Governments aim to achieve a very broad range of social, environmental and economic objectives on behalf of their communities through the delivery of capital and non-capital programs. Capital and infrastructure projects can be delivered using a number of different procurement methods, which should be selected and applied on the basis of a thorough analysis of project characteristics and risks.
In alliances, the state agency delivering the project works collaboratively with private sector parties in procuring major capital assets, and agrees to take uncapped risks and share opportunities1. The use of alliance contracting is appropriate when it can be demonstrated that an alliance approach will deliver incremental value for money over other alternatives.
The purpose of this policy is to establish the policy principles, governance and approval framework to be applied by agencies using the alliance delivery method, and to consolidate the positive outcomes of alliance contracting to ensure it is used and applied appropriately. The key benefits of alliance contracting include that the parties are incentivised to work co- operatively to complete the project within the time and budget forecasts in the business case, to find the best solutions for the project (rather than for their own interests), and to work quickly and collaboratively to resolve issues as they arise. Agencies are using alliance contracting to capitalise on such benefits.
A recent study2 has shown that there has been a significant increase in the use of alliances in the Australian public sector in recent years. Therefore, it is timely to develop common policy principles for alliancing, in order to promote leading practice for the delivery of these infrastructure projects to the community.
This policy framework is underpinned by the following three main principles:
1. Governments should ensure good public accountability and transparency, and protect the public interest.
2. Each project should achieve value for money in line with business case commitments.
3. Efficient and effective market engagement for each project.
The application of these principles should assist to further develop and retain the alliance delivery method as one of the key procurement strategies that government agencies can use for delivering select infrastructure projects.
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1 In alliancing, the project team is integrated; it is required to act in good faith, with integrity, keep to certain principles (such as 'no blame') and make unanimous decisions and recommendations on all key project issues. The concept of collective assumption of risk applies in alliance contracts where the alliance participants bear all risks equitably (although not always equally regarding financial consequences).
2 In Pursuit of Additional Value: A benchmarking study into alliancing in the Australian Public Sector, DTF Victoria, October 2009.