Any chink in the construction supply chain causes a ripple effect that quickly turns into a serious problem. Ian Heaphy explains how the new NEC4 Alliance Contract aims to get all the project team working towards a common goal.
Ian Heaphy
The scale and complexity of large infrastructure projects has had a dramatic effect on the supply chain. Incorporating new technology demands and consultancy needs can drive up the number of contractors, consultants and suppliers, and engaging so many firms presents a challenge to clients and delivery managers.
Collaboration is, and has always been, essential. Each firm is working towards a shared end goal and ensuring each considers the others’ objectives is key. In theory, this should be self-explanatory.
In practice, it is rarely that simple. Many end clients are now establishing alliances to help foster a culture of collaboration, for example Anglian Water’s @One Alliance and the Midlands Highways Alliance. However, without the legal framework in place to explicitly outline how these can work, it can be difficult to ensure these partnerships translate to best practice projects.
In June 2018, in response to these challenges, NEC – the formalised contracts system created by the Institution of Civil Engineers – launched its Alliance Contract (ALC), as part of its NEC4 tranche of agreements. Aligned with the government construction strategy and its commitment to BIM and Soft Landings, all NEC4 contracts were created to inspire and enable better project collaboration.
The ALC aims to provide a solid legal foundation for alliances to work from. It works to set guidelines for best practice collaborative working and ensures all delivery partners are committed to the success of a complex project.
How is it different?
While all NEC agreements have collaboration at their core, the ALC expands by providing a multi-party contract with an integrated risk and reward model. This approach creates an alliance agreement where the client, key contractors, consultants and suppliers, or “partners”, are engaged under a single contract, with each given an equal voice and a share in the performance of the alliance.
“Client, contractors, consultants and suppliers are each given an equal voice and a share in the performance of the alliance.”
This means the success of the project as a whole becomes each contractor’s prerogative, rather than focusing solely on the part they are responsible for.
An ALC creates three distinct roles and functions. The client takes a central role and forms an active part of the alliance. It retains certain powers and functions that it performs outside of the alliance, as well as contributing towards the delivery of the work as a member of the alliance.
The alliance board has a representative from each of the partners and the client and overall responsibility for the alliance. The board is responsible for setting strategy, decision-making and resolving disputes. As alliance members share the majority of risk under the contract, the contract requires that no claims can be made against the other members except for limited events such as a deliberate breach of contract.
The board appoints an alliance manager to administer the majority of activities under the contract, including functions normally carried out by the project or service manager under other NEC contracts, and some aspects of the contractor’s role.
What are the challenges?
The biggest challenge to implementing an ALC is attitudes within the industry itself – a significant step change in thinking is needed from the sector towards embracing collaboration.
For contractors that may have traditionally focused on their project contributions alone, the concept of shared risk and co-working may be disconcerting at first. A programme of stakeholder engagement workshops should be considered to help foster strong working relationships from the beginning of a project, and help create a culture of collaborative working that can spread organically throughout the industry.
As the complexity of projects increases, the number of alliances created is following suit. The potential that alliance working can bring is huge. However, legal infrastructure needs to be in place to support and act as a cornerstone for encouraging collaboration – that’s what the NEC4 Alliance Contract aims to provide.
Ian Heaphy is a member of the NEC4 Contract Board and a director of IN Construction Consulting
