Historically government procurement of infrastructure has been based on the concept of competitive and open bidding, and as a result, the majority of infrastructure projects were delivered using traditional competitive bidding processes. As the Australian construction industry evolved and matured so too did the delivery arrangements. From the early 'traditional' methods such as design and construct, lump sum, and construct only to more recent methods of public private partnerships and alliancing.
The more traditional contractual arrangements involved competition between constructors, documented with technical drawings and specifications, commercial conditions of contract and structured payment systems based on fixed pricing or schedule of rates arrangements. These traditional delivery methods generally saw risks associated with project delivery being transferred to the constructor to varying degrees. The formal contractual arrangements sometimes created an unproductive positional relationship between the 'buyer' and the 'seller', leading to adversarial relationships and litigious outcomes.
In the early 1980s the US Army Corps of Engineers started looking at ways of resolving litigation and disputes. An alternative disputes resolution method, the mini-trial, was established to save time and money, to provide flexibility, and to protect the relationship between the 'buyer' and 'seller'.100, 101 As a progression of its alternative dispute resolution program, in 1998 the US Army Corps of Engineers, with the assistance of the private sector which had pioneered the model, implemented its first Partnering model. Partnering was promoted as disputes-prevention (as opposed to disputes-resolution) and aimed to improve communication, increase quality and efficiency, achieve on-time performance, improve long-term relationships and a fair profit and prompt payment for the contractor. It was not a contractual agreement, nor legally enforceable.99
As an extension to Partnering, alliancing was first used in the oil and gas fields of the North Sea, by British Petroleum (BP) in the early 1990s. When Australia embarked on its first alliance project in 1994, The Wandoo Alliance, the Owner decided to use project alliancing to:
• Reduce development costs.
• Share time and cost risks.
• Minimise use of its management team.46
Australia's first alliance was delivered using a non-price competition process for selecting the NOPs and under the principles of good faith and trust. In particular, the Project Alliance Agreement noted:
• Value for money in completing the Works.
• Operate fairly and reasonably without detriment to the interest of any one participant.
• Use best endeavours to agree on action that may be necessary to remove any unfairness or unreasonableness.
• Individuals employed by one participant could be transferred to another participant (including the responsibility for their workmanship and work).
• Open book.
• Wherever possible, innovation was to be applied to all activities particularly where it could reduce cost and time for completion and improve quality.
• Use best endeavours to ensure that additional work remained within the general scope of works.
• Share of savings and cost overruns to be apportioned (win:win).
• Avoid claims, disputes and litigation, arbitration and any other dispute resolution process.46
From 1995 to 1998, the alliance delivery method was becoming more sophisticated. The spirit of trust was still prevalent, with the notion of 'what is best for the alliance is best for my organisation' making its debut. New principles were emerging including:
• tendering on factors other than price.
• the best people for each task.
• no blame.
• clear understanding of individual and group responsibilities and accountabilities.
• emphasis on business outcomes.
With the significant growth of the infrastructure market (discussed in more detail below), alliancing has also enjoyed significant growth, and has emerged as a mainstream project delivery method. Collaboration and trust remain strong themes. New principles emerging by 2006, which remain today, include:
• best for project focus.
• equal say in decisions (unanimous decision making).
• best in class resources.
• participants are committed to developing a culture that promotes and drives outstanding outcomes.
• communication is open, straight and honest.51
Broadly speaking, alliances may be categorised as a project, program or strategic alliance:
• A project alliance is generally formed for a single project, after which the team is usually disbanded.
• A program alliance incorporates multiple projects under an alliance framework, where the specific number, scope and duration of projects may be unknown and the same alliance participants are potentially delivering all projects. These are usually longer term arrangements, in the order of 5-10 years.
• Strategic alliances relate to longer term incomplete commercial contracts between organisations (generally private)72 that generally do not include the project and program alliance principles referred to above. They are not the subject of this Study.
With $65 billion of alliance projects delivered in Australia in the last 12 years, it appears that the alliance delivery method has been embraced and, as demonstrated further below, the jurisdictional appetite for this delivery method has increased markedly since its inception.