In simple terms, the commercial arrangements define the price the Owner is to pay for the project's benefits to be delivered by the alliance. The Owner should develop and agree commercial arrangements (including the PAA, TOC and Commercial Framework) before selection of the preferred tenderer. Relevant insights include:
Owners must negotiate the TOC as an entire number and Owners should not yield to the temptation to leave parts of the TOC 'to be agreed later' or to carve out items that cannot be agreed with the NOPs.
[an Owner's Representative/Participant]
The development of the TOC is a robust commercial negotiation, not a collaborative workshop.
[a construction contractor]
'We need capability to read the open book and to recognise when commercial negotiations are taking place; "visibility" (e.g. open book) is of little worth if the Owner does not "see" what is in front of them. Similarly we need the capability to understand and challenge assumptions and contingency.'
[a state Treasury official]
People and resources participating in a development of the TOC need to be highly skilled in order to challenge assumptions and validate the TOC- critical players need to be in the room to challenge the composition of the TOC and all innovations/savings need to be accounted upfront before the TOC is finalised.
[an alliance facilitator]