Partnering: The Right Procurement Tool for Risky Contracts Joep Athmer, Ben Hamer, Tim Kersley and Phillip Sanderson Partnering: The Right Procurement Tool for Risky Contracts Abstract Introduction Partnering has been increasingly used both in the UK Despite the recent progress, partnering in the UK and internationally as a means to facilitate a proactive continues to mean different things to different people. approach to problem solving as a project team rather The difference between “project” and “strategic” than adopting a reactive, adversarial approach partnering is fundamental and could reflect the commonly associated with the more traditional forms difference between a client’s desire to partner on a of contract. short-term or long-term basis. The Environment Agency, Halcrow Group Ltd and There are a number of purists who would argue that Van Oord UK Ltd are partners who have been active “project partnering” is a contradiction in terms: indeed, in promoting the use of partnering type procurement, the 1991 National Economic Development Council design and construction since 1996. All partners (NEDC) Report adopts a definition of partnering, which participated in three distinct ‘Frameworks’ for the requires that partnering be a “long-term commitment”. programme of flood defences in England and Wales. A proactive partnering approach opposed to a reactive, Namely, the National Environmental and Engineering sometimes adversarial approach certainly gives many Consultancy Agreement; the National Contractors’ clear advantages. These include better forward Framework; and, the Combined Beach Management planning of resources, better cost control and value for Framework. These ‘Frameworks’ apply the principles money. Partnering should be voluntary and willing on all of Partnering by using the tools available within the sides, based on joint ownership of common objectives New Engineering Contract (NEC), comprising both and commitment. the Professional Services Contract (PSC) and the Engineering and Construction Contract (ECC). The authors, through their respective organisations, have been actively involved in promoting and practising a partnering philosophy to the procurement and construction of various flood and coastal schemes in the United Kingdom. In this article, the historic events that have influenced the UK flood and coastal construction industry in adopting a partnering ethos are presented. The mechanics of partnering procedures are discussed and risk management is examined in detail. Auditing, value for money and cash forecasting are analysed together with strict reporting and early warnings of potential and real problems ahead. How team members relate to each other and to the public and to other stakeholders is also described. Finally, some relevant Figure 1. Catastrophic flooding of the south of Holland in 1953 examples of partnering projects successfully completed resulted in a long-lasting partnership between client, engineers are presented. and contractors to build effective flood defences. 3 Terra et Aqua – Number 98 – March 2005 With more than 27 years experience, The partnering approach to procurement of Flood and Joep Athmer has worked on projects Coastal projects in the UK has been seen as generally ranging from large reclamations such as successful and is becoming, although slowly, accepta- Chek Lap Kok, Hong Kong to offshore ble in other countries. It is seen as the establishment of platform installations in the Beaufort long-term arrangements between the parties involved Sea, Canada. He graduated in Civil with competent individuals carrying out the execution Engineering from the College of as one team. Advanced Technology, Utrecht (1976) and in Business Administration from Breda (1989) both in The Netherlands, HISTORY OF PARTNERING IN MARINE but has primarily lived and worked CONTRACTS abroad. He is presently Managing Joep Athmer Director of Van Oord UK and Ireland. Whilst the initiative in the UK for the New Engineering Contract (NEC) dates back to 1985, it was only subse- quent to Sir Michael Latham's report “Constructing Graduated in Oceanography with the Team” in 1994 and the publication of the second Mathematics at Southampton edition of the suite of NEC Contracts in 1995, University in 1989, Ben Hamer is a that clients in both the public and private sectors really Chartered Engineer and a member of began adopting it. the Institution of Civil Engineers. Presently an Associate Director with Its utilisation was further encouraged after Sir John Halcrow Group Ltd, he is responsible Egan's report “Rethinking Construction” in 1998, for delivery of coastal and estuarial which amongst other things espoused the benefits of engineering projects in England and all parties involved in the delivery of a project acting in a Wales. Prior to joining Halcrow in “spirit of mutual trust and co-operation”. 1995, Ben worked with HR Ben Hamer Wallingford and in local government Contractors working in the field of marine civil in Dorset, England. engineering infrastructure have historic experience in supply chain partnerships. This has developed from “must-must” situations or events. “Only disasters Tim Kersley studied at the University make people change”. of Plymouth and obtained BEng (Hons) and MICE (CEng). Tim has For example, in 1953 the massive storm and North Sea 14 years experience in Maritime surge were catastrophic and 2000 people were lost as Construction and Supply Chain a result of floods in the Zealand, in the south of Holland. Management. He has worked for A law in the Dutch Parliament was passed to ensure 9 years, first as a Project Manager, the swift, efficient, raising of flood defences. Client, then as Commercial Manager, consulting engineers and contractors were encouraged and now as Operations Manager, to work together in partnership by the Government. all positions within the National “Join Hands” was the rallying cry and was effective in Capital Programme Management bringing together all parties to complete the advanced Tim Kersley Service for the Environment Agency. flood defence works that have served Holland so well since that time (Figure 1). Phillip Sanderson graduated from In 1997, the Water Industry in the UK was many years Portsmouth in 1980, was awarded the ahead of flood defence in the procurement of projects HSE Part 1 Offshore Air Diver using partnering philosophy. For example, by com- Certificate in 1982 and became a bining three new outfalls at Cambois, Hendon and Chartered Member of the Institution Horden, Northumbrian Water were able to save money of Civil Engineers in 1985. He has been by agreeing favourable terms for an efficient single the Resident Structural Engineer at mobilisation of expensive marine plant. After a detailed the Brighton Palace Pier, worked with assessment process, which included a major focus on Mobell Marine and with Geoffrey the attitudes and values both consultant and contractor Osborne Ltd. He joined Dutch Marine exhibited towards partnering, a design and construct Contractor Van Oord UK Ltd in 1988. alliance was formed between all parties. Risks were Phillip Sanderson Since April 2004 he has been a self identified early, and managed by those best-placed to employed Consulting Engineer. mitigate their effects. Fundamental issues addressed were joint objectives, development of appropriate behaviours, and agreement to joint problem solving 4 Partnering: The Right Procurement Tool for Risky Contracts processes. Early contractor involvement resulted in custom-made site investigation saving £350,000, Advertise • Or use existing knowledge of the market to draw up a and other value management techniques were used to long list assess suitability of design. The outfall pipe at Horden • Or use experience of professional team was pulled from offshore through a tunnel and pre- Long List dredged trench so avoiding the need for an expensive cofferdam. Briefing Van Oord UK Ltd ACZ had been successful on a number of large outfall schemes working with new forms of target based Conditions of Contract within Presentations a Partnering Framework. The ECC is particularly Post tendering Preferred route well-suited to partnering arrangements, as it seeks to partnership minimise disputes, encourage good working relation- ships, and stimulate effective management. Timely Preferred contractor Short list communications, and the adoption of a forward-looking perspective, to identify and resolve potential problems before the financial and programme implications are Workshop Tender actually encountered are the principal benefits of this contract form. A payment percentage for profit and overhead is agreed between the parties, and can then Award be applied to a transparent analysis of actual cost. Detailed This both reflects the client’s awareness that design process contractors require appropriate profit margins to remain Workshop in business, and provides the client with the confidence Negotiated target price of value for money that can only be secured by an understanding of cost build-ups. The success of this Construction Construction style of working led Van Oord UK Ltd to consider its application to flood and coastal projects. Figure 2. Flow chart for the Partnering Selection Process. The Environment Agency for England and Wales commenced a series of new procurement “pilot” projects in 1998. This work sought to explore a number been involved in a large number of partnering contracts of ways in which more productive “Partnering” within the marine and other fields of civil engineering,