REUTERS | Jumana ElHeloueh

Does alliancing matter?

Alliancing matters to clients, contractors and professional consultants. It can deliver what was once thought undeliverable, but it can also exclude innovative SMEs (small and medium enterprises) from projects that they might otherwise transform.

If you are a major player (whether a contractor or professional consultant), a long-term alliance can allow you to innovate, focus on meeting a client’s needs and invest in staff training.

If you are an SME, alliancing and framework contracts can exclude you from public contracts and (even if those contracts are available) take up a disproportionate amount of your management time and resources, whilst forcing you down to tier two in the supply chain. That is, alliancing can force you to become a sub-consultant or sub-contractor, rather than a “small” main contractor or tier one consultant.

In the current economic climate, a long-term contract, where cash flow and the ability to always cover your costs are secured, is certainly beneficial.  However, that does not make it an easy option.  The best alliances are probably forged in a challenging, but forthrightly honest, environment: perhaps out of a tension between what has always been done and what now must be done. That is, between what was thought possible before the alliance and what is now possible using the alliance.

The tensions (or “creative tensions”) within an alliance can force a integrated project team away from a “bunker” or “silo” mentality. The team will be able to bring their combined skills and experiences to bear together. Where the team includes the client, this can bring rewards for all. However, those rewards may not always be the panacea claimed for “partnering”: the project may not be (on the face of it) cheaper, but surely it will be better:

  • More satisfied staff (leading to less time lost to sickness and greater staff retention).
  • Improved health and safety.
  • Fewer (or “zero”) defects.
  • Fewer (or no) disputes, and no litigation or arbitration.
  • More time for the “real” project and less meaningless administration.
  • An opportunity to improve performance year-on-year (perhaps via close analysis of project KPIs).
  • A more dynamic working environment, from site operatives all the way through to senior managers.

So is this easy?  If it was, wouldn’t everyone be doing it?

First, alliancing is not suited to every project. On major projects, it can be made to work. “Can be made to work” because it is not about contract terms, or one person acting differently, but about a fundamental change in mentality throughout the organisations involved. (One-off smaller projects are not usually suitable for an alliance: the costs and time required for effective alliancing outweigh any benefit of using an alliance.)

Second, it isn’t easy. An alliance will be at its best when that creative tension is constantly at the fore, where parties work together (out of enlightened self-interest) to deliver a project’s goals effectively, rather than resting on their laurels or on a financial “gain” made one financial year. (For more on pain and gain shares, see our Practice note on NEC Option C.)

Alliancing should never be seen as the soft option. It brings risks and challenges as well as rewards, but the rewards make it worth doing, and worth doing well.

Manchester Business School are currently examining experience of alliancing and other forms of collaboration. They would welcome views on these subjects.

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