Utility Week

2. THE DISRUPTION: THE FUTURE OF ALLIANCES What's the deal: Alliancing is a procurement route that solves many of the challenges caused by adversarial contracts, and as such becomes a useful approach for projects that have high levels of complexity and risk or urgency, as well as major capital programmes. The project alliance con- cept was first introduced in the 1990s, in the North Sea offshore oil and gas industry. Perhaps one of the best known, and certainly the largest, infrastructure alliances in the water sector is Thames Water's eight2O, which includes Thames Water, and two design-and- build joint ventures made up of Costain, Atkins, Black & Veatch (CABV); and Skanska, MWH and Balfour Bea y (SMB). MWH leads pro- gramme control and IBM is the technology partner. Together, the alliance will carry out £1.75 billion of capital investment work during AMP6 (2015-20), with the poten al to extend the contract to 2025. This includes a large mains replacement programme, with a required outcome of reducing leakage, bursts, flooding, and increasing capacity for growth. Why it ma ers: In recent years, alliance contrac ng has emerged as a popular procurement route for large, complex infrastructure developments. In fact, in our research, 61 per cent of respondents said they feel alliances are the most effec ve and efficient approach to the delivery of major capital programmes. Another major UK water alliance is Anglian Water's @One Alliance. Alliance director Dale Evans says: "One of the reasons we created it was because we wanted the benefits of integra on with partner organisa ons to constantly drive us forward, bringing new ideas and new prac ces. "We've been able to challenge our alliances to deliver some fairly audacious goals. In a collabora ve arrangement we get a construc ve and progressive response, we don't get a defensive contractual response, and that's a fundamental difference." Previously, partnering was the preferred method for enhancing collabora on and communica on, and encouraging innova on between project teams. However, as key elements of project partnering were legally non-binding, partnering did not offer the protec ons of a legally enforceable contract. But an alliance requires a culture that transcends the culture of the individuals and organisa ons involved in it. Unlike the tradi onal partnership model, an adversarial "master- contractor" dynamic will not work, and an alliance requires a complex governing model. While the partners in an alliance or JV s ll control their own opera ons, sharing resources and risks requires a lot of trust. In a research document, PwC says se ng the goals of an alliance or JV too high can be an issue. Companies must have a plan for when the alliance will be unwound, including the dispersal of any shared resources. These can be sensi ve conversa ons, but failing to agree on these crucial points can jeopardise the partners entering into the alliance. Add to that the fact that our research found 22 per cent of supply chain respondents worry that working with some u li es could nega vely impact their own brand, and it becomes clear that these alliances must be chosen and formed carefully. w w w . u t i l i t y w e e k l i v e . c o . u k P R E S E N T S 8 | 20TH - 26TH APRIL 2018 | UTILITY WEEK P R E S E N T S

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