Alliance Agreement Construction
Although Alliancing has been used in Australia and New Zealand since the 1990s, this method of sourcing and managing large investments and services has become increasingly popular in Europe in recent years. Under an alliance contract, a public or private body contractually cooperates with the contractor to carry out the project according to the principle of „open books“, i.e. to share the benefits and pain. This chapter analyses the Alliance contract model, which is characterised by three main characteristics: it requires the parties to cooperate, act with integrity and make the most appropriate decisions. The project team, composed of members of the proponent and contractors, works as an integrated collaborative team to address all project issues. In alliance contracts, risks are managed jointly by the parties, with the exception of the financial commitment, which is primarily the responsibility of the owner/developer. The examples presented in the chapter, including the desalination plants in Perth or Adelaide, Australia, make it possible to conclude the most appropriate type of projects for possible delivery as alliances. The key to alliance is the commercial orientation of the parties` objectives, so the parties are financially motivated to focus on achieving the agreed results. Typically, Alliancing (unlike partnerships) shares cost overruns and savings between the parties, regardless of how they were achieved.3 The idea is that this avoids conflicting behavior, sometimes related to traditional construction contracts. In particular, alliancing focuses on creating an integrated project team, highly motivated to achieve the best overall result of the project rather than serving the interests of its own employer. Alliance agreements often extend throughout the supply chain to promote innovation and value for money.
In Spain, public concessions for water management have some similarities with alliances (joint venture between administration and private companies, long-term orientation) and have demonstrated their effectiveness in improving water services in cities such as Barcelona, Granada or Alicante. Since owners and contractors act as a team, all information that may change the delivery is immediately received and analyzed by all parties so that they can react and adapt the project to the new situation. This is essential for large, multidisciplinary projects to solve complex design, construction and environmental problems that might not be obvious at the beginning of the project. This is perhaps the decisive advantage of the alliance model. When it comes to traditional contracts, all changes cause a dispute and, very often, a delay. The growth in alliance contracts is due to discontent within the oil industry over supply delays and rising costs. As a result, the parties have been involved in litigation for years and their lawyers have tried to take into account all eventualities in increasingly long and complex contracts. It was created in the 1990s to promote collaborative work and since then alliance contracts have been prevalent in projects in Asia-Pacific, particularly in construction projects in Australia and New Zealand. The results have often been impressive and include cost reductions, fewer delays and excellent health and safety records.
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