Under non-price competition, the fee for the NOPs is generally determined by one of two methods - either nominated by proponents at an early stage of the selection process or assessed by an audit of the proponent's historical BAU (Business As Usual) Fees. The rationale for the latter being that NOPs should receive their BAU fees for BAU outcomes.
However, adopting a Fee based on a historical assessment of BAU fees obtained from a limited selection of previous projects may not reflect75:
• The market's current conditions.
• The NOP's current appetite for risk/reward.
• The specifics of the current project.
• The modern corporate approach of continuous improvement.
• A balance of the NOPs' historical good and bad projects.
• That alliances provide a commercially more advantageous risk profile for NOPs than traditional contracting.
The benefits of determining fees by historical assessment are therefore problematic and it would appear to be simpler and more relevant for the NOPs to nominate their fees under competition during the initial expression of interest period. Owners would need to ensure that undue weighting was not given to the fees in the selection process.
Additionally, the Research Team observed that some Owners expected NOPs to accept a lower fee return than normal BAU because under the risk sharing framework of an alliance the Owner retains significantly more risk relative to a traditional contract, particularly the downside financial risk that is capped for NOPs.