JORDAN KELLY, bid strategist,
coach and author, wrote
Cracking the VfM Code: How
to Deliver Genuine Value
for Money in Collaborative
Contracting in 2011, and it
was published in March this
year. This weighty, 330-page
book presents Australasia’s
full “alliancing” story and,
more particularly, the many
controversial aspects of
the topic, including the
“broadening out” of this
project delivery methodology
into various forms of
collaborative contracting
hybrid.
In his review of the book
for Contractor (Aug. 2012),
NZFC executive officer
Malcolm Abernethy said,
“This is a book I strongly
recommend people to
read if they are interested
in collaboration within the
infrastructure construction
and maintenance industry.”
Contractor has secured
the author’s permission
to publish Chapter 1 in its
entirety, for the benefit of
those readers with an interest
in the ongoing evolution of
this important topic and its
relationship to the delivery
of value for money in major
projects.
H
ow ever ‘project alliancing’ has
emerged from its rapid rise to fame and
subsequent dilution in the Australasian
public infrastructure sector – be it
as the beginning of the end of alliancing
purism, or the mainstreaming of ‘collaborative
contracting’ – its contribution to the industry’s
overall ‘health’ and workability is undeniable.
But whether, going forward, the
fundamental tenets of project alliancing
maintain a firm place in public infrastructure
delivery, or whether they slowly give
way to the old dynamics associated with
conventional price competition as it makes
its way back in, is something only time
will tell. For now, though, alliancing has
– inarguably – laid down the tracks for a
new and enlightened way of delivering
construction works.
The progressive subsidence of alliancing
into the broader and more versatile concept
of ‘collaborative contracting’ has now taken
place… but no-one can deny alliancing’s
contribution towards moving the Australian
public infrastructure sector past former
eras characterised by legal bills, conflict and
general division.
Alliancing – for a range of reasons, some
passing – enjoyed a somewhat meteoric rise
from an embryonic delivery mechanism in
the mid-1990s, to less than 15 years later (i.e.
quoting official figures released in 2008),
representing one-third of the total value of
Australian public sector projects.
Added to this explosive rate of uptake
was a marked increase in the dollar value of
alliancing projects – from $100 million to
$250 million in the earlier days, to $500m
and upwards of $1 billion in the case of
the “megaprojects”. The estimated annual
peak of alliance-delivered projects ($9.75b
in 2008) is now in steady decline, however,
with a forecast of $1.4b worth of alliances to
be delivered in 2012.
The reasons for alliancing (where,
retrospectively, they would now be deemed
‘correct’) include projects featuring
substantial complexity and unknown risk
factors, tricky interfaces, difficult stakeholder
issues, very tight timeframes, likely scope
changes, and the added value of direct
owner involvement. Its supporters cite its
many benefits as including the acceleration
of delivery, reduction in planning and other
pre-project overheads (most especially
eliminating the need for exhaustive risk
identification upfront), quality community
interface (particularly important in
brownfield developments), attraction and
retention of high quality and/or specialist
expertise, industry up-skilling, and its most
noteworthy fundamental: no litigation.
Most importantly, it has delivered to
an infrastructure-backlogged nation, well
upwards of 500 public infrastructure
projects (from $10 million to $2 billion
value) in a relatively short space of time – far
shorter than could have been achieved via
traditional contractual arrangements.
In addition to the pace at which it has
delivered these projects, programmes and
infrastructure-related services, are some of
the groundbreaking innovations and feats of
engineering that alliancing has produced…
from the accolade-winning Lawrence
Hargrave Drive, perched high above the
rugged Illawarra coastline, to the Split Rock
Inca Alliance, a remote, culturally sensitive
and highly resource, material and weatherchallenged project requiring considerable
lateral thinking.
Whatever direction the future may
have mapped out for collaborative (or
‘relationship’) contracting, project alliancing
– its most premium form – has demonstrated
the tremendous power of co-operation:
The power of working in commercially
advantageous harmony, to deliver large
public infrastructure assets “on time and
on budget” (albeit there are conflicting
statistics in certain quarters), harnessing
the brilliance of multiple minds and the
motivation of aligned goals in areas as diverse
as community satisfaction, environmental
improvement and technological innovation.
It has also awakened a hard-edged industry
to the value of softer concepts like ‘culture’
and their critical contribution to healthy,
functional working environments. It has
created collective and individual motivation
to be part of something more than simply
the sum of its delivered components. T
be integral to the success of memorable
endeavours in design and construction.
To be part of an evolutionary movement.
Its application has also created and
catapulted careers, carved out by savvy
individuals whom have been clear, present
and capable when it came to aligning
themselves with alliancing’s opportunities.
A brief history… and insights from
early adopters
Keen to understand the way in which the
movement’s leaders picked up the fledgling
project alliance concept and eventually took
it mainstream in the Australasian public
infrastructure industry, I interviewed several
of the sector’s early adopters of project
alliancing for Cracking the VfM Code.
Menno Henneveld, now managing director
of Main Roads Western Australia, was one of
the ‘earliest early adopters’.
Back in 1987, then-manager of major
projects for the then-Water Authority of
Western Australia, Henneveld felt “a strong
pull to investigate better ways of procuring
infrastructure”. The litigious, expensive,
schedule and budget-busting outcomes that,
at that time, characterised so many public
infrastructure projects was something that,
from the perspective of his own customer
service orientation, he found deeply
disturbing.
He spoke to me of his foray into relationship
contracting: “I had, for some time, been aware
of the concept of ‘partnering’, which was
introduced in the United States by Charles
Cowan, a relationship contracting thought
leader and pioneer, who was working
with navy projects in Portland, Oregon. In
very simple terms, he was working with
the precept that both the client and the
contractor, theoretically, share the same
overarching objective i.e. to deliver a top
quality outcome at an agreed price.
“From that point of commonality, his
theory went, they should be able to work as a
team rather than as opposing parties. He held
that, if the two parties worked as one team
with a common framework of objectives
and a reasonably structured approach,
the outcomes should be productive and
favourable, and disputes minimal.
“It was the late eighties and I was
responsible for delivering the state’s largest
dam-building programme. There had been
up to 30 and 40 percent cost escalation on
the early projects within this programme. It
was also energy sapping and altogether not
resulting in a value for money outcome. The
roading sector was, similarly, experiencing
significant cost increases, with the value of
the disputation, in some cases, the same as
the actual start-out value of the projects.
And that was occurring right across the
infrastructure industry.
“With five dams still lined up to be
delivered and with that sort of remarkable
cost escalation, change was needed – and
needed fast. Suddenly, here was Cowan
making a visit to WA to introduce his
partnering concept. I was keen to try it.
“This was also around the time a book called
No Disputes, a publication by the National
Public Works Conference (Australia) and the
National Building and Construction Council
of Australia, was released, highlighting the
fact that change – in the form of structured
co-operation – was possible.”
“Alliancing, also called
‘relationship contracting’
in construction, has been
a successful infrastructure
procurement method for
projects with significant
risk, scope uncertainty
and requiring a flexible
approach to delivery.”
Alain Mignot, Co-founder &
Executive Director, Alliancing
Association of Australasia
(AAA), in his August 2010 white
paper, ‘So, What’s Wrong with
Alliancing?’
Lawrence Hargrave Drive, Illawarra, New South Wale
Collectively, these provided thefirst inkling of what the power of
relationships could achieve.
“We ran our first ‘partnering’ project in
1991: the North Dandalup Dam project
– a significant water storage facility
required for the security of Perth’s future
water supply.
“Partnering differed from conventional
contracting in that, while you still had
the usual, heavy contractual documents,
there was a ‘Partnering Charter’ that
sat above these. They were behavioural
codes. These charters (per project) spelt
out how the relationship would be
conducted and, essentially, how people
would behave.
“Partnering, as a practice, eventually
fell apart for a number of reasons, not
the least being because lawyers picked
holes in it. They attempted to turn this
essentially ‘good faith and fair dealing’
code of conduct into a litigative process,
continually looking for potential points
for litigation.”
Next in the historic sequence of major
influences were two landmark North
Sea oil and gas projects: BP Hyde (1991)
and BP Andrew (1994), or “BP Andrew
Field Development Alliance” – as it was
referred to in a paper written by Brown
& Root Energy Services’ director of
business acquisition for Europe and Asia,
Ash Bakshi, the deputy project manager
on this latter North Sea oil and gas
project. (The paper also claims Bakshi
was the architect of the “gainsharing”
mechanism applied to the alliance.)
Bakshi wrote that the marginal nature
of the oilfield and related evaluations by
BP had led it to the conclusion that it
would take more than clever technology
to make the Andrew Field development
proposition a profitable one; it would
also take innovation and a collective
commitment to driving cost savings.
There was a recognition that, in turn,
these would result only from “leadership
and co-operation”.
In its invitation to the market,
BP presented 10 selection criteria:
efficiency, accountability, profitability,
continuous improvement, quality and
safety management, reliable fit-for
purpose design standards, minimal
offshore intervention with low-cost
operations, information systems, quality
relationships and project commitment.
It also proposed a set of ‘alliance
agreement principles’ that represented a
balanced risk and reward – or ‘painsharing’
and ‘gainsharing’ – approach.
And with that, project alliancing
was born.
Then, in terms of greatest relevance
to Australia, came the application of
this fledgling methodology off our own
[Australian] shores.
Commencing in 1994, were the
East Spar Oil Project Alliance for
the now-defunct Western Mining
Corporation and the Wandoo B Offshore
Oil Platform Alliance for Exxon Mobil
(then Ampolex).
Both projects developed hydrocarbon
fields off the northwest coast of
Western Australia. Each project was
highly successful in its own right –
East Spar successfully overcame major
geotechnical challenges to come in on
time and under budget, while Wandoo
B produced similar cost and schedule
achievements, in the face of significant
construction challenges.
Then, in 1998, came the landmark $470
million Northside Storage Tunnel Alliance
for the Sydney Water Corporation (an
organisation that would go on to become
one of the most influential and prolific
early adopters of project alliancing).
The first public sector project alliance
in Australia, the success against-all-odds
nature of this project’s outcome (and
its litigation-free delivery) raised the
industry’s collective eyebrow.
It was a project that faced a
gargantuan mission… and a 100 percent
non-negotiable deadline – the Sydney
2000 Olympics. The alliance team was to
capture, store and transport, to the North
Head sewerage treatment plant, the
overflows from four different locations
on the north side of Sydney Harbour.
This already sizeable mission
(especially given the timeframe)
necessitated working with the
full support and co-operation of
communities in some of Sydney’s most
blue-chip neighbourhoods.
Despite numerous challenges (some
evident before commencement but many
not) the alliance brought the project in
on time.
During the first third of the project
was provided wouldn’t cover the essential
costs involved, and a compelling case
was put forward for additional funding.
It is widely agreed that – had this been
a conventional form of contract, such as
Design & Construct – this would have
lead to enormous contractual difficulties:
the scope change was so significant that it
would have been impossible to negotiate
under a conventional contract.
A member of the ‘Non-Owner
Participant’ (NOP) team of engineering
firm Transfield, design firm MWH (then
Montgomery Watson) and Connell
Wagner, Bob Vickers (then a construction
engineer with Transfield) was appointed
operations manager on the project.
Vickers provides an interesting window
into the project, its challenges and
its imperatives:
“The EPA (Environmental Protection
Authority) had, in the mid-nineties, given
Sydney Water its ‘by the Sydney 2000
Olympics’ ultimatum. A project of its scale
and complexity would normally take
eight to 10 years to go through process
approvals and so on, and then to actually
carry out the work.
“One of our greatest advantages was
getting on board many of the advisors
that had worked on the BP North Sea
alliances.
“This gave the rest of us – essentially
novices – a running start, in terms
of knowing how to optimise the
advantages of the alliancing framework
and harnessing them for the seemingly
insurmountable task ahead of us.
“Working closely together rather than
in conflict, we achieved some fantastic
goals that I know full well we would not
have been able to achieve if we had tried
to deliver the project under a Design and
Construct or other conventional type
of contract.
“It was a very enjoyable, comfortable
environment to work in – especially since
we were kicking big goals. We had a very
clear understanding of where we were
going and how we were going to get
there. Self-discovery and team-building
were a critical part of the package. We did
a lot of that and that’s what gave us the
intense and unified focus we needed to
pull the project off.
“At the same time, we were building up
intelligence into how to make alliances
work; establishing the Key Result Area
(KRA) framework, setting up reporting,
capturing innovations, [and] establishing
performance measurement protocols for
painshare and gainshare payments. It was
all new; nobody knew how to do these
things then.”
The whole concept of alliancing sat
very comfortably with Vickers’ own
professional modus operandi, and
after the completion of the Northside
Storage Tunnel Project, he made several
career moves that ultimately saw him
lead Abigroup Contractors’ embrace
of the philosophy, as its national
alliancing manager.
The Northside Storage Tunnel Project
came at the beginning of a decade of
massive infrastructure investment all
across Australia. Interest in this still-new
alternative project delivery method
mushroomed.
From the year 2000 through until the
2008 Global Financial Crisis (“GFC”),
Federal and State budgets for the upgrade
and development of public infrastructure
increased markedly i.e. 15 percent CAGR
(Compound Annual Growth Rate) for the
eight-year period.
The power of alliancing to successfully
deliver risk-ridden, technically complex,
time-constrained, community-opposed,
environmentally-sensitive and/or
otherwise challenging projects readily
caught on across the country. Project
alliances started up in all infrastructure
sectors, including roads and bridges,
rail, water, ports and transport hubs,
with some of Australia’s highest-value
projects awarded to the methodology.
Just one example was Australia’s largest
single road alliance – the $1.95 billion
Dinmore to Goodna Ipswich Motorway
Upgrade by the industry-acclaimed
Origin Alliance.
These halcyon years of the mid
and late nineties through until 2008,
saw substantial and ever-increasing
percentages of tier one constructors’
public sector work portfolios and public
infrastructure agencies’ budgets given
over to projects delivered via alliancing.
A marketplace on fire
While project alliances of substantial
scope and value began appearing in
quick succession across Australia, nothing
compared with the rate of uptake in
Queensland. Quickly becoming Australia’s
“capital of alliancing”, its track record fast
featured more than double the number
of alliances of New South Wales, the next
most alliance-prolific state.
A unique series of factors meshed
to underpin Queensland’s explosive
adoption of project alliancing. This
included its unfortunate status as the
most infrastructure-backlogged state in
the country, its rate of population growth
(including en-masse immigration of
around 77,000 people a year up to 2006,
a continually escalating rate), its rapidly
expanding urban centres, the mineral and
resources boom, and water shortages.
All these factors and more, drove
infrastructure requirements to fully
stretch the resource capacities both
of the marketplace and of infrastructure
agencies.
It must, at this point, be acknowledged
that, given the design and construction
sector’s strong preference for this new
methodology, alliancing – to some
degree – became the default delivery
mechanism of choice during these
labour and resource-strapped years.
In retrospect, the industry at large
generally agrees that, in too many
instances, infrastructure agencies
(“project owners”, or “clients”) resorted
to opting for this procurement strategy
simply to attract and lock in sufficient,
appropriately skilled resources for their
project…whether or not the project wa
in fact, sufficiently complex and challenging
to actually warrant this approach.
Indeed, the years leading up to the closure
of the new century’s first decade didn’t
see just a ‘heated’ marketplace, they saw a
marketplace on fire with opportunities for
contractors and designers… with agencies
reduced to securing the necessary talent by
whatever means they could.
The methodology itself rarely
disappointed, however, and whether or
not its application was always justified,
alliancing resulted, for the most part, in very
satisfactory outcomes for the projects on
which it was employed.
Suddenly, in late 2008, the winds of
economic uncertainty blew in with the Global
Financial Crisis (“GFC”). These [winds]
inevitably brought cynicism over whether
the methodology offered genuine value
for money.
To a large degree, this cynicism – nowhere
stronger than in the various State treasury
departments – was the catalyst for the 2011
virtual mandating of price-competitive
alliance selection as the new default
procurement process for an alliance.
This saw many agencies and most
consultant-advisors to the industry jump on
the new, broader-in-definition “collaborative
contracting” bandwagon.
Still though, alliancing has shaped a
broader culture in all sectors of the public
infrastructure delivery industry – a culture
in which the various design and engineering
disciplines have learned to work together
productively and harmoniously to create
genuinely “gamebreaking” innovations and
solutions (“gamebreaking” being one of the
more over-used and least-proven terms in
the alliancing lexicon, but used with good
reason here).
To slightly rephrase the sentiments of
the Alliancing Association of Australasia’s
co-founder and executive director, Alain
Mignot: “Alliancing methods are here to stay.
Nobody in the industry wishes to revert to the
more litigious past and negate the welcome
attitude of transformation in the industry.
“Alliancing does need to improve, and
it will continue to evolve to reflect the
needs of its practitioners, particularly
procurement agencies and government.
However, the infrastructure industry should
ensure that further evolution preserves the
power of alliancing.”
In his recognition of the inevitability of
further evolution, he echoes a much earlier
prediction by Abigroup’s national alliancing
manager, Bob Vickers, that “alliancing is only
one point on the continuum of the relationship
contracting developmental curve”.
New Zealand: a slower & more
considered foray into alliancing
Across the Tasman, the New Zealand
infrastructure sector – with its comparatively
fewer large and complex projects –
experimented and progressed with the new
delivery methodology at its own less urgent,
fiscally cautious pace.
With a population only one-fifth the size
of Australia’s – and with correspondingly
smaller infrastructure budgets – the 2011-
awarded NZ$1.6 billion Waterview project
(the connection of a 3.5-kilometre tunnel
completing Auckland’s western ring road)
is both the country’s highest value road
project and its highest value alliance. (It was
a price-competitive selection process.)
To this point, the NZ$365 million Northern
Gateway (completed in 2009), a 7.5-kilometre
extension of Auckland’s northern motorway,
had been New Zealand’s largest project
alliance (and its largest capital infrastructure
project), with the $65m Grafton Gully, an
earlier extension of the same motorway,
both its first and its smallest. (Both these
alliances were selected using the non-price
competitive process.)
To 2011, New Zealand had run an
approximate four percent of Australasia’s
alliances, spread across the energy,
mining, transport, water, prisons and local
Government sectors.
Similarly to Australia, up to 2010, the
majority had been non-price competition
selected.
One experience marring the progress of
the alliancing concept in New Zealand was,
arguably, a major Department of Corrections’
four-prison construction programme run
under an alliancing arrangement termed
a “Collaborative Working Arrangement”
(CWA).
The very public financial story behind this
arrangement – and the resultant perception
– did nothing to move the mindset of the
Labour Government of the day, which was
already philosophically against sharing the
public purse with the private sector.
The model had allowed the Total Outturn
Costs to remain undeveloped until well
into the project’s implementation (due to
uncertain scope and early state of design) –
and, by definition, until after the risks were
well-known and well-covered.
The attendant reduction in painshare left a
public question mark hanging over the issue
of the resultant profits.
While the alliance achieved completion
of the construction programme ahead of
time (critical given prison over-population)
and its participants declared it a resounding
success, it was unfortunately perceived
to have been something of a rort by the
Opposition and by Parliament itself.
It was given prime time coverage by the
media, which did not hesitate in loudly
declaring its own opinion on the matter. It
was a long and embarrassing moment for
Labour, with an independent enquiry called
for by Cabinet.
Notwithstanding the passing clouds, and
while its uptake was significantly slower
than in Australia, alliancing did see a healthy
uptake in New Zealand in the latter part
of the 2000-2010 decade (and with great
emphasis on probity and value for money).
In most other aspects, New Zealand’s
track record with alliancing has mirrored
that of Australia – albeit on a considerably
smaller scale, both in project number
and in project value.
It has mostly been used with a good
measure of success and a number
of award-winning projects have
resulted from its application, two of
its higher-profile and more recent
examples being Manukau Harbour
Crossing Alliance (which constructed
a duplicate motorway-carrying bridge
on State Highway 16 between Auckland
International Airport and the CBD) and
MetroWater’s Clear Harbour Alliance, a
major upgrade of the drainage networks
of several of Auckland’s suburbs (aimed
at reducing the amount of waste water
pollution overflowing into waterways
leading to Waitemata Harbour).
Two Kiwi early adopters
The New Zealand Transport Agency
(NZTA, the country’s planning and
delivery agency for national transport
networks) – with its large and diverse
portfolio of projects – was not only one of
the early adopters; it was a catalyst agent,
with its 2001 decision to run the landmark
Grafton Gully project as an alliance. It
had hoped to find that alliancing would
deliver projects faster than traditional
contracts.
With Grafton Gully deemed a
considerable success, the organisation
moved forward with the introduction of
its own informal yet strictly adhered-to
policy that it would have one alliance
running at all times.
With the range of projects it
constantly had on the go, having one
live alliance at any given time enabled
NZTA to benchmark the outcomes of
these against projects being delivered
under other contract types.
Interviewed for this chapter, group
manager – highways & network operations,
Colin Crampton says: “We probably didn’t
fully realise what we were getting into
at the time we ventured into alliancing
with Grafton Gully – but we applied the
model successfully nonetheless and we
built on it from there.”
Crampton says the agency still operates
the same way today, piloting new ideas
and “if they land well”, building on them
and applying them again and again.
“Our long-term procurement philosophy
is that we like to pick and mix from a variety
of hybrids we’ve developed ourselves.
We think and operate at a whole-ofportfolio level, looking at those options
that will bring us innovation, that will help
change the culture of the industry and
create the most rewarding and satisfying
environment for our own staff to
work in.
“Because alliances provide a lot of
those benefits, we think it’s good to have
a few of them going at any given time.”
The decision to run the $1.6b
Waterview project as an alliance was
taken because “firstly, we are delving
into tunnels and haven’t done this
length and size before, so we needed
to share the risk; secondly, there is
substantial opportunity to innovate as
the works progress, and thirdly, we want
to bring some international players into
the market.”
On that final note, Crampton has some
interesting observations to share, when
it comes to cultural differences between
the Australian and the New Zealand
collaborative contracting movements:
“By contrast to the more egalitarian
culture that exists between the
Government agency and construction
sectors here in New Zealand, clients and
contractors have a very master/servant
relationship in Australia.
“When I talk to Australian contractors
they are amazed at how open we are
in New Zealand about what’s going on
politically around our project portfolios,
the world we live in, the background to
the various projects, and how to best
bid them.
“We don’t have any ‘us and them’
boundaries in our mindset.
“We meet regularly and discuss things.
We treat the contractors as peers that
need to know the issues for their own
forward planning.
“They can ask whatever they feel they
need to about Government policies
and the like; we see no reason to keep
anything from them.
“This environment creates a very wellinformed industry that bids on our work.”
Another longstanding member of the
New Zealand infrastructure industry
whose efforts have helped productively
shape collaborative contracting is
KiwiRail’s general manager – network,
Rick van Barneveld, formerly CEO of
Transit New Zealand (now part of NZTA).
Van Barneveld delves further back
into New Zealand’s political history in
his commentary on the value – and the
future – of collaborative contracting.
“Our long-term procurement
philosophy is that we like
to pick and mix from a
variety of hybrids we’ve
developed ourselves. “We
think and operate at a
whole-of-portfolio level,
looking at those options
that will bring us innovation,
what will help change the
culture of the industry and
create the most rewarding
and satisfying environment
for our own staff to work in.
Because alliances provide
a lot of those benefits, we
think it’s good to have a few
of them going at any given
time.”
Colin Crampton, group manager,
highways and network
operations
New Zealand Transport Agency
(NZTA)
Waiwera Viaduct, part of the Northern Gateway – the country’s longest balanced cantilever bridge.
IMAGE: NZTA
IMAGE: MANUKAU HARBOUR CROSSING ALLIANCE
Part of the Western Ring Route RoNS project Manukau Harbour Crossing in its earlier stages
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Cracking the VfM Code: How
to Identify & Deliver Genuine
Value for Money in Collaborative
Contracting is the result of two
years’ background research and
investigation by author, Jordan
Kelly. It features numerous upclose-and-personal interviews
with industry, thought and
opinion leaders from around
Australia, New Zealand and
further afield, and captures
in detail all aspects of the
energetic and robust
“VfM” debate.
The book is available
separately or in conjunction
with the second book in the
series, Cracking the VfM Code
in Collaborative Contract
Bidding: Value for Money . . .
Understanding It & Articulating
Your Ability to Deliver It from
the author’s website:
www.bidstrategist.com
He personally trod the long and winding
road from the days of vertical integration
that characterised infrastructure delivery
in New Zealand up to the era of rampant
outsourcing ushered in in the mid-eighties,
by the-then Minister of Finance, Labour’s
Roger Douglas. Douglas was written into
the country’s history books as “the architect
of privatisation”.
Up to that point, says van Barneveld, the heads
of the well-siloed Government departments
“controlled everything down to the
tea lady.”
This era of privatisation heralded van
Barneveld’s own formative career years, and
he participated directly in “establishing the
world of privatisation that we have today”.
“If I was to condense that whole 30-year
period, then what we are doing now, through
collaborative contracting, is re-capturing
the best of the vertically integrated model
and blending it with sharp-edged private
sector innovation and competition.
“In Australia, your [Australian] agencies
still have an on-the-ground delivery
capability in some of your key public
infrastructure sectors.
“For the most part, we no longer have
this in New Zealand. It’s almost totally
outsourced. (One of the very few exceptions
is, in fact, KiwiRail. A significant part of our
construction and maintenance activity is
still in-house).”
Van Barneveld says one of the primary
reasons he helped pioneer collaborative
contracting in New Zealand was that “in
the environment of straight outsourced,
hard-edged contracting, we lost some of
the benefits of the vertically integrated
structures of the past.
“Alliancing provided an opportunity
to re-capture some of those ingredients –
like common objectives, common goals
– and to blend them together to create
an environment where you get the best of
both worlds.”
His says the former Transit New Zealand
worked in accordance with the ideal that,
“you pick a procurement model to fit your
circumstances. In other words, you don’t
alliance everything.
“Most agencies have now developed
their own sophisticated policies and
practices for ‘portfolio segmentation’. For
example, some might run one-third of their
contracts as lump sum, one-third as hybrids,
and one-third as performance and alliance
contracts.
“Transit New Zealand had always made it
very clear to industry from the introduction
of the alliancing methodology that all our
eggs were not going in one basket. At any
given time, it would have one major alliance
on the go, although there was often overlap
as some came in and others completed.”
What did that achieve?
“It developed an aspirational approach
amongst suppliers.
“Everyone wanted to be in that select
group that qualified itself to have an
alliance with the client. It was considered
a sophisticated and sexy space to be in,
because we’re also talking about highsignificance, high-priority projects that
were almost always complex and not well
understood at the outset.
“And from a purely financial perspective,
they had the opportunity to make a
pre-agreed base margin, which was put at
risk against capabilities that the supplier
actually knew it had. That’s always been an
attractive proposition for industry
participants, and it secured us the best of the
best to compete for those opportunities.”
“We probably didn’t
fully realise what we
were getting into at the
