Simply adopting a policy of partnering with and within the supply chain will not itself ensure success. Partnering is not an easy option; a number of prerequisites, or key success factors, need to be taken on board. Some of the following are desirable for project part- nering; all are essential for successful strategic partnering:
● There needs to be a commitment at all levels within an organi-
sation to make the project or programme of work a success, which means a commitment to working together with others to ensure a successful outcome for all participants (win–win situa- tion). Returns will not be immediate; a willingness to make an early (and perhaps not insignificant) investment in time and ef- fort to build the team is essential.
● Partners must have confidence in each other’s organisations,
and each organisation needs to have confidence in its own team, which means careful selection of the people involved. Participants need to have a clear understanding and commit- ment to the teamworking culture. Partners should be chosen on the basis of the ability to offer best value for money and not on lowest price; their ability to innovate and offer effective solu- tions should also be considered.
Clients should normally select their partners from competitive bids based on carefully set criteria aimed at getting best value for money. This initial competition should have an open and known prequalification system for bidders.
● Partners need collectively to agree the objectives of the arrange-
ment/project/programme of work and ensure alignment/com- patibility of goals. This will require early involvement of the entire team to ensure a win–win situation for all. It is this agreement that should drive the relationship, not the con- tract(s). The agenda must be of mutual interest with a focus on the customer; it must therefore be quality/value driven.
● To satisfy the relationship’s agenda, there needs to be clarity
from the client and continued client involvement. It is essential to define clearly the responsibilities of all participants within an integrated process. There can be no weak links. People, without regard to affiliation, must be brought together into in- tegrated teams with streamlined supply chain management. There needs to be a willingness to be flexible and adopt new ideas and different ways of doing things, for example, different operational methodologies, different administrative proce- dures, different payment methods, different payment proce- dures, etc.
● Sharing is important. All players should share in success in line
with their contribution to the value added process (which will often be difficult to assess). There also needs to be a sharing of information, which requires open-book accounting and open, flexible communication between organisations/teams/people. Responsibility for risks must be allocated clearly and fairly, but there must be a collective responsibility for problems and an openness and willingness to accept and share mistakes. This re- quires a departure from the finger-pointing, blame culture to an acceptance that getting things wrong results in a lose–lose,
rather than a win–win, scenario. Adoption of such openness and sharing requires trust.
● It is important that all partnering arrangements incorporate
effective methods of measuring performance. It has been identified that partnering should strive for continuous im- provement, and this must be measurable to ascertain whether or not the process is effective. It is essential therefore that agreed measurable (and achievable) targets for productivity improvement are set, and clear, easily understood measure- ment systems are adopted to evaluate efficiency with respect to time and cost. Similarly, ways of measuring improvements in quality must be adopted as part of the quality assurance procedures. Benchmarking, perhaps including use of the in- dustry’s key performance indicators (KPIs), should be adopted and, to enable organisations to share in savings/increased ben- efits, effective incentive schemes need to be in place. In long- term agreements, annual reviews should take place to reset objectives/targets. Clients with major programmes of work should not put all their eggs in one basket; this will enable them to benchmark their different partners against each other. These clients may periodically test the market by limit- ing the time of agreements to enable new bids to be made; however, it is important that the duration of agreements is of reasonable length to assure bidders of predictable turnover (subject to satisfactory performance). This will, of course, re- quire clients to be able to assure continuity (or at least pre- dictability) of workload.
● There will be times when partners don’t agree, and it is there-
fore important that agreed non-adversarial conflict resolution procedures are in place to resolve problems within the relationship. The principle of trying to resolve disputes at the lowest possible level should normally be adopted to save time and cost.
● Education and training is needed to ensure an understanding of
partnering philosophy. It is important that, regardless of how well-versed participants are in the philosophy and procedures, teambuilding takes place at commencement of the relationship. Good teambuilding and development of efficient teamworking can be enhanced by adopting commonsense procedures such as sharing of office space and sharing of information through com- puting networks/intranets, etc. Successful teambuilding should result in the development of trust.
Trust is generally regarded as being crucial to the success of part- nering; indeed it has been described as the cornerstone of a successful partnering relationship. Blois (1999) argues that only in- dividuals can trust, and consequently trust between organisations (which are, after all, only collections of people) means a lot of peo- ple needing to trust a lot of other people. This makes relationships vulnerable to human fickleness. Careful selection of the correct in- dividuals by each organisation is therefore crucial to success. These individuals, particularly those at the interface with partners, must fully accept the philosophy of partnering and be committed to the success of the arrangement. Changes in personnel or attitudes of key people can render relationships fragile; it is therefore very im- portant to invest in trust building activities amongst everyone in- volved with integrated teams so that the collective trust in the team as a whole can withstand breakdown in individual relation- ships. The building of trust, which is essential for co-operative ac- tivity, takes time, effort and patience, particularly for those with experience of the traditional way of doing business. Where trust has been established, partners can be relied upon.
Reliance on others to do what is expected is necessary in any arrangement, including conventional procurement strategies, where a contract is used to encourage/enforce it. This extra ingre- dient, which stems from trust, is what is being sought within part- nering arrangements. There will be times when organisations in a partnering arrangement are tempted not to act in a mutually acceptable way. This may be for short-term gain, or market changes may result in changes in attitude. In such times, many organisa- tions may be tempted to break faith and break ranks. Only when trust has been fully developed will commitment to seeing things through be expected of partners.
Opportunities for quantity surveyors
Collaborative integrated procurement offers opportunities for quantity surveyors, including:
● Acting as an independent client advisor. Many clients will still
look to their quantity surveyor for independent advice. This raises the question, ‘where is the trust within the relationship if external advice is still needed?’ Many clients will still feel that they need advice of someone without an axe to grind – for
example, appointing an external quantity surveyor and audit team to ensure that its strategic partners perform. Services provided might include assessment of target costs, develop- ment of incentive schemes, measurement of performance, au- diting, etc.
● Participating as a partner in an alliance. Quantity surveyors
able to demonstrate that they have the skills and ingenuity to add value will be welcomed by most alliances. Imaginative teams will consider numerous solutions – who better to evalu- ate the alternatives than the quantity surveyor?
● Leading an integrated supply chain. Many quantity surveyors
have become successful project managers. There is no reason therefore that they cannot manage a supply chain. With appro- priate financial resources, a quantity surveying practice can act as a prime contractor.
● Acting as a partnering advisor within PPC 2000 contracts. The
described role would seem to fit the quantity surveyor with partnering experience. This is a key role and would suit a quan- tity surveyor who can demonstrate a collaborative rather than adversarial attitude.
The move towards clients partnering with integrated supply chains offers significant opportunities for consultants wishing to join al- liances to share in the potential rewards. If the industry does be- come less adversarial, as is hoped, quantity surveyors will welcome it. They will then be able to concentrate on what they do best – adding value for clients, which coincides with the purpose of part- nering!
Alliancing
As with partnering, alliancing can be catagorised as follows: Strategic alliances can be described as two or more firms that collaborate to pursue mutually compatible goals that would be difficult to achieve alone. The firms remain independent follow- ing the formation of the alliance. Alliancing should not be con- fused with mergers or acquisitions.
A project alliance is where a client forms an alliance with one or more service providers: designers, contractors, supplier, etc. for a
specific project and this section will continue to concentrate on this aspect of alliancing.
The principal features of a project alliance are as follows:
● The project is governed by a project alliance board, that is com-
posed from all parties to the alliance that have equal represen- tation on the board. One outcome of this is that the client has to divulge to the other board members far more information than would, under other forms of procurement, be deemed to be prudent.
● The day-to-day management of the project is handled by an inte-
grated project management team drawn from the expertise within the various parties on the basis of the best person for the job.
● There is a commitment to settle disputes without recourse to
litigation except in the circumstance of wilful default.
● Reimbursement to the non-client parties is by way of 100 per
cent open book accounting based on:
1. 100 per cent of expenditure including project overheads: Each non-client participant is reimbursed the actual costs incurred on the project, including costs associated with re- works. However, reimbursement under this heading must not include any hidden contributions to corporate over- heads or profit. All project transactions and costings are 100 per cent open book and subject to audit.
2. A fixed lump sum to cover corporate overheads and a fee to cover profit margin: This is the fee for providing services to the alliance, usually shown as a percentage based on ‘busi- ness as usual’. The fee should represent the normal return for providing the particular service.
3. Pain/gain mechanism with pre–agreed targets: The incen- tive to generate the best project results lies in the concept of reward, which is performance based.
A fundamental principle of alliances is the acceptance on the part of all the members of a share of losses, should they arise, as well as a share in rewards of the project. Risk: Reward should be linked to project outcomes which add to or detract from the value to the client. In practice, there will be a limit to the losses that any of the alliance members, other than the client, will be willing to accept, if the project turns out badly. Unless there are good reasons to the
contrary it may be expected that the alliance will take 50 per cent of the risk and the owner/client the remaining 50 per cent. The sharing of pain:gain is generally based on objectively measurable outcomes in key performance areas, such as:
● Time of delivery ● Safety
● Environmental compliance
● Industrial and community relations.
Performance-based remuneration ensures that some of the con- tractor’s remuneration, the profit margin referred to in point 2, is at risk unless it achieves the indicators.
The major differences between alliancing and project partnering are outlined in Table 3.1.
For example, in project partnering one supplier may sink or swim without necessarily affecting the business position of the other sup- pliers. One entity may make a profit, while the other entity makes a financial loss. However, with alliancing there is a joint rather
Table 3.1 Differences between alliancing and project partnering
Partnering Alliances
The form of the Core group with no Quasi joint venture undertaking legal responsibilities. operating at one level
Binding/non-binding as a single company charters used in 65%
of partnering arrangements
The selection Prime contractor Rigorous selection
process responsible for choice process
of supply chain partners. Alliance agreement Project can commence not concluded until all while selection continues members appointed The management By prime contractor Alliance board structure Partnering advisor
Risk and reward Partners losses not shared Losses by one mechanisms by other members of the alliance member
supply chain shared by other
than a shared loss, therefore if one alliance party underperforms then all the parties are at risk of losing.
Therefore, alliance members form a quasi joint venture, because they operate at one level as a single company; however, they do not merge their companies in any legal sense. They remain independ- ent but they must work with each other in order to meet the Key Performance Indicators (KPIs) (see Chapter 1), to realise risk and reward. Therefore if the project fails to meet agreed project KPIs then all alliance members share the loss.
There are some significant legal and financial aspects that need to be put in place in an alliance agreement, but while important, it is the behaviour of the parties which determines whether an al- liance will be successful. Choose your alliance members carefully!
Therefore, given the operational criteria of an alliance, it is vi- tally important that members of the alliance are selected against rigorous criteria. These criteria, usually demonstrated by reference to previous projects undertaken by the prospective alliance mem- bers, vary from project to project but as a guide could be:
● Demonstrated ability to complete the full scope of works being
undertaken from the technical, financial and managerial per- spectives
● Re-engineer project capital and operating costs without sacrific-
ing quality
● Achieve outstanding quality with an outstanding track record ● Innovate and deliver outstanding design and construction out-
comes
● Demonstrate safety performance
● Demonstrate conversance with sustainability issues
● Work as a member of an alliance with a commitment to non-
adversarial culture and change direction quickly if required
● Have a joint view on what the risks are and how they will be
managed.