Page 418 - Global Project Management Handbook

PARTNERING IN PROJECTS 20-7

and the difference between the second and third columns is primarily savings from reduc-
ing and eliminating risks. It is more difficult to achieve reductions in the cost of works
after design freeze and sanction.
Partnering is not appropriate on every project, only where the client and the contractor
can jointly control risk. In such cases, the risk usually lies both in the design of the plant
and in the method of construction. Where the risk lies in the method of construction only,
usually only the contractor can control that risk, and the appropriate form of contract is
typically a fixed-price design-and-build type of contract. Where the risk lies in the design
only, the appropriate form of contract is separate design-and-build contracts, with remea-
surement payments for the build phase (Turner, 2003). Partnering also should be adopted
only on projects worth more than about $15 million or £10 million. There are substantial
setup costs, and the relationship requires careful management, increasing project manage-
ment costs. This is only worthwhile if the potential savings are sufficiently large to cover
these larger transaction costs.

Legal Considerations
Some people suggest that partnering is in violation of laws on competition. The client
enters into a relationship with a construction contractor before design is complete, not
giving other contractors a chance to bid fairly for the work. However, the usual interpre-
tation is that as long as the process for appointing the contractors is fair and open, it falls
within the law. In the circumstance, however, it is probably best that the appointment
process be adhered to rigorously. A four-stage coached award procedure is recommended
by the European Union:
Step 1: The job is widely advertised in the trade press, and a long list of potential contrac-
tors is formed.
Step 2: Those contractors are asked to submit information to judge their suitability for the
work. This will cover their technical capability and financial strength but also can
include their commitment to alliance working and problem-solving skills. Based on this
information, a short list of prequalified contractors is formed.
Step 3: Problem-solving workshops are conducted with the contractors to brief them on the
technical requirements of the work, the targets for cost reduction, and the implications

for cooperative working. Contractors without the right attitude and approach may be
eliminated at this stage. Contractors not willing to work in this way also may choose to
withdraw from the process.
Step 4: The remaining contractors are asked to submit full proposals for the work.
Workshops are held with the contractors individually to further coach them on the need
for cooperative working and problem solving to achieve cost reductions and to judge
their ability to do so. The contract is awarded based on this round.

Establishing and Managing the Alliance

Scott (2001) suggests a three-stage process for establishing and managing the alliance
(Table 20.2). I just wish to emphasize four points:
1. Client strategy. Before starting the project, the client must determine that an alliance is
the right approach for this project. I discussed earlier when it is appropriate. The client
also must ensure that the right attitude to cooperative working exists throughout the