Choosing the correct project delivery model is a vital aspect of ensuring an infrastructure project is successful. Using the right delivery model for a given project ensures contractual obligations are allocated appropriately, risks are managed and objectives delivered. This article outlines the key factors that inform which delivery model will work best for a given project, then details the ideal uses of different delivery models, along with each of their pros and cons.

1. 5 June 2020
Procurement in Focus
It’s all in the delivery – project delivery models for major infrastructure projects
The Basics
The project delivery model is the guiding aspect which
governs the relationship between the principal and the
contractor (and often, other stakeholders). Choosing
the correct delivery model for your infrastructure
project is vital to ensuring contractual obligations are
allocated appropriately, performance is guaranteed,
and a project runs smoothly and in accordance with
requirements.
Key Considerations
Before commencing any major infrastructure project, a
project team should identify the key factors and risks
which may arise during the course of the project and
which party is best placed to manage and deal with
those risks. Some factors to be considered are
detailed in the figure below.
Figure 1: Key considerations when choosing a
project delivery model
Types of Delivery Models
Linear models
These include more traditional construct only and
design and construct delivery models, where the
principal contracts with a contractor, who then
contracts with various subcontractors to deliver
different parts of the project.
Figure 2: Basic linear delivery model
A more complex type of linear model which is often
effective for large infrastructure projects is the design,
build, operate and maintain model (DBOM). As the
name suggests, in a DBOM model, the principal
engages a contractor to not only design and build the
infrastructure, but to operate and maintain it for a set
period of time – often between 5 and 30 years. The
Project objectives
 What are the ultimate project objectives and
outcomes?
 How is the project to be managed and handed over
on completion?
 Are there additional continuing obligations on a
party after completion, such as operating and
maintaining the project works or services?
Complexity
 How complex is the project?
 Are there significant or novel design elements?
 How will these risks be managed?
Performance requirements
 If the infrastructure is required to produce a certain
output (eg. energy), how is that output measured?
 How is that performance contractually guaranteed?
 What are the consequences for under or over-
performance?
Time and cost
 What pricing model is the contractor for the project
being engaged under (e.g. lump sum, schedule of
rates or guaranteed maximum price)?
 Is there a cost regime in place to incentivise the
contractor to achieve critical dates for completion
or for exceeding performance standards?
Experience
 Does the contractor regularly perform the required
project works?
 Has your organisation engaged them before?
 Familiarity with the contractor and their operations
may inform a different contracting approach.

2. Paul Muscat Craig Tanzer Lachlan Bongers Aaron Williams BJ Doyle Tayla Kamura
PARTNER SENIOR ASSOCIATE ASSOCIATE SENIOR PARALEGAL GRADUATE LAW CLERK
T: +61 7 5553 9485 T: +61 7 5553 9481 T: +61 7 5553 9535 T: +61 7 5553 9546 T: +61 7 5553 9544 T: +61 7 5553 9400
paul.muscat@minterellison.com craig.tanzer@minterellison.com Lachlan.bongers@minterellison.com aaron.williams@minterellison.com bj.doyle@minterellison.com tayla.kamura@minterellison.com
*Disclaimer: The information contained in this update is intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation
of this update, MinterEllison does not accept liability for any errors it may contain.
principal finances the development and owns the
infrastructure, while paying set fees to the contractor
for the operation and maintenance. Alternatively, for
infrastructure which generates operational income like
toll roads, the contractor may provide the operation and
maintenance in exchange for a portion of that
operational income, which further incentivizes the
contractor to operate and maintain the infrastructure
optimally in order to maximise the operational income.
Linear model contracts for project delivery are direct,
commonly used, and effective for projects where the
scope and requirements of the project are known at the
time of contracting. They don’t provide as much room
for collaboration or innovation as some of the delivery
models discussed later in this article, but their relative
simplicity can allow for cheaper procurement processes
and efficient contract administration, especially for less
complex projects.
Construction Management
In a construction management model, the principal
engages a construction manager to manage the
construction works on the principal’s behalf. The
principal engages any required design consultants
directly, and also engages the trade contractors directly
(with the construction manager acting as the principal’s
agent in these transactions).
Figure 3: Construction management delivery model
This model is particularly useful when the principal
needs to maintain direct control over the project while it
is being undertaken, for example, when a state
government is upgrading a hospital which must remain
operational during the upgrade works.
Otherwise though, this model can be complicated from
a contract administration perspective, and the principal
takes on added risk because they’ll need to claim
against each of the trade contractors directly (instead
of just claiming against one head contractor who
contracted with many subcontractors) if something
goes wrong. Likewise, the principal bears the risk of
cost overrun from all contractors, instead of relying on
a fixed price head contract and having the head
contractor bear the risk of subcontractor cost overrun,
as in the linear model. The principal also takes on the
added cost of the construction manager.
Public Private Partnerships (PPPs)
As the name suggests, the PPP model involves a more
collaborative approach between the public and private
sectors. This can make it particularly useful for more
complex and innovative projects. Typically, the
government entity commissioning the project (the
principal) will provide an output-based rather than
completely prescriptive specification for private
contractors (often private consortiums) to tender for.
The principal then engages the chosen contractor to
deliver the services over a long period of time –
typically 25 to 30 years or more – and the contractor
finances, designs, constructs, operates and/or
maintains the infrastructure, depending on the contract
and type of PPP required.
Figure 4: Example PPP delivery model
The ownership of the infrastructure varies depending
on what type of PPP is being implemented for the
project. Two common types are outlined below.
Build, own, operate and transfer (BOOT) – the
contractor finances and builds the infrastructure, often
with some funding provided by the government
principal. The contractor owns and operates the
infrastructure for a set period of time, during which the
principal pays fees to use the infrastructure, and at the
end of the set period the ownership of the infrastructure
is transferred to the government principal, either freely
or for a fee set in the initial contract.
Design, build, finance and operate (DBFO) – the
contractor designs, builds, finances and operates the
infrastructure development, leasing it to the
government principal for an agreed period of time at
agreed rates depending on whether agreed KPI’s are
met. At the end of the set period the ownership of the
infrastructure remains with the contractor.
There are many other variations to each party’s
requirements under the contract, but generally

3. Paul Muscat Craig Tanzer Lachlan Bongers Aaron Williams BJ Doyle Tayla Kamura
PARTNER SENIOR ASSOCIATE ASSOCIATE SENIOR PARALEGAL GRADUATE LAW CLERK
T: +61 7 5553 9485 T: +61 7 5553 9481 T: +61 7 5553 9535 T: +61 7 5553 9546 T: +61 7 5553 9544 T: +61 7 5553 9400
paul.muscat@minterellison.com craig.tanzer@minterellison.com Lachlan.bongers@minterellison.com aaron.williams@minterellison.com bj.doyle@minterellison.com tayla.kamura@minterellison.com
*Disclaimer: The information contained in this update is intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation
of this update, MinterEllison does not accept liability for any errors it may contain.
speaking under a PPP model, the government principal
pays the contractor over the term of the contract based
on what services the contractor is providing and how
those services are being delivered against various
contractual KPIs. The contractor is the one who bears
the cost risks over the life of the contract because the
fees to be paid by the principal are set ahead of time to
increase or decrease according to those contractual
KPI’s. In this way, efficiency and quality are
encouraged in the design, construction and operation
of the infrastructure, which is why the PPP model lends
itself well to large scale projects where the principal
seeks innovative solutions from providers. The better
the solution provided by the contractor, the more they
will reap the benefits.
From a cashflow standpoint, the long term of the
contract also allows for the contractor to benefit from
steady incoming payments, and allows principals to
benefit from known outgoing costs of the operation of
the infrastructure (within the range calculated in
accordance with KPIs), for an extended period of time.
Some important points to note though, are that the
success of the project relies heavily on well-defined
specifications and performance agreed by the principal
and the contractor. The upfront costs of this model can
therefore be higher than others because the tendering
and contract negotiation processes are complicated.
The principal also generally needs to have a higher
degree of technical skills to be able to assess effective
tenders and negotiate the technical aspects of the
contract with the provider. If these upfront cost hurdles
can be met though, this model can be very successful
over the lifespan of a major infrastructure project.
Alliance models
Alliance models involve a government principal
collaborating with one or more other parties (for
example, a design contractor and construction
contractor, or a materials supplier and a construction
contractor) to deliver infrastructure which the principal
will eventually take ownership of. The parties share
both the risks and rewards of the project on a ‘no-fault,
no-blame’ basis, and decisions usually need to be
unanimous.
Figure 5: Alliance delivery model
Usually the non-owner parties are guaranteed to be
reimbursed their direct project costs and overheads,
but past that the return from the project is based on its
effectiveness. If the actual delivery of the project
exceeds agreed targets the reward is shared between
the parties according to an agreed ‘gain-share’ formula,
but likewise if the project delivery does not meet
agreed targets an agreed ‘pain-share’ formula will
apply.
The mutual interests of all the parties involved can
often lead to better solutions than more adversarial
contracting models, but also means that maintaining
relationships between parties in the alliance is vital.
These relationships can be costly to establish and
maintain at times, and the principal will bear the major
brunt of any catastrophic failure of the project, because
the other parties are guaranteed to be paid at least
their base costs and overheads.
For this reason, this model often works best when the
contractors have worked well with the principal
previously. Even if this is the case, alliance models
should generally only be considered for the delivery of
complex infrastructure projects where significant
innovation is required, where risks are unpredictable
and can best be managed collectively, and when the
government principal can be closely involved with the
project and add value through their own contributions.
Conclusion
Consideration of which delivery model to use for a
given infrastructure project is vital to ensuring the
efficient and effective delivery of the project. Each of
the available models offers its own pros and cons
which make them suitable for different situations. The
decision as to which delivery model to implement can
be a complicated one, but with deliberate consideration
of the requirements of the project, the optimal solution
can always be found for any given infrastructure
project.
If you would like any advice or for further information
about any of the above project delivery models, please
contact Paul Muscat (details below).
*All delivery model flowcharts sourced from the
Australian Government, Department of Infrastructure
and Regional Development, National Public Private
Partnership Guidelines, Volume 1: Procurement
Options Analysis (December 2008).