SPECIAL FOCUS: CONSULTANTS’ FORUM
Applying the alliance contracting model to the Canadian water sector holds a great deal of potential, but it will require some significant shifts in the way we think about project delivery.
Choosing right delivery model more important than ever for large infrastructure projects runs and a risk transfer model that has caused many design and construction firms to rethink their business strategies.
Gurjit Sangha
A
Stephen Horsman
s urban populations grow denser and aging infrastructure meets increased strain, big infrastructure projects have grown ever more vital and increasingly complex. This trend has become especially apparent in the water sector, where an estimated 30% of infrastructure is not in good condition. Yet, delivering successful water projects requires a lengthy list of stakeholders, significant government investment and extensive risk management. Even before COVID-19, project procurement processes were already facing growing challenges and multifaceted risks. Traditional delivery models like Public-Private Partnership (P3) or Design-Build (DB) have met mounting pressure from cost and schedule over26 | December 2021
ALLIANCE VERSUS TRADITIONAL CONTRACTING Compared with traditional project models like P3, where risk transfer between project stakeholders remains a challenge, the alliance model has some notable advantages. The alliance model is an alternative procurement and delivery method. Under alliance contracting, “an owner and one or more service providers (designer, constructor, suppliers, etc.) work as an integrated team to deliver a specific project under a contractual framework where the commercial interests are aligned with actual project outcomes.” Essentially, alliance contracting was born from the desire to align the interests of all stakeholders in a project, encouraging synergies and integration with two possible outcomes: either winning or losing together. With traditional forms of contracting, each party to the contract is assigned
separate obligations, and risks are also generally allocated to one party or the other. With alliance contracting, all parties share obligations as well as risk and opportunity. The “pure alliance” approach relies on a mutual agreement that covers risk sharing, setting a cap on financial exposure, and no litigating. If a problem occurs, it is everybody’s problem and all parties work together to solve it. An alliance approach makes a fundamental shift to a shared or collective set of obligations, and a shared approach to risk and opportunity. There also is typically an incentivized key performance indicator [KPI] system in place that identifies non-cost attributes of the project, such as stakeholder satisfaction, environmental outcomes, quality, safety, and performance, that are key to the successful delivery of the project. The inclusion of these KPIs ensures a balanced view of success, which extends beyond cost alone. A cornerstone of the alliance model is that all participants work as part of an integrated team, with continuous transparency. A PROMISING HISTORY Alliance contracting is relatively new to Canadian projects, but it has a solid history of success elsewhere. Alliance contracting was first developed during the 1990s in the U.K. oil and gas sector for petrochemical projects (such as offshore drilling platforms). Here, the traditional delivery of a complex risk profile typically led to significant cost and time overruns. It has since been successfully adopted and further developed on a range of infrastructure investments globally, including in Australia and New Zealand. The alliance model has in fact become the norm in Australia over the past 20 years, and that significant body of experience and best practices can go far toward informing a Canadian approach. Over those two decades, a number of alliance variants developed, such as pure, competitive, and hybrid, and a range of related collaborative models developed as well, such as delivery partner, risk-allocated maximum price, and new engi-
Environmental Science & Engineering Magazine
