Queensland’s Department of Main Roads has considerable experience with alliancing. The organisation has used the approach for more than a decade under the guidance of the Major Projects Office’s general manager Derek Skinner, who says alliancing is used where appropriate for a major project to provide the potential to progressively wind up the project as the issues are settled and the Total Outturn Cost (TOC) is signed off.
“Alliances really shine when projects are not fully documented or where clients realise there are considerable assumptions and uncertainties,” he says. “We are about to start construction on the $1.9 billion Ipswich Motorway Upgrade (Dinmore to Goodna) as an alliance—the biggest alliance ever for Main Roads—because we found there were a lot of unknowns attached to what the final scope might look like.”
He says that several years ago there were numerous development proposals for land next to the motorway, which presented potential design changes during construction to allow for motorway exit and entry ramps entries, and “an alliance deals well with these sort of changes”.
Skinner adds that although they had a reference design, they recognised that to extract best value, the design would need to change quite substantially. “We knew it would also be subject to further treatments associated with stabilising disused coalmines located at Redbank,” he mentions.
His office developed a custom-selection process for the alliance, to reflect the booming infrastructure market during 2008. “Industry was pretty strapped, but we wanted to see a good line of constructors and designers come forward to meet our timeframes,” Skinner says. “So rather than let the proponents pick their own dance partners, we selected each individually. The process also opened up the door to mid-tier constructors, which was a benefit for the market.”
Skinner admits the method was developed to suit the specific circumstances and won’t work for all infrastructure projects. He sees more capacity returning to the market, which means, “the option to go back to teams forming before the bid process is again attractive”.
However, “in the case of sole negotiated arrangements such as alliances, we will probably see more interest in contestability. While competitive alliances will do this, you have to be reasonably sure of scope for offerers to price the work with any certainty,” he says. “This was the case on the Tugun Bypass project where we had a lot of knowledge about the shape and form it would take, so the two competing alliances were basing their TOC on a reasonably defined scope of work.”
In that case, Main Roads were unsure about the level of interfaces, with more than 20 or 30 agencies to deal with, so were after “a form of delivery that would allow the proponents to make adjustments. Alliances allow for such change,” says Skinner.
Alliancing has emerged over the past decade as a distinct management competency and continues to evolve. It has had a profound influence on how infrastructure is delivered with public and private sector organisations changing internally to adapt the ‘whole of project’ philosophy, which has influenced all infrastructure delivery models.
While alliances are particularly suited to projects with largely undefined scope and risk, its cornerstone principle of collaboration is extending to other contractual models used to deliver public sector infrastructure. Project partners focus on delivering great outcomes, not just ‘their bit’.
Skinner agrees, saying the industry has come a long way in the past decade. “Industry certainly does not want to return to ‘ruinous competition’, a term coined in the 1980s to express a low-bid mentality i.e. bid low, litigate up,” he says, adding that Occupational Health and Safety has improved significantly through alliance commitment to non-cost as well as cost outcomes.
No wonder the future of alliancing is bright, widening from delivery to long-term service, maintenance and operation of public infrastructure, with new sectors emerging in defence, power generation and gas.