Last edited 02 Dec 2016

Partnering in construction

Partnering (sometimes referred to as alliancing, for example in the rail sector) became popular largely as a result of Sir Michael Latham’s report, ‘Constructing the Team’ in 1994 which criticised the adversarial approach inherent in traditional construction contracts. This was followed by publication of ‘Partnering in the Team’ by the Construction Industry Board.

Partnering is a broad term used to describe a collaborative management approach that encourages openness and trust between parties to a contract. The parties become dependent on one another for success and this requires a change in culture, attitude and procedures throughout the supply chain. It is most commonly used on large, long-term or high-risk contracts.

Partnering can be adopted for a one-off project, or can be a long-term relationship over a number of projects (such as a framework agreement). The longer the contract, the greater the benefit of partnering as there is more opportunity for building working relationships, finding improvements and planning investment. Where a partnering relationship is for a specific project, it is known as ‘project partnering’. Where it is a multi-project relationship it is known as ‘strategic partnering’.

Successful partnering should enable long-term integration of the entire project team for the mutual benefit of all, and so it is crucial that the right partners are selected. Partner’s commercial objectives and culture should be aligned, use of parties resources should be optimised and risks should be allocated to those most able to mitigate them.

Partnering requires both expertise and commitment from the client to set up and manage the process effectively and to act as an adjudicator of disputes. It can be arranged either by use of a traditional contract with a separate partnering agreement, or by use of a contract with an aligned partnering agreement. It can be either a two-party or multi-party arrangement.

Contracts are often arranged on a cost-reimbursable, target-cost, open-book basis including both incentives, and penalties. Problem resolution procedures should be based on solutions not blame, and there should be procedures in place to ensure continuous improvement. This requires continual benchmarking, target setting, assessment, feeding back and adaptation.

Partnering agreements include the project partnering contract PPC2000, the term partnering contract TPC2005, the NEC partnering agreement and the ICE Partnering Addendum.

Whilst there are clear benefits to partnering in certain circumstances, there can be risks that partnering becomes a paper exercise unless there is proper buy-in throughout the supply chain and that ‘cosy’ inefficient relationships develop. There is also some criticism that large partnering contracts can exclude smaller companies and so may hamper innovation.

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