Relationship contracting is a form of project delivery designed around the shortcomings of traditional procurement. The Latham Report (1994) and the Egan Report (1998) were reviews of the poorly performing United Kingdom construction industry and both identified weaknesses in the adversarial basis of lowest price tender procurement. Both reports pointed to the benefits of alliance contracting and were influential in its wider use for government projects in Britain and Australia.
Relationship contracting is a collaborative approach to procurement under which there is agreement on price and method, a sharing of risk and rewards and an avoidance of adversarial methods to project manage the delivery, resolve disputes and settle claims. Relationship contracting may take the form of a long-term project articulated into a series of separate contracts with the same contractor group. However, it does not offer the lifecycle costing and delivery performance characteristics of PPPs, outsourcing or BOOT delivery. Accordingly, performance is mainly measured on the basis of delivery time and cost.
Recent studies suggest that relationship contracting is improving procurement and service delivery outcomes (NAO 2005) (see Table 5). Contractors in Australia have long expressed a preference for non-adversarial contracting over both the traditional and PPP procurement models.
Table 5 Procurement Outcomes 1999-2008 a
|
|
| On Budget | On Time | User Benefits b |
| Traditional Procurement | e | 25% | 34% | 27% |
|
| d | 27% | 30% | 35% |
|
| f | 55% | 63% | 55% |
| Gateway Programs | d | 69% | 73% | 65% |
| Alliance Contracting | e | 77% | 78% | Refer notes |
| PFI (UK) | f | 78% | 76% | n.a. |
| PPP (Australia) | g | 79% | 79% | 74% |
| UK Defence Contracts | h | 17% (14%) | 8% (24%) | Met requirements |
SOURCE
MR 2008
NOTES
a Sources as noted. Sample sizes vary. Parenthesis denotes average overruns for sample
b Qualitative assessment from independent NAO 2004, 2006 reports. Defect reporting.
d 2000-01 results: NAO 2001 Moderninsing Construction. Delivered on or under time and price.
e 1999 results: NAO 2005 Improving Services Through Construction Part B
f 2004 results: NAO 2005 Improving Services Through Construction Part A
g Fitzgerald 2005; Audit Office Reports Victoria & NSW 2004-08; IPA 2007
h NAO 2004, 2006 MOD Defence Contracts