03 Dec 2009

STOP PRESS: National benchmarking report on alliance contracting

by Doug Jones

The Victorian Department of Treasury and Finance has (as the lead sponsor of an inter-jurisdictional steering committee) released a report: In Pursuit of Additional Value: A benchmarking study into alliancing in the public sector. The report details the results of a study on the performance of alliancing in Australia. The research is based on a five-year study of 14 projects covering a range of major infrastructure sectors.

The major theme of the report is that alliancing has the potential to deliver value for money outcomes for owners, and performs particularly well in delivering non-financial outcomes. As a collaborative delivery method and compared to traditional delivery methods, alliances were found to perform well in avoiding disputes, improving non-cost outcomes and commencing physical works early, leading to earlier completion.

One of the key findings was that the actual outturn costs for the alliancing projects in the sample case studies were 45-55 percent above the costs quoted in business cases. This compared to PPP delivery which rated at 5-10 percent and traditional models at 20 percent. Despite these figures, the policy recommendations were in favour of government retaining and developing alliancing as a project delivery method for infrastructure provided that steps are taken to improve the rigour in estimating outturn costs in the business case and that a greater emphasis is placed on maximising the opportunity for price competition in the procurement process.

In our next edition of Project Insights we will review the findings and implications in more detail.

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