Page 422 - Global Project Management Handbook

20-10 MANAGEMENT OF THE PROJECT-ORIENTED COMPANY

shareholdings. This approach was adopted for a small but highly complex part of the con-
struction of the Betouweroute, a freight line in the Netherlands from the Port of
Rotterdam to Germany.

LONG-TERM PARTNERING

Why Adopt Long-Term Partnering

The motivation behind long-term partnering is slightly different, reflecting a different
genesis. Until the mid-1980s, many large companies in the process plant industry, oil
companies and chemical giants, did all their own work:
● They designed and built their own plants.
● They operated their plants.
● They maintained their plants.
● They marketed and sold the products produced.

As is common with many large companies, their staff adopted restrictive and inefficient
working practices.
In the late 1980s, many of these companies began to adopt the attitude that they
should keep to their core business. Their core business is to make, market, and sell petro-
leum products or chemicals, and some went as far as saying that their core business is just
to market the petroleum products or chemicals. Thus they began to outsource much of
their traditional operations:
1. The design and construction of new plants were the first to be outsourced.
2. Then maintenance of plants and small retrofit projects were outsourced.
3. Then operation of the plants (under build-own-operate arrangements the company does
not even need to own the plant) was outsourced.
4. And the oil giants often outsourced the operation of their filling stations.
The design and construction of a large new plant is now done using alliancing arrange-

ments as described earlier. But this is inefficient for small retrofit projects and maintenance
work. It is inefficient to go through the substantial setup costs for a single alliance on every
small design job, maintenance job, or retrofit project. For very similar reasons, however,
clients want to avoid confrontational working arrangements, perhaps more so on what is to
be a long-term working relationship. Further, clients want to work with their contractors to
achieve continual performance improvement on these small jobs. Thus long-term partnering
is adopted.
The benefits the client hopes to obtain from long-term partnering are
● Cost reduction—lower rates, higher productivity
● Profitability—better returns for the contractor
● Schedule—better coordination of projects/work packages
● Quality—optimized design solutions, better reliability
● Service—better contractor response times
● Safety—better safety planning and performance
● Reduced risk—shared risks, better management