Across Canada, collaborative contracting models such as Alliance delivery have gained momentum as infrastructure programs continue to grow in complexity, budget and scale. From major rail and Light Rail Transit (LRT) expansions to integrated corridor improvements, project owners are exploring Alliance models to improve collaboration, define scope and better manage risk across large scale capital projects.
At the core of Alliance contracting is a simple but powerful principle: ‘Best for Project.’ It is the common theme that aligns the owner’s participants, designers and contractors under shared goals, shared risk and shared reward mechanisms. The Alliance delivery model creates an environment where the project team can collectively solve problems, evaluate trade-offs and make informed decisions together. For complex transit infrastructure projects, the benefits are significant. But what happens when Alliance’s ‘Best for Project’ principle is applied within a larger infrastructure program?
The strength of Alliance contracting in complex transit projects
I had the pleasure of being a part of one of the first major transit Alliance contracting projects in Canada, becoming deeply involved as an owner’s participant within the Alliance project team. Involvement in the development phase was a learning curve for all participants, which many took on with excitement and motivation. The team took part in collaborative behavioral training, undertook numerous joint team workshops, and completed psychological personality profiling, so that everyone understood what it takes to work together in the Alliance project model. It was a unique experience to see that dominant human behaviours can emerge in simulated exercises. The desire to win, to be right and to lead, were all present in these training exercises. And it was a humbling learning experience, as we learned to leave our egos at the door.
Once behavioural expectations were set, and the Alliance project charter was created, the entire Alliance project team had something to reference. This is how we behave, what we value and what our goals are. We all signed the charter, which drove our actions and established a respectful method to call out behaviours that were not considered to be conducive to the ‘Best for Project’ approach. We quickly learned that collaborative contracting behaviours require more than being nice to one another. It means having hard conversations, respectfully, and fully understanding the impacts of our decisions on each other’s success and bottom lines. Coming out on the other side of a difficult conversation, having gained understanding and respect for each other, is true collaboration.
Now that we had the project charter finalized, our Alliance team set out to develop the Alliance project proposal. The output of the development phase was to achieve an agreed upon, realistic, risk allocated, resource loaded, schedule and target cost, using the Pain Share/Gain Share method for any benefits or overruns. Jointly discussing realistic methods of construction, design considerations, owner limitations and project goals revealed the power of Alliance contracting. The Alliance project team could discuss various scenarios, risks and downstream impacts, ensuring ‘Best for Project’ decisions were well informed, before presenting them to the owner’s representative, so they could make decisions on how the Alliance project proposal should be shaped for scope. This defines the project agreement.
Once the owner’s representative – who is responsible for administering the Alliance contract on behalf of the owner – accepted the Alliance project proposal, the Alliance project team began executing the work. The benefits of Alliance contracting were evident very early on. Those who worked and solved problems best together, were the ones who provided the most value. They quickly emerged as leaders within the Alliance delivery model because everyone was acting on behalf of the Alliance project, as opposed to representing their individual companies’ interests or leaning on their own specific titles.
The program-level challenge
While Alliance contracting can be an effective delivery model when applied to a single, yet complex transit infrastructure project, there are some challenges to consider:
- The moment an Alliance project sits inside a broader capital infrastructure program, many of the core ‘Best for Project’ assumptions can be challenged or compromised within the program;
- While one project may use an Alliance delivery model within a program, adjacent and often interdependent projects may be more traditional Design-Build or Design-Bid-Build projects. This can slow decision-making and increase complexity for the owner, as not all parties working within the broader program share the same Alliance incentives;
- Risk allocation becomes blurred at the interface between contracts when risk ownership is not well defined;
- ‘Best for Project’ thinking inside the Alliance can conflict with ‘best for owner’ (or even what might be best for the province, community, etc.) given the incentives that lie outside the Alliance contract.
During the Alliance development phase, changes to scope and requirements are intended to be part of the process by design – and therefore more effectively absorbed. While these changes still represent a cost in direct time and material, the Alliance project team has not yet locked in the schedule and target cost, meaning they can make modifications as they evaluate how to achieve the requested success criteria.
If the broader transit program releases a new standard that has an adjacent and impacting project schedule, or includes another project which overlaps and passes requirements onto the Alliance project, the Alliance project team can analyze the changes and provide feedback during the development phase. However, it is important to establish a clear and defined decision-making and escalation process, as the feedback loop must come to an end at some point.
Once ready, the Alliance project team will develop a well thought out proposal that will be approved by the owner’s representative, initiating the execution phase. The time for open-ended scenario analysis will have passed, as budget and performance requirement agreements are structured and established, and outline the rules of engagement for the remaining detailed design. Depending on the challenges that surface in the execution of the Alliance project, further scenario analysis can cause delays that negatively impact the Alliance project with subsequent impacts on the project schedule and cost.
Governance complexity in multi-project transit programs
We’ve now entered the execution phase for the Alliance project, with a freshly agreed upon and locked down schedule. However, imagine that on day one, the ever-evolving program undergoes a change that impacts the Alliance project proposal requirements. Any changes to the scope, schedule, project interfaces, regulatory or governing body requirements, can create a variation within the Alliance project that needs to be evaluated by the Alliance project team – and subsequently by the owner’s representative. However, with the development phase complete, the time for the most efficient and open scenario analysis has passed, and each of these points become much more meaningful and potentially impactful to cost, schedule and even subcontractor relationships. Timing is everything here. The Alliance project team may have lined up their sub-contractors, prepared to begin construction and then may have to cancel or delay from the agreed delivery path. Relationships can suffer and it becomes harder to maintain the positive teamwork morale and culture. This is why it is crucial to understand that once an Alliance project enters the execution phase, the amount and type of variation impacting the Alliance project team, should be strongly considered against the plans and commitments that have been outlined and accepted during the development phase. If the program requirements outside of the Alliance project, haven’t been defined or prepared to give clear direction, consideration should be given to “shielding” the Alliance project from unknown and unclear decisions. A process for managing decision making effectively must be clearly established by the owner to account for this.
The risk of misalignment
The suggestion here is that an Alliance can optimize a project, but it may not be able to influence the optimization of a complex transit program. This is why it is critical to understand what constitutes a project and a program, and how the two entities interact. What is the mechanism for the project to react to the program, or vice versa? How is this controlled effectively, and what are the thresholds to allow this to happen? Owners need to proactively set up this framework of interaction and associated decision making in advance.
Aligning Alliance projects with broader transit program objectives
Our experts navigate complexities associated with Alliance delivery models and associated transit infrastructure programs. We take the time to understand your program and will support you as you select the best contract models and decision-making framework to deliver each project and program successfully. Program owners need to consider the complexities of blending Alliance contracts with traditional delivery models and be prepared to handle the impacts. The answers to these considerations will lie within the unique context of each project within the program and will vary. Setting up the framework of the program, the Alliance project and other projects within the program, will be critical to ensure efficiency and success. Once these foundational elements are correctly set, the benefits and motivations seen within the Alliance project are very real.
