2.29 An alliancing approach involves two or more parties who share risks and rewards to enable the successful delivery of joint objectives. The incentives are closely aligned to ensure that common objectives are achieved. Alliancing relies very heavily on strong procurement and commercial skills and detailed day-to-day management involvement by a proactive authority willing to invest in its own capacity and capability to be effective. Key features of alliancing include:
∙ a strong focus on specifying outputs rather than inputs and processes;
∙ confidence and trust between public and private parties, with a focus on partnership and alignment of interests, and generally an integrated project team drawing on expertise from the authority and relevant contractors;
∙ strict risk management procedures on an integrated project basis;
∙ a sharing among all parties (including the contracting authority) of the costs and benefits of overruns and underruns; and
∙ open book accounting.
2.30 Alliancing may be appropriate where there is a high level of uncertainty about the nature of the infrastructure needed to meet the policy objectives, where there is significant technological risk, where there is a lack of a competitive supplier market, or where the project is large and not readily divisible into discrete parts that could be separately contracted. In contrast to many PPP models, key project risks under an alliancing structure are generally retained by the contracting authority. As such in alliancing:
∙ the contracting authority needs particularly strong contracting skills; and
∙ the value of private finance is limited.