The review of terminology set out in this guidance note has helped identify some areas where alliance agreements could be improved to enhance, articulate and demonstrate the value proposition to the state.2 The review shows there is a potential risk of a 'disconnect' between the aspirational use of alliancing terms and the practical application of these terms where a project becomes 'distressed'.
Three principal areas for attention, to help minimise this risk, emerged from the review and discussions.
(a) Standard alliance practice and terms need to be challenged periodically
The procedures for the procurement of alliance contracts risk become increasingly 'business-as-usual'. The forms, structure and content of alliance contracts are generally well understood by alliance Participants, and for this reason have remained relatively static. On one hand this is a strength-it provides industry Participants with certainty and reduces the lead time and cost of procurement. However, it also carries with it a risk that Participants may not sufficiently test their understanding of:
• terminology used (and whether the 'aspirational' meaning of terminology meets the actual or legal meaning);
• the commercial framework and its appropriateness for the individual project and Participants; and
• the risks that they as an Owner (and in turn the state) will bear under the Commercial Framework.
(b) Proposal-a formal Charter of Alliance Behaviours
This guidance note proposes the use of a 'charter of behaviours' to which alliance Participants will commit. Although most alliance agreements include a set of alliance principles on which the culture of the alliance is based, the proposed formal charter of behaviours would move away from broad 'motherhood' statements towards more objective and understandable behavioural criteria.3 These behaviours would help define good faith and best-for-project conduct for the alliance Participants, providing more certainty about many of the mechanisms in the alliance agreement that use those definitions.
(c) More emphasis on risk analysis
The fact that alliance Participants may act in good faith and in a way that is best-for-project does not mean that where a project becomes distressed, governments do not need to be concerned about the consequences. Although project risks are partly 'shared' between the alliance Participants, beyond a certain point (agreed as part of the Risk or Reward model) the state bears the impact the distress.
This is not a criticism of the alliance methodology. However, it is a feature of alliance contracting that needs to be fully understood and accepted. Public sector agencies should be better placed under alliance contracts to understand the risks they face (and the potential consequences if these risks arise) than under traditional 'risk transfer' contracts. To this end, a thorough risk analysis at the pre-award stage is an important step towards a successful alliance project.
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2 The expression 'state' here is used to denote all the government entities of Australia, which include the Commonwealth of Australia and all Australian state governments and territories.
3 National Alliance Contracting Guidelines Guidance Note 3: Key Risk Areas and Trade Offs; and National Alliance Contracting Guidelines Template No 1: Model Project Alliancing Agreement, Schedule 2, provide a template form of a standard or generic alliance charter that can be detailed and tailored to meet the requirements of an individual project and which can finalised during commercial negotiations.