Page 417 - Global Project Management Handbook

20-6 MANAGEMENT OF THE PROJECT-ORIENTED COMPANY

The European Construction Institute (2003) defines long-term partnering as

. . . the development of sustainable relationships between two or more organizations,
to work in cooperation for their mutual benefit in the requisition and delivery of works,
goods and/or services over a specified period to achieve continuous performance
improvement.

In the next two sections I consider each of these forms of partnering in turn.

SINGLE-PROJECT PARTNERING

Why and When to Adopt Partnering

As we have already seen, partnering is adopted to overcome limitations in traditional
contracting. Two of these limitations have been discussed already:
● Misalignment between the client’s and the contractor’s objectives
● Misalignment between the various contractors objectives
Another reason is to gain early access to contractor expertise. A problem with tradi-
tional contracting is that the construction contractor is only appointed when construction
is about to start, which means that the contractor’s construction expertise is not available
to the design team to improve the constructability of the plant. Improving constructability
can help to reduce construction costs. Under traditional contracting, the construction con-
tractor is not appointed until the design is complete, but then it is too late to gain access
to that contractor’s expertise. Under a traditional contract, if the construction contractor is
appointed before design is complete, during construction, the contractor will be seeking
variations (see Fig. 20.1, left) to cover the uncertainties in the design that existed when
the contractor was appointed. Under alliancing, the contractor is appointed early to help
reduce the cost of construction, and the contractor’s share of the gain-share pot covers the
uncertainties in design that exist when the contractor is appointed.
Scott (2001) illustrates what can be achieved with partnering and alliancing

(Table 20.1). The first column is the forecast cost of the project at concept stage, when
most of the contractors are appointed. The second column is the estimated cost at sanction,
and the third column is the outturn cost. The difference between the first and second col-
umn is primarily reductions in the cost of works from early access to contractor expertise,

TABLE 20.1 Savings from Project Partnering

Project Concept Estimate Sanction Value Out-turn
Off-shore oil platform £450 million £373 million £290 million
Refinery revamp $295 million $269 million
Plant addition $175 million $149 million $133 million
Onshore terminal £123 million £119 million £92 million
Off shore pipeline £348 million £319 million £242 million
Hydrocracker revamp £41 million £39 million
FCCU revamp £54 million £47 million