Governments1 seek to achieve a very broad range of social, environmental and economic objectives on behalf of the community. This results in an equally broad range of capital and infrastructure projects. There are a number of project delivery methods which can be applied to government projects on a 'fit-for-purpose' basis. The project delivery method should be selected on the basis of careful and knowledgeable analysis of the relevant project characteristics and risks.
Governments often use alliance contracting to procure significant infrastructure. A key value proposition of alliance contracting is that government entities reduce their traditional contractual rights (under a 'risk transfer' contract) in exchange for Non-Owner Participants (NOPs) bringing to the project their good faith, acting with the highest level of integrity and making decisions which are best-for-project. The Owner Participants and NOPs collaborate to determine the best project solution and to deliver the project. A key element of the project solution is the Target Outturn Cost (TOC), which is the target cost estimate to deliver the project.
This Guidance Note has been prepared to assist public officials ensure Value-for-Money (VfM) outcomes through the TOC development process as set out in Chapter 5 of The Guide to Alliance Contracting2 (the Guide).
Like all delivery methods, there should be continual improvements to alliance contracting. This Guidance Note aims to identify where alliance arrangements can be improved to further deliver and demonstrate value to the state.
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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.
2 National Alliance Contracting Guide to Alliance Contracting; Department of Infrastructure and Transport, Commonwealth of Australia, April 2011.