This guidance note was prepared to assist public officials undertaking alliance contracting to clarify the value proposition, or benefit, of using alliance agreements.
Governments1 seek to achieve a very broad range of social, environmental and economic objectives on behalf of the community. This normally results in an equally broad diversity of capital and infrastructure projects. There are a number of mature and emerging project delivery methodologies that can cater well to this project diversity on a 'fit-for-purpose' basis, the selection being on a careful and knowledgeable analysis of project characteristics and risks.
Increasingly, governments are using alliance contracting to procure significant infrastructure.
A key value proposition of alliancing is that government entities trade-off their traditional contractual rights (under a 'risk transfer' contract) in exchange for Non-Owner Participants bringing to the project their 'good faith' in acting with the highest level of integrity and making 'best-for-project' decisions.
To deliver on this proposition, alliances need to have a clear mechanism to understand and implement this 'trade-off'. For each project, the terminology, and the commercial elements that apply in each alliance agreement need to be clearly understood and must reflect the meaning agreed by the Participants.
The legal position and the government's commercial exposure must always be transparent and understood, regardless of any aspirational or 'assumed' meaning of terminology or risk allocations under alliance agreements, which may be based on previous experience or interactions with proponents of alliance contracting.
Like all contracting methodologies, alliancing should also make continual improvements. This guidance note aims to show how a close examination of the language underlying alliance agreements can further improve both the agreements and the value alliancing brings to the public interest.
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1 Unless otherwise stated, the expression 'government' is used to denote all the government entities of Australia, which include the Commonwealth of Australia and all Australian state governments and territories.