What Is the Difference Between Project Alliancing and Project Partnering? ?
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1. What is the difference between project alliancing and project partnering?
The major difference between project partnering and project alliancing is in the way in which the contract for undertaking the work is structured. Significant differences occur in the selection process, the management structure of the organizations undertaking the project and the nature of risk and reward incentives. The Australian National Museum project is breaking new ground in the construction industry, as it is the first alliance-building project to be undertaken in Australia (and possibly the world).
Partnering relies solely on the commitment of individuals as the partnering charter is not legally binding and this can be its best or worst feature. With partnering, aims and goals are agreed upon and dispute resolution and escalation plans are established but partners still retain their independence and may individually suffer or gain from the relationship. However, in an alliance the parties form a cohesive entity that jointly shares all risks and rewards based on an agreed formula. Consequently if the project fails to meet pre-agreed performance indicators then all parties jointly share the agreed penalty. Alternatively, if the project exceeds the stated performance criteria all parties share the rewards. This creates a true win-win, lose-lose environment which is the primary driver of behavior in an alliance.
The primary disadvantage of partnering, certainly as experienced in Australia is that all the undertakings given by the parties, whilst invariably well intended and genuine, tend to be overtaken by the formal contractual relationship when significant problems arise. If problems of a minor nature arise the partnering charter instrument used to record the intentions of the parties usually provides a mechanism for settling matters at whatever level is appropriate and thus the arrangement can be very successful.
However, if a more serious dispute arises which cannot be readily resolved by the procedures described in the charter the parties invariably reach to the bottom drawer and draw out the contract document. Once that stage is reached parties revert to their formal position as prescribed in the adversarial language of the contract. Under these circumstances the situation can actually become more poisonous than in a project where partnering has not been adopted in the first place. Having developed a closer sense of trust between the parties the reversion to the adversarial conduct associated with strict enforcement of a traditional contract can generate a sense of great disappointment and even betrayal. It is, therefore, instructive to examine the spectrum of relationship contract arrangements through the lens of dispute resolution to clearly understand the critical differences between the relationships that exist in traditional, partnering and alliance models.
So, the core issue that differentiates between the two approaches is that in partnering, partners may reap rewards at the expense of other partners. In alliancing, each alliance member places his or her profit margin and reward structure “at risk”. Thus in alliancing, the entire alliance entity either benefits together or not all. This fundamentally changes the motivation and dynamics of the relationship between alliance members.
2. What is your opinion of the alliance selection criteria? Explain.
In my opinion, the alliance selection criteria were rigorous, transparent and professional. This placed acute demands upon participants to achieve high levels of communication and presentation skills related to the factual matter of substance rather than sales and marketing rhetoric. The way that alliance partners are selected on the basis of services provision first, and cost considerations later is a novel approach to the delivery of a project. There was no tendering based on cost estimate preparation or detailed planning. So, the cost of presentation and its preparation by aspiring alliance teams was less that the cost of tendering for an equivalent project. While considerable effort was required in preparing proposals based upon 12 criteria, this was developed from existing presentation and management information resources and was limited to explaining how this kind of project could be delivered without detailed reference to design details. The assumption governing the process was simply by having the best-qualified people working together in the best interests of the project, the best and most effective solution would emerge. This is substantially different mindset than that which prevails other project delivery strategies including those that use partnering where mechanics for cooperating and managing disputes may be subject to greater focus. Motivators attracting parties to an alliance are pivotal in establishing successful risk and reward relationships that are based on agreed targets. A risk and reward graph indicates gain/pain share of the overall success of the project measured against key performance indicators. Risk and reward provisions encourage but do not guarantee cooperative behavior between alliance members, including the client.
3. What were some of the lessons learned from this project?
The Australian National Museum project has been used as an example to illustrate how to achieve a responsible and responsive workplace environment for construction industry workers. The concept of alliancing and the mechanism used to select the successful alliance on this project established the framework for not only a procurement delivery system but also a changed workplace culture. The ideals of cooperation, collaboration and mutual respect of alliance partners appears to have spilled over into wider engagement with all elements of the supply chain on this project. Australian National Museum project had facilitated sub-alliances to be established on the project between suppliers and subcontractors. The approach represented by the project workplace agreement illustrates how the alliance concept has been extended to the general workforce. The degree of gainshare/painshare evident in the alliance partners agreement has not been replicated but the concept of performance-based rewards has echoes in the concept of mutual commitment to excellence as a basis for reward. While this may have been instigated as a necessity imposed 307 by Government (and hence client) requirements as expressed in the National Code of Practice, it has resulted in an innovative way to achieve a responsible and responsive workplace environment for construction industry workers.
Interim and continued monitoring of quality and other project success Key Performance