Team building

By Catriona MacLennan

Tuesday 1st June 2004

Big construction projects too often degenerate into confrontational, litigious affairs. But, as Catriona MacLennan discovers, there's increasing interest in a new concept that can deliver quicker, cheaper, and more peaceful results

Dave Winsborough sees inner beauty in Auckland's Grafton Gully motorway. To the average commuter it might look like any other strip of heavy-duty tarmac; but Winsborough reckons it's an absolute stunner.

Winsborough's a psychologist - not a discipline normally associated with motorway construction. And the reason he's so excited about Grafton Gully is that it represents what can be achieved through collaboration and co-operation. He worked on the motorway project as part of the team pioneering the use in New Zealand of alliancing - a co-operative approach to large construction projects. He found the experience so rewarding he's singing its praises to anyone who will listen. The client, Transit New Zealand, is pretty happy too: the project was delivered ahead of time and $4.6 million under budget.

Alliancing, an idea born in the North Sea oil fields, aims to get away from the traditionally adversarial approach to large infrastructure, construction and mining projects, where cost overruns, delays, hostility, and litigation between contractors and clients are all too common.

Back in the 1990s BP, which was looking for a way out of this conflict-ridden approach for its North Sea oil and gas projects, came up with the idea of pulling the owner and service providers - designers, constructors and suppliers - into an integrated team to deliver a project under a contractual framework where all parties shared in the upside if the job went well, and in the downside if there were delays or problems.

The results were startling. The Andrew field was developed using an alliance between BP and seven contractors, reducing the estimated development cost from an uneconomic £450 million to £373 million. That sounded impressive enough, but when the work was actually completed the final cost was only £290 million and the project was delivered six months ahead of time. Clearly, something went very right.

Alliancing has since been used in several countries. Australasian alliancing guru Jim Ross says the concept has been taken to heart more eagerly in Australia than anywhere else. His firm, Brisbane-based Project Control International, has worked on alliances in Australia, New Zealand, South Africa and Indonesia. There have been more than 35 alliances in Australia.

The first major public sector alliance across the Tasman was Sydney Water's $A466 million Northside Storage Tunnel Project between 1997 and 2000. Alliances were also used for Canberra's National Museum Acton Point and South Australia's Pelican Point Project. They have also been used for roading projects by most Australian state roading authorities.

In setting up an alliance the participants agree to assume collective responsibility for a project, taking joint ownership of all the risks and gains, depending on how the actual outcome compares with pre-set targets.

Ross says essential features are a project alliance board or leadership team representing all parties, which makes all decisions unanimously. Day-to-day project management is carried out by an integrated team, with members being assigned on a "best-for-the-project" basis, regardless of which company actually employs them. The parties agree to resolve issues within the alliance with no recourse to litigation, except in the case of a very limited class of prescribed "events of default".

Ross's role is to come in at the beginning and help the parties set up the alliance. He was involved in getting the Grafton Gully project off the ground and has more recently been back in Auckland facilitating the Alpurt B2 motorway project from Albany to Puhoi. In the Alpurt case, four groups of companies registered interest in being involved with the alliance. Two were then selected to go to two-day development workshops. At that point none of the companies had been asked to provide any information about costs.

After the preferred proponent was chosen, a group of auditors was sent in to its five component companies (Leighton Contractors, Fulton Hogan, Boffa Miskell, Tonkin and Taylor, and URS) to spend a week combing through their books. Fees were then negotiated and an interim agreement signed, kicking off six months of detailed preparation work.

Transit's national capital works manager, Colin Crampton, has worked on both Grafton Gully and Alpurt. He lists benefits of the former project as early start and completion, the quality of the work delivered, the environmental and social performance, as well as the fact the job came in $4.6 million under budget.

Winsborough's role on the Grafton Gully job was to pick up where Ross left off, acting as a coach throughout the life of the alliance. To build the alliance culture, people share the same offices and attend ongoing workshops about alliancing behaviour. Blame is not permitted. The focus is solely on fixing what is wrong. At the end of the project, further workshops are held to take it apart and see what can be done better in future.

Certainly there are downsides to alliancing, and it's not suitable for all projects. Among the problems is a perception of lack of certainty about costs for the owner, the high level of commitment required from senior management and owners, and the high costs to set up and sustain the alliance culture. Another problem Crampton notes is that people who have worked on an alliance can find it hard to reintegrate back into the traditional style of contracting. Turned around, though, this is also an opportunity: the new skills and collaborative mindset acquired by workers on alliance projects are transported to other jobs.

How to make an alliance work

Select the right partners

Take collective responsibility for performance

Give all participants equal say

Establish a no-blame culture

Make all transactions open book

Maintain good communication

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