Each year, governments have a large stream of capital projects. It should be common practice to strive for continuous improvement through reporting on 'success and failures' and lessons learned on these projects.
Alliancing presents some challenges for reporting VfM outcomes, when compared to other forms of contracting which are not relationship-based (e.g. design and construct' and Public-Private Partnerships). These other procurement methodologies have defined benchmarking processes that inform judgements on VfM outcomes. For example, Public-Private Partnerships use Public Sector Comparators; and bids for 'design and construct' contracts will have well-defined scope and deliverables determined by the project Owner as well as a contract price.
It is always preferable to have cost certainty at the onset of a project. However, in some alliances, the final project solution and final costs may be agreed after the Non-Owner Participants have been formally appointed and signed the Project Alliance Agreement. This means that the alliance 'self-approves' project deliverables after project implementation has commenced. On the other hand, in Public-Private Partnerships and traditional delivery methodologies, the scope and costs are settled prior to contract signing, and any variations to the contract are externally scrutinised to ensure VfM implications are known prior to implementation.
Therefore, it is important to evidence whether the alliance outcomes have delivered the approved Business Case requirements that were agreed between the Owner and the government.
The alliance approach should create an increased capacity to respond collectively to challenges and risks that may arise during delivery of the project. While this collective approach can provide better VfM outcomes for the right projects, the VfM reporting should be validated independently. Also, the alliance Participants should not have any editorial control over the VfM Report (although they may be asked to provide comments and feedback). This is necessary to avoid the reporting being considered self-congratulatory and its reliability discounted as a result.
Reporting of VfM outcomes in alliance contracting provides an opportunity for the alliance to demonstrate to the Owner, and in turn for the Owner to demonstrate to the government:
• the selection of the Proponents, the project solution, the agreed TOC and the legal and Commercial Framework were demonstrably best-in-market;
• the success and failures of the alliance in achieving the requirements of the Owner's VfM Statement, the Project Alliance Agreement and generally the alliance's objectives and activities;
• the successes and failures in delivering on the relevant objectives and requirements of the approved Business Case; and
• the lessons learnt that can be applied to future projects.
This Guidance Note is prepared on the basis that the ultimate target for the VfM Report is the government (as the 'investor') and that responsibility for the efficacy and veracity of the Report is with the Owner.