Sharing risk improves bottom line study finds

National infrastructure projects could provide better value for money if alliancing concepts were more widely adopted, according to the results of the largest survey of participants on Australian and New Zealand infrastructure projects.

The Collaborative Contracting Study led by QUT with Royal Melbourne Institute of Technology, the Alliancing Association of Australasia (AAA) and Project Delivery Services, aims to improve outcomes from the construction and maintenance of road, water, rail, building and energy infrastructure.

Project Leader Associate Professor Karen Manley, from QUT's Civil Engineering and Built Environment School, said the study found that collective risk sharing that was inherent in alliances made for better outcomes.

"This study is a ground-breaking improvement in our understanding of performance drivers in constructing national infrastructure," Professor Manley said.

"Recent moves away from alliances in Australia, especially single-team alliances, may be costly to taxpayers.

"This is because alliances, which share risk between the client and delivery teams, outperform other types of collaborative contracting, like ECIs, where risks are allocated to particular parties."

Project performance was measured with a single construct built on eight factors to reflect value-for-money: time efficiency, cost efficiency, safety, environment impact, quality, team collaboration, community impact, and innovation.

The 320 survey respondents were contacts of the AAA database with experience on collaborative projects in Australia or New Zealand, and largely worked on projects valued in excess of $5M, with the majority experienced on projects valued between $100M and $500M (46%), and exceeding $500M in value (30%).

"Alliance proponents believe that shared risk creates a truly integrated team, leading to performance improvements," Professor Manley said. "It seems they're right."

Professor Manley said while Australia was a world leader in collaborative delivery models that more efficiently provided and maintained national assets, such as roads, dams, railways, buildings and mines, there was still room to improve.

The study looked at the impact of more than 200 government collaborative projects with experienced clients. Two main methods of pricing the project were employed (1) using one delivery team, selected on non-price criteria, with whom a project price was negotiated; or (2) using multiple delivery teams that provide competing project prices. A delivery team typically comprises contractors, consultants, suppliers and client representatives.

"The study found that the single team model performed better," Professor Manley said.

"When the client negotiates price with just one team, combined with open-book transparency, they turbo-charge trust and a feeling of shared responsibility, which has a demonstrable positive impact on project performance.

"Despite the widely held belief that competitive tension pushes prices down and ensures value for money, this does not appear to be the case.

"The above findings are based on t-tests and cluster analysis which found statistically significant differences in project performance at the 99 per cent confidence level."

Professor Manley said another startling finding of this survey was that contractual conditions do not directly impact project performance; instead their impact is shaped by the non-contractual features of a project. This finding is based on regression analysis and structural equation modelling.

"Obligations established under the contract are not sufficient to optimise performance," she said.

"Non-contractual measures to enhance collaboration are required, especially in relation to the quality of leadership and team workshops.

"Because non-contractual factors like improving relationships between people, functions, or organisations belong to the human side of management and are largely unseen, they are often ignored but this is at a project's peril."

A good example of effective collaboration was the Origin Alliance Ipswich Motorway Upgrade: Dinmore to Goodna Project, which was completed six months ahead of its four-year program and 10 pr cent under its budget of $1.95B last year: bit.ly/1bjWztw

Professor Manley has devised a means of comparing collaborative project performance with that of traditional projects and is currently seeking funding to extend the study in that direction.

Provided by Queensland University of Technology