National Academies Press: OpenBook

Alliance Contracting—Evolving Alternative Project Delivery (2015)

Chapter: Chapter Six - Conclusions, Effective Practices, and Suggestions for Future Research

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Suggested Citation:"Chapter Six - Conclusions, Effective Practices, and Suggestions for Future Research ." National Academies of Sciences, Engineering, and Medicine. 2015. Alliance Contracting—Evolving Alternative Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/22202.
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Page 60
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Suggested Citation:"Chapter Six - Conclusions, Effective Practices, and Suggestions for Future Research ." National Academies of Sciences, Engineering, and Medicine. 2015. Alliance Contracting—Evolving Alternative Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/22202.
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Page 61

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61 chapter six CONCLUSIONS, EFFECTIVE PRACTICES, AND SUGGESTIONS FOR FUTURE RESEARCH INTRODUCTION This chapter consolidates the conclusions and effective prac- tices developed in accordance with the chapter one protocols. The most significant finding is: Alliancing appears to be an excellent choice to deliver complex projects that require innovative solutions to the challenges pre- sented in their scopes of work. In addition, it was found that the primary motivation for implementing alliance project delivery was to leverage the interrelationships necessary to manage complex projects and benefit from the innovation produced by chaos by building a highly integrated and highly collaborative project execution environment where decisions are made using “best for project” as the default decision criterion. Put another way, if the agency’s primary motivation is to compress the schedule or minimize costs they should use other authorized project delivery with which they are famil- iar. Alliancing is best reserved for extremely complex, high- risk projects where the sheer number of external stakeholders requires a highly integrated and highly collaborative project delivery team. CONCLUSIONS The following conclusions can be drawn from this synthesis report: • There are three separate and distinct models for alliance contracting: – Pure alliance, – Competitive alliance, and – Collaborative alliance. • Once they are granted enabling authority, North Ameri- can transportation agencies could most likely use alli- ance contracting to enhance the level of integration and collaboration on the same types of projects that they delivered before with public-private partnerships (P3), design-build (DB), or construction manager/general contractor (CMGC). • Alliance project partners could in most cases be selected using a form of the U.S. qualification-based selec- tion procurement method currently used by agencies to select engineering design consultants and CMGC contractors. • Implementing alliancing will require agencies to develop an education and outreach strategy to overcome internal and construction industry resistance to change. • Washington State Department of Transportation’s one attempt to experiment with alliancing leads to the con- clusion that implementing alliance contract project deliv- ery may appear to be feasible in the United States under most of the current statutory constraints on procurement. • The findings of the Federal Acquisition Regulation analy- sis shown in Table 14 shows that implementing alliance contracting will be complex but not impossible. As with most alternative delivery methods, it may require an agency to specifically seek enabling legislation. • Projects that are good candidates for alliance con- tracting delivery are highly complex projects worth AU$50 million (~U.S. $47 million) or more. They have high-risk profiles with a “potential for a substantial change in project scope” and therefore require flexibility to make decisions and change plans in an expeditious and agile manner. The risk profile is complicated by a large number of external stakeholders and often an aggressive schedule. • Alliance contracting procurement demands that a signifi- cant amount of weight be placed on the compatibility of the personalities of the key personnel, unlike other alter- native project delivery methods where the emphasis on key personnel focuses on their experience and credentials. • Implementing alliance contracting will require North American agencies to shift their risk management pro- grams away from risk shedding and risk allocating to real risk sharing to benefit from alliance delivery. • Alliancing does not significantly alter post-award design or construction administration procedures. • Alliancing agreements contain provisions that are unusual in typical U.S. public sector construction contracting in that they advocate: – Joint management and unanimous decision making, – No blame and no disputes, and – Payment to the alliance team members on a cost- reimbursable basis, with gainshare/painshare relation- ships that limit the potential exposure of the members to the project’s owner. • There are some significant challenges that U.S. transpor- tation agencies will face in using alliance contracting,

62 FUTURE RESEARCH Two potential future research projects are identified to fill gaps in the body of knowledge on alliance contracting. The first effort addresses the various legal issues that need to be resolved before the second effort, producing a guidebook for implementing alliancing, can be produced. 1. The procurement culture shift in the relationship between the U.S. public agency owner and its private industry partners in alliance contracting is considerable. Not only do the public employees have to become highly col- laborative, they have to accomplish the shift without violating any of the federal and state statutes that were enacted in the procurement culture of supreme distrust to regulate design-bid-build delivery of all public projects. Many of those legal barriers to implementation have been removed in recent years, but there are still several that could present barriers to U.S. agencies that would like to experiment with alliancing to expedite project delivery. The synthesis identified three legal impedi- ments that could create significant potential problems: (1) the Anti-Deficiency Act, (2) the use of open-ended indemnity arrangements, and (3) the liability for design errors and omissions. The proposed research would make an in-depth analysis of alliancing contracts in use overseas and evaluate each major component in the con- text of appropriate U.S. and state law. Such an analysis would furnish a point-by-point roadmap of the necessary changes that would need to be made for a typical state department of transportation to implement alliance con- tracting. The final deliverable would be a guidebook to building the legal/statutory/regulatory foundation for the engineers to deliver projects using an alliancing model tailored to the agency’s own statutory environment. 2. AASHTO and NCHRP have a long history of assist- ing public transportation agencies by adding new tools to their procurement toolbox through the development and dissemination of guidance documents. Therefore, a more thorough research project is proposed to develop a guidebook for implementing alliance contracting in North American transportation agencies. This synthesis found that CMGC project delivery appeared to offer most of alliancing’s benefits and fit the integrated col- laboration model around which alliancing revolves. Therefore, research would extend the information devel- oped in this synthesis and the final products of NCHRP 10-85, Guidebook for CMGC Contracting, and produce a guidebook for implementing alliancing. including the authority to contract on a cost-reimbursable basis with limited recourse against the design and con- struction teams. • The “no dispute” aspects of alliance contracting cre- ate insurance and legal challenges, particularly in rela- tion to whether parties can negotiate away their rights to seek legal recourse if they believe they have been wronged. EFFECTIVE PRACTICES The case example projects described in chapter two were the source of most of the effective practices identified in the syn- thesis. The following is a list of those practices: • Holding industry outreach meetings prior to advertis- ing for alliance partners provides a forum for interested firms to engage the agency in meaningful dialog that can gain insight on the agency’s objectives in using alli- ancing to deliver the project. • It is also effective to engage in public information plan- ning to inform external stakeholders and the general pub- lic of the alliance’s performance throughout the course of the project. • Emphasis on the personalities of each alliance mem- bers’ key personnel is the primary issue in qualifying individuals to participate in given alliance team roles and leads to the practice of using scenario testing dur- ing the selection process to gauge individuals’ abilities to fully collaborate with people from outside their own company or agency. • Creating sub-alliances for specific features of work that require specialists to design and build allows limited participation in the gainshare/painshare scheme with- out exposing the specialty subcontractors to the entire project risk. • For features of work that are limited in scale and routine in nature, the alliance can let separate sub-contracts to entities that do not join the alliance or take part in the incentive/disincentive schemes. • The 3-Limb pricing structure has proven itself to be a useful method for establishing the alliance compensation scheme. • Retaining an independent cost estimator to independently validate the target outturn cost (TOC) before signing the Project Alliance Agreement encourages all parties to the agreement to have more confidence in the TOC’s reason- ableness and reality.

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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 466: Alliance Contracting—Evolving Alternative Project Delivery synthesizes current practices related to the use of alliance contracts around the world, and explores the procurement procedures that have been used to successfully implement alliance contracting on typical transportation projects.

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