Alliance Agreements Construction

The underlying premise of a traditional treaty is contradictory in that each party seeks its own business interests. In an alliance agreement, both parties, contractors and contractors, assume collective responsibility for risk, performance and result (gain-sharing/bread-sharing) and avoid a debt culture. They will form integrated teams as soon as possible to develop strategies that will guide their business interests and benefit both parties and the project`s progress. This is the first in a series of quarterly blogs on the theme alliance contracting. This contribution compares this innovative form of contracting to traditional forms of contracts and takes into account the benefits and risks for companies operating in a number of sectors. An alliance is for the customer and key members of the supply chain to act under a single multi-party contract with common objectives, risks and rewards. In the UK and internationally, particularly in Australia, alliances have performed better for both customers and suppliers, with increased efficiency and less litigation. The experience of Australia and New Zealand, which involves many European contractors, such as SUEZ, Acciona or Tecnicas Reunidas, rail alliances in the United Kingdom and other experiments in Northern Europe, shows that this method can be used at low cost in Europe [12]. This too in other areas such as Latin America or Asia.

Existing NEC contracts are bipartisan agreements that can be superimposed on an alliance agreement, for example. B by using the secondary option X12. In 2016, NEC collaborated with UK Infrastructure Client Group to publish guidelines on the implementation of alliancing with NEC3 contracts. 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. Flexibility reinforces the alliance model that allows the contract and parties to easily adapt to the changes required in large multidisciplinary projects that allow parties to address complex design, construction and environmental issues that may not be obvious at the beginning of the project. This may be the main advantage of the alliance model. On the other hand, the change in the traditional contract is not easy to manage. Business performance is measured at the alliance level and not at the individual party level, as the reward criteria are based on the client`s objectives.

All Alliance members commit to an open-book basis with initially agreed project incentive agreements. 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. As parties are encouraged to act in the best interests of the project as a whole, alliancing has the potential to reduce project costs and duration and improve the quality of results. On the other hand, it is generally accepted that fixed-price contracts have the disadvantage of requiring suppliers to include a ”risk value” in their contracts, which can lead to higher anticipated prices. Alliance contracts are addressed by encouraging them to work together through a common bonus-sharing and gainshare program that rewards the value of the alliance`s performance.