Transforming Australia’s infrastructure sector: a spotlight on collaborative delivery models and relationship contracting
In recent years, Australia’s infrastructure sector has undergone a remarkable transformation and period of growth. Fueled by an increasing population and the need for improved connectivity, both state and federal government initiatives have played a significant role in stimulating interest in the sector and contributing to the rising number of megaprojects under development. Additionally, market demand for sustainable and technologically advanced solutions, coupled with favourable regulatory changes, has encouraged large-scale private sector participation and record capital investments.
Whilst these trends have positively contributed to the broader economy, they have emerged in lockstep with delivery capacity pressures resulting from the increasing requirement for general and specialised resources to oversee, fund, finance, and manage project portfolios. Entities wanting to develop new infrastructure now face the challenge of adapting and harmonising traditional methodologies with these emerging market trends. This requires creating transparent and appropriate governance structures, identifying adequate risk and profit-sharing incentive mechanisms, developing a clear understanding of consumer requirements, and ultimately unlocking superior value-for-money (VfM) outcomes.
Consequently, current market conditions lend themselves to re-thinking and innovating traditional delivery methods which has in many cases resulted in undesirable project outcomes (e.g delays, disputes and cost overruns) for clients and contractors alike. Against this backdrop, collaborative delivery models and relationship contracting arrangements, such as Alliance Contracting and the Delivery Partner Model (DPM), which promote stakeholder cooperation, alignment on project objectives and more equitable risk allocation, have gained popularity.
Table 1: Snapshot of Traditional Delivery Model, Alliance Contracting and DPM
|
Traditional Delivery Models |
Alliance Contracting |
Delivery Partner Model (DPM) |
|
|---|---|---|---|
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Summary |
Traditional Delivery Models typically involve a structured sequence of phases and contracts for design, construction, and operations in project development. It follows a linear progression where clients or developers employ designers to formulate designs and specifications, which are subsequently utilised in bids to enlist potential contractors to finalise design and deliver the project. Throughout the project lifecycle, the contractor typically bears the risk of project uncertainties. |
Alliance Contracting engages project stakeholders such as owners, contractors, and suppliers throughout the project lifecycle, fostering a cooperative environment facilitated by integrated structures and processes that promote innovation and adaptability in project implementation. Effective management of interfaces within such models can address issues projects encounter related to size and complexity, whilst adequately sharing risks and rewards. |
This contracting approach is adaptable to both traditional and collaborative delivery models,and involves designating a delivery partner responsible for overseeing interactions with crucial stakeholders throughout the project lifecycle. Its aim is to support project developers or teams minimise interface-related uncertainties. These relationship contracts usually encompass provisions for collective decision-making, risk distribution, and shared benefits, serving to reinforce integrated team frameworks. |
Alliance Contracting
Alliance Contracting involves formulating a partnership composed of owners, designers, and contractors to manage objectives throughout the design, construction and operation phases of a project. Early engagement of key stakeholders and the integration of processes and structures, encourages effective communication and collaboration and risk allocation among key stakeholders.
Project teams are aligned to common objectives through mechanisms of profit and risk-sharing designed to reduce the likelihood of delays and cost overruns. In particular, these mechanisms create environments of robust risk management practices and have proven to reduce overall project costs under a traditional lump sum contract through the reduction in contingency and direct costs. When internal structures of an Alliance Contracting model are effective, developers minimise interface risks whilst benefiting from innovation and overcoming capacity constraints related to the size, complexity and volume of a project pipeline.
Delivery Partner Model (DPM)
The Delivery Partner Model (DPM) is a relationship contracting arrangement where developers engage a delivery partner to support project development and execution. DPM can be applied to both traditional and collaborative delivery models to address capacity pressures.
A delivery partner supplies specialist resources with their capabilities and expertise to manage project interfaces and enable a disaggregated procurement approach. External support is provided early during the project feasibility stage and continues on a staged engagement basis for the remainder of the project lifecycle. DPM provides benefits to projects operating under capacity constraints by supplementing the project development capability and resource availability of the project developer.
Conclusion
Embracing collaborative delivery models and contracting arrangements, fully or in part, to complement traditional delivery models, can offer developers and contractors novel solutions to address some of the current project delivery issues and complexities often experienced in Australia’s infrastructure landscape. These approaches provide additional flexibility to project teams to mitigate uncertainties and enable an equitable distribution of risk and rewards throughout the project lifecycle.
