| Once the Owner's decision to use an alliance has been approved, the Owner will need to prepare for selecting its alliance partner(s) and delivering the alliance project. These stages are discussed in Chapters 5 and 6. This chapter addresses the preparation required by Owners and provides guidance on: • understanding the commercial environment; • developing the alliance's Commercial Framework and PAA; • defining and planning the Owner's resources; and • how best to engage and use specialist advisers. |
Chapter 2 highlighted that an alliance is a commercial transaction between the Owner and the NOPs for the delivery of a capital asset.35 The commercial and legal terms of that transaction, as agreed between the Owner and the NOPs, are set out in the PAA.
It can be expected that both Owners and the NOPs will seek to implement the commercial and legal terms that are favourable to themselves, the Owner because of its duty to guard the public interest and the NOPs due to their corporate obligation to optimise shareholder returns. These competing interests are not unusual and do not create an unhealthy situation, even in the context of developing an alliance.
The Owner's obligation to negotiate favourable commercial and legal terms for an alliance contract is no different to its obligation for other forms of contract. In all cases, the Owner needs to be proactive in developing project-specific commercial and legal terms that optimise the Owner's position and are consistent with the achievement of the Owner's objectives for the project. In doing this, the Owner needs to be also mindful of the reasonable and fair commercial objectives of the NOPs. This requires a thorough understanding of the prevailing commercial environment, the specific VfM objectives for the project (as expressed in the Business Case) and how the Commercial Framework should be applied in practice.
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35 As noted in Chapter 2, the alliance delivery method and its associated characteristics is also applicable to operational and maintenance (O&M) services. For simplicity, in this Guide, reference to a capital asset will also include O&M services.