Partnering Strategies: The Legal Dimension
by Ellis Baker
Ellis Baker is a Partner and Head of the Construction & Engineering Practice Group, White & Case, London.
Presentation delivered at the Institution of Mechanical Engineers Conference “Collaborative Strategies - Partnering and Alliancing for Success” 7 September 2006
The paper examines the concepts of partnering and alliancing and their potential benefits for participants in engineering projects. Given that some advocates of these techniques have argued that they render contracts redundant, the paper considers the feasibility of partnering without a legal framework. Alternatively, the range of contractual arrangements available is explored. The paper also addresses the use of pain/gain share agreements and open book accounting and the specific issue of the feasibility of long-term relationship-building under the EU procurement regulatory regime.
The success of the Shajiao ‘B’ 700 MW power station in Shenzhen in the People’s Republic of China is an example of co-operative working arrangements helping to deliver a positive result in the power industry. The conference aims to consider aspects of partnering and alliancing from the point of view of the respective participants and whether they offer opportunities to achieve such results. This paper begins by asking whether partnering/alliancing are an alternative to a legal framework for the project or whether they require special legal provision to be put in place.
The partnering and alliancing concepts Partnering can be project specific or long term. Both involve the parties to a project, in construction typically the owner/client, the contractor and the consultants, forming a different kind of relationship from the relationship which normally exists under traditional procurement arrangements. The key is the promotion and practice of collaborative working and the use of techniques aimed at encouraging co-operation between the parties. The degree of the relationship can vary considerably across a wide range, from the signature of a statement of goals without more, to, at the other end of the spectrum, full integration of management systems, open-book accounting and sharing of other information and mutual incentivisation. Alliancing is a related concept centred around all the major participants. The term is also used to describe a long-term arrangement, which offers opportunities for benefits to be gained by co-ordinated action and cost-sharing over a number of projects or an ongoing programme.
The benefits of partnering/alliancing It is not the purpose of this paper to advocate the use of partnering in the power sector or any other industry. It is sufficient to say that there is enough evidence of benefit to justify serious examination of the means of implementation. The UK construction industry has recorded a number of high-profile successes which serve to illustrate the potential benefits available.