Alliance

Government, the contractor and the designer agree to collectively share all risks associated with the design and construction of the facility. It is unusual, but not impossible, for alliance contracts to also cover the maintenance of the facility. The contract includes a sophisticated cost plus remuneration regime where government reimburses the direct costs of the contractor and designer, and pays them a fee on account of profit margin and contribution to overheads that is adjusted upwards or downwards depending upon the collective performance of the alliance members against agreed key performance indicators. The alliance participants agree to a 'no blame' regime, under which they give up any entitlement to make claims against each other for poor performance or negligence. This is done to encourage the alliance participants to accept stretch targets, and abandon adversarial behaviour designed to protect legal positions. The model is particularly suited to risky projects, or projects with uncertain or changing scope, which are difficult to price on a fixed price basis.