clearly explained and accepted by both parties. How complex could it be for a city council that wants to electrify its roads in order to promote the use of electric cars, prepare a tender with all possible aspects of the projects so that a contractor can give a fixed price? What about the assessment of all possible risks (right, property, technology, etc.), including problems when they choose the wrong solution? And time to do so with continuous improvements and changes in technology, legislation, etc.? The main point of this training should be, among other things, to add the criteria “project preference” in addition to “benefit at the expense of anything”, including the outcome of other parties. Other criteria that would be necessary for both the owner and the contractors are relationships, attitudes towards business repetition, environmental aspects and health and safety benefits. The first project, managed as an alliance, was promoted by Ampolex, an Australian oil company acquired by the Mobil Group. Ampolex opted for this model to build a crude oil and gas storage tank from the Wandoo oil field in 1996. Contracts that use alliancing are generally of high value and are often for longer-term projects. Alliancing was first used in the 1990s in the United Kingdom to invest in North Sea oil fields.5 In Australia and New Zealand, alliancing is also widely used for quality infrastructure investments such as roads.6 The key to alliancing is the commercial orientation of the parties` objectives, so that the parties are financially motivated to focus on achieving agreed results. Cost overruns and savings are generally shared among the parties, regardless of how they have been achieved.3 The idea is that this has the effect of avoiding conflicting behaviours sometimes associated with traditional construction contracts. Alliancing focuses in particular on building an integrated project team, highly motivated to ensure the best overall outcome of the project, instead of serving the interests of its own employer. Alliance agreements often cover the supply chain to promote innovation and good value. In these mega-projects, the legal and financial aspects, because of their inherent technical complexity, contribute to creating a climate of mutual suspicion between proponents and contractors, as the benefits of one party seem to be at the expense of the other.
After pre-qualification, owners should put in place appropriate procedures to ensure that any bidder providing intellectual property or innovation remains a matter of “commercial trust” between the bidder and the owner and that it is protected by confidentiality agreements during the tendering process.