With the debate raging over spiralling costs for capital infrastructure investment, a new model of project that might just show the way is quietly establishing itself in the UK rail industry. Pure alliancing is a form of project organisation based on an Australian model – the pure alliance agreement – in which employer and contractors sign a contract committing them to work closely together as one integrated team for the duration of a project.
What distinguishes ‘pure’ from more traditional methods of alliancing and other collaborative contract models is that the parties agree to share most of the risks and rewards. This means, for example, that an employing organisation cannot force a contractor to take the hit on cost overruns. Instead, what are sometimes called ‘no sue agreements’ or ‘no claims environments’ bind the partners to reimburse each other’s extra costs and prevent them from suing each other.
Value for money
The 2011 government-sponsored McNulty report on rail investment shaped the attitude of much of the rail industry towards alliancing, including Network Rail. One of McNulty’s key recommendations was for the industry to adopt BS11000 – a benchmark for collaborative working – to deliver greater value for money for taxpayers.
Neill Carruthers, head of collaborative working for Network Rail Infrastructure Projects, has been heavily involved in developing the company’s alliancing approach. “The alliance model now represents our most advanced form of collaborative working with the supply chain,” he says.
“It’s been around in the UK since the1990s. Originally, it was developed by BP for North Sea projects, and in more recent years in other infrastructure sectors by companies such as the National Grid and Anglia Water.
“There’s also been a tremendous amount of work done in Australia over the past decade or so. Over A$80 billion (£47 billion) of public sector infrastructure projects have been carried out under various forms of alliancing.”
The Stafford project
Over the past two years, several projects across the network have been established as alliances. The most advanced of these is the £250 million Stafford Area Improvements Programme (SAIP).
The first UK rail industry project to adopt the one contract, pure alliance approach, SAIP is an intensive programme of improvements to track, telecommunications, highways, and most things in between.
This multidisciplinary programme is being delivered by the Staffordshire Alliance, comprising Network Rail, VolkerRail, Laing O’Rourke and Atkins. It aims to remove a bottleneck on the West Coast Main Line through three key projects: linespeed improvements between Crewe and Stafford, resignalling Stafford station and the surrounding area, and a proposed new flyover at Norton Bridge (issue 104 – June 2013).
The core of any alliance is its integrated management team – comprising representatives of the main project players. Under a pure alliance agreement, all major decisions are agreed unanimously.
Such projects have just one standalone commercial agreement. In earlier models, the commercial agreement took precedence over a separate works agreement, and generally overrode it in cases of dispute.
“We’re trying to create a different commercial imperative,” adds Neil. “There’s just one agreement and the parties have to make it work – there’s no opt out into another agreement.
“The basic concept of pure alliancing is collective legal responsibility, which means moving away from the traditional risk transfer approach of ‘the employer shall do this and the contractor shall do that’ towards saying ‘the alliance shall do this’.”
Above all, pure alliance projects are about individual staff working and behaving in a new way, and prioritising the project’s aims above those of their employers.
Peter Webb, head of construction management at Balfour Beatty, was delivery manager in the Finsbury Park to Alexandra Palace project (F2A) – a complex resignalling and improvement programme that’s been likened to “carrying out open heart surgery on the network every weekend”.
“One of the fundamental points of pure alliancing is behaviour,” insists Webb. “The old way of contracting fostered suspicion. Information was given out on a need-to-know basis, and people protected their own company and resources.
“In place of that, you have a very open culture: a sharing of information and resources, based on trust and relationships.”
The alliance leadership team, including representatives from Network Rail and Balfour Beatty, reinforced the idea of the project as a new organisation by renaming it F2A – First to Alliance – with its own logo and branded pens and mugs.
After spending some time impressing the new attitude upon the project workforce, and finding new roles elsewhere for those unwilling to work this way, Peter and the leadership team saw a new attitude begin to emerge with contractors making practical decisions that favoured the project rather than their own company.
“We set a challenge to our integrated project organisation – specifically the P-Way – to save costs over the plan,” says Peter. “They came back and told us they could lose one locomotive off every engineering train – there were usually two – and do what’s called a run- around move. To move the train from the non- locomotive end, they’d disconnect the engine, cross over some points, run it back round the other way, cross over some more points, and put it back the other end.
“It forced them to do more logistics planning, but saved the project £750,000. That shows people changing their behaviour and thinking with the client rather than selfishly. And the money went back into the pot of that particular project.”
Neill Carruthers agrees that attitudes had to change. “Network Rail had a reputation as quite a tough client to work for, so one of the challenges we are trying to tackle is unpicking years of learned behaviour.
“We’ve invested a lot in alliance development opportunities – workshops for our own staff before the procurement process begins, and joint workshops afterwards. The principles upon which we assess partners as being suitable for alliancing are very much the same ones we now apply to ourselves.”
Alliancing and beyond
Although pure alliancing isn’t suitable for every project, Neil believes that it will be used more widely during control period five (2014- 2019). He hopes it will also be extended to involving Network Rail’s customers, the train and freight operating companies, in infrastructure project schemes.
“Alliance working has already been established between Network Rail and its customers for operational activities, such as our alliance with South West Trains, but widening this to capital expenditure projects represents a further opportunity for collaboration,” he says.
“To this end, the Rail Delivery Group (a body bringing together train operators and Network Rail) is overseeing a piece of work to develop a framework to promote greater collaboration between us and the operators in the delivery of capital expenditure schemes.”
The HS2 alliance?
So could this new spirit of industry co- operation, and a determination to keep a lid on costs, extend to the biggest infrastructure project of them all – HS2?
HS2 Ltd has already issued a statement declaring its aim to save 10% on costs by recruiting contractors at the start of the project to work “in an integrated way”. But is the company prepared to embrace alliancing principles still further?
“We’re looking at a wide range of contracting models to assess which are most appropriate for HS2, considering its size and complexity, including alliancing,” commented Beth West, HS2’s commercial director. “We recognise that collaborative working is vital to the successful delivery of our project. We’re only starting the process of engaging with our supply chain, and we’ll need to incentivise our suppliers from the outset to ensure they focus on the overall costs and programme – not just their own performance.
“The bottom line is that we want to ensure these incentives are cascaded to all companies in our supply chain – not just at the top tier – so we can deliver the best value for money for the taxpayer.”
So alliancing is here for the long term. Companies will have to get used to forming alliances with others, and those alliances will be different from project to project. Just another challenge to face in the years ahead.