A term alliance governs the issue of orders for services, works or supplies over an agreed period of time, for example in respect of repairs and improvements or the direct procurement of equipment and materials. The potential duration of a term alliance offers scope for the development of collaborative systems that recognise agreed objectives, for the parties to agree joint and individual activities that improve the prospect of achieving those objectives and for the measurement of success according to agreed targets.
If a term alliance governs a combination of planned, responsive, and cyclical tasks, it is particularly valuable as a procurement model for integrated and collaborative asset management through which:
■ Capital improvements can reduce responsive and cyclical costs
■ Repair and maintenance can reduce the risk of failure of project components and can avoid or delay the need for additional capital expenditure.
Example: The Welwyn Hatfield Borough Council housing term alliance won an Institute of Building Management award, and their 'many examples of good practice' attracted praise from the Council's District Auditor. Their alliance governed the repair of 9,500 homes, creating a new culture under which: ■ 'The shake-up in performance had clear financial advantages beyond the social benefits of housing more people and cutting the time they spend in temporary accommodation' ■ 'For example, the capital cost of increasing housing capacity (by building more houses instead of shortening the time properties are empty) would have been about £10 million' ■ 'Customer satisfaction, independently measured by MORI and monitored by a tenants' panel, showed solid improvements in landlord service, value for money, and quality of repairs and maintenance' ■ 'Viewings accompanied by Mears increased the number of tenants accepting the first property offered from 30% to 80%' ■ 'Void turnaround time more than halved, leading to quicker lettings and increased rent receipts' ■ 'Under Open-book pricing the annual cost increase for maintenance jobs ran below inflation. ' |
Successful asset management depends on creating interfaces between the capital works team and the operation, repair and maintenance team. These interfaces give rise to provisions that should appear in collaborative construction contracts and should be mirrored in related term alliance contracts:
■ Suitable intellectual property rights licences in respect of BIM models and other design documents that enable the operation, repair and maintenance team to access and use all available asset information
■ A clear interface between the defects liability obligations of the capital works team and commencement of the obligations of the operation, repair and maintenance team, with clarification as to who responds to notification of a problem and at whose expense
■ An understanding of all exclusions and limitations in the liability of the design and construction team, including all specialist subcontractors, suppliers and manufacturers, so that it is clear where the operation, repair and maintenance team must step in to avoid leaving any gaps in the service
■ Availability to the operation, repair and maintenance team of information regarding plant and equipment warranties, including the terms and conditions of those warranties, so that the operation, repair and maintenance team do not invalidate them through any act or omission
■ A clear understanding of the specific obligations of the operation, repair and maintenance team in relation to warranted plant and equipment
■ Clarity as to the liability of the capital works team, including subcontractors, suppliers and manufacturers, in the event of an error or omission by the operation, repair and maintenance team.
More ambitious term alliances can be crafted where the same provider is responsible for capital works and for operation, repair and maintenance works, and is incentivised to complete the capital works in a way that reduces on-going responsive and cyclical expenditure. Appropriate incentives could be, for example, a share of savings and/ or the award of additional capital works projects linked to anticipated reductions in operation, repair and maintenance costs. The SCMG Trial Project led by Hackney Homes and Homes for Haringey combined capital and responsive works with direct client/subcontractor relationships giving rise to extended warranties and other long-term benefits.