Partnering and partnering contracts presentation


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Partnering and partnering contracts presentation

  1. 1. Partnering and Partnering Forms of Contract
  2. 2. Kim Newman <ul><li>In excess of 18 years experience of consultancy services </li></ul><ul><li>Partnering Advisor to number of local authorities </li></ul><ul><li>Post graduate diploma in Procurement </li></ul><ul><li>Chartered Member of CIPS </li></ul><ul><li>Seeking Fellowship of CIPS </li></ul><ul><li>Regular presenter in relation to partnering </li></ul>
  3. 3. Background to Partnering <ul><li>‘ Win-win’ relationships are not a new idea </li></ul><ul><li>Initially developed in the early 1990’s </li></ul><ul><li>Egan – Rethinking Construction </li></ul><ul><li>Practices developed and refined over the past decade </li></ul><ul><li>Now we know a lot about building partnering relationships </li></ul><ul><li>The concept is simple, the practice is more involved </li></ul>
  4. 4. What is Partnering? <ul><li>Partnering exists where two, or more, organisations develop a close and, generally, long-term relationship to work together as partners </li></ul><ul><li>Other names for this have included ‘Partnership Sourcing’, ‘Proactive Purchasing’, ‘Co-makership’ and others </li></ul><ul><li>It isn’t philanthropy: the aim is to secure the best possible advantageous position for both parties. </li></ul><ul><li>The principle is that teamwork is better than combat </li></ul><ul><li>A Partnering relationship works because the parties have an interest in each other’s success </li></ul>
  5. 5. What is Partnering? <ul><li>There is no standard model </li></ul><ul><li>There are a number of interpretations of the basic idea </li></ul><ul><li>Partners regard themselves as part of the same team with the same aim: to ensure that the end client is delighted </li></ul><ul><li>Even if the size of the Partners differ, they each have rights and responsibilities in making the Partnering relationship work </li></ul><ul><li>Partnering is not an end in itself or a panacea, but a means of strategically and continuously managing the business relationship to mutual advantage </li></ul>
  6. 6. Strategic Partnering <ul><li>Strategic Partnering means sharing: </li></ul><ul><ul><li>Knowledge and information </li></ul></ul><ul><ul><li>Challenges and solutions </li></ul></ul><ul><ul><li>Risks and rewards </li></ul></ul><ul><ul><li>Visions </li></ul></ul><ul><ul><li>Resources and/or facilities </li></ul></ul><ul><li>And requires teamwork, also </li></ul><ul><ul><li>Mutual trust </li></ul></ul><ul><ul><li>Understanding </li></ul></ul>
  7. 7. Cultural Adaptation <ul><li>Benefits of the Partnering Contract </li></ul><ul><ul><li>Achieve best practice and quality standards </li></ul></ul><ul><ul><li>Increase flexibility </li></ul></ul><ul><ul><li>Reduce administration costs </li></ul></ul><ul><ul><li>Plan more effectively </li></ul></ul><ul><ul><li>Opportunities for innovation </li></ul></ul><ul><ul><li>Transform a supply chain into a value chain </li></ul></ul>
  8. 8. Cultural Adaptation <ul><li>Embracing the Contract </li></ul><ul><ul><li>For Partnering to work a cultural change is required, as well as a change in mindset of those involved </li></ul></ul><ul><ul><li>Partnering is not a one-off solution but a culture that is applied continuously </li></ul></ul><ul><ul><li>Risk and reward </li></ul></ul><ul><ul><li>Team work </li></ul></ul><ul><ul><li>Developing a ‘no blame’ culture </li></ul></ul><ul><ul><li>Knowledge management </li></ul></ul><ul><ul><li>Output focus </li></ul></ul>
  9. 9. Cultural Adaptation <ul><li>Overcoming Cultural difficulties </li></ul><ul><ul><li>Scepticism will be rife – inside your own organisation as well as your suppliers </li></ul></ul><ul><ul><li>It might be generated by: </li></ul></ul><ul><ul><ul><li>Incomprehension </li></ul></ul></ul><ul><ul><ul><li>Unwillingness to change the status quo </li></ul></ul></ul><ul><ul><ul><li>General fears of the unknown </li></ul></ul></ul><ul><ul><ul><li>Specific concerns about an individuals future role </li></ul></ul></ul><ul><ul><ul><li>Or a mixture of several of the above </li></ul></ul></ul><ul><ul><li>Change is rarely welcomed, although it is fundamental to survival </li></ul></ul><ul><ul><li>Commitment from the top is therefore imperative </li></ul></ul>
  10. 10. Partnering Advisor <ul><li>Partnering Advisor </li></ul><ul><ul><li>An independent party owing a duty of care to all Partnering Team members to provide fair and constructive advice on all aspects of the Partnering Contract </li></ul></ul><ul><ul><li>Selection of partnering team members, team building and review of Specialist Contractors </li></ul></ul><ul><ul><li>Preparation of Project Partnering Agreement and any Partnering Charter </li></ul></ul><ul><ul><li>Preparation of any Joining Agreements, Pre-Possession Agreement and Commencement Agreement </li></ul></ul><ul><ul><li>Provision of fair and constructive advice for the benefit of the Partnering Contract </li></ul></ul><ul><ul><li>Facilitation of the partnering relationship </li></ul></ul><ul><ul><li>Attendance at Core Group and Partnering Team meetings </li></ul></ul><ul><ul><li>Assistance in Dispute Avoidance and Resolution </li></ul></ul>
  11. 11. Define what you want from the Partnering relationship <ul><li>Agree the style of the relationship </li></ul><ul><ul><li>Result – A committed and open approach to Partnering </li></ul></ul><ul><li>Agree tangible objectives </li></ul><ul><ul><li>Result – Defined and agreed objectives for the Partnering Relationship </li></ul></ul><ul><li>Agree continuous improvement </li></ul><ul><ul><li>Result - Agreed targets and mechanisms for measuring performance </li></ul></ul><ul><li>Exit strategy </li></ul><ul><ul><li>Result – A mutually agreed exit strategy </li></ul></ul><ul><li>Commit to a Partnering relationship </li></ul><ul><ul><li>Result – Legal contract </li></ul></ul>
  12. 12. Partnering – Cause and Effect
  13. 13. Partnering Contracts <ul><li>Bespoke forms </li></ul><ul><li>Strategic Partnering Agreements </li></ul><ul><li>PPC2000/TPC2005 </li></ul><ul><li>ECC Partnering Option X12 </li></ul><ul><li>ICE Partnering Addendum </li></ul><ul><li>Public Sector Partnering Contract </li></ul><ul><li>Be collaborative contract </li></ul><ul><li>JCT98 non-binding Partnering Charter </li></ul><ul><li>JCT Constructing Excellence Contract </li></ul>
  14. 14. PPC2000 <ul><li>First standard form of partnering contract </li></ul><ul><li>Only binding form </li></ul><ul><li>Foundation and route map for the partnering process </li></ul><ul><li>Project/programme focus </li></ul><ul><li>Can be applied to any partnered contract </li></ul><ul><li>Multi party contract </li></ul><ul><li>Specialist project partnering contract available </li></ul><ul><li>Integrated relationships and processes </li></ul><ul><li>Mutually enforceable rights and remedies </li></ul><ul><li>Most widely used form </li></ul>
  15. 15. TPC2005 <ul><li>Term Partnering version of PPC2000 </li></ul><ul><li>Focused on tasks and high volume activities </li></ul>
  16. 16. ECC Partnering Option X12 <ul><li>Option is supplement to the standard contract </li></ul><ul><li>Separate contracts for each team member </li></ul><ul><li>Non binding </li></ul><ul><li>Form being used for the olympics </li></ul>
  17. 17. ICE Partnering Addendum <ul><li>Works in similar way the Partnering Option X12 </li></ul><ul><li>Non binding </li></ul><ul><li>Schedules provided for Partners re Core Group Members, Partnering Objectives, Partnering Documents, Risk Management and KPI’s/Incentives </li></ul>
  18. 18. Public Sector Partnering Contract <ul><li>Uncomplicated </li></ul><ul><li>Sets out basic rights and obligations </li></ul><ul><li>Clearly defines risk allocation </li></ul><ul><li>Ethos is one of simplicity </li></ul><ul><li>All parties sign the agreement </li></ul><ul><li>Partnering Agreement has 10 options </li></ul><ul><li>Contains very few procedures </li></ul><ul><li>Used on Perform 21 projects </li></ul>
  19. 19. Be Collaborative Contract <ul><li>For construction related services only </li></ul><ul><li>Aims to provide a framework underpinning collaborative working </li></ul><ul><li>Contractually binding </li></ul><ul><li>Based on a purchase order and collaborative construction terms </li></ul>
  20. 20. JCT Contracts <ul><li>JCT98 with partnering charter </li></ul><ul><ul><li>Option is supplement to the standard contract </li></ul></ul><ul><ul><li>Separate contracts for each team member </li></ul></ul><ul><ul><li>Non binding </li></ul></ul><ul><li>JCT Constructing Excellence Contract – NEW, March 07 </li></ul><ul><ul><li>The aim of the new contract is to promote collaborative and integrated working. It seeks to provide a single contract form to regulate all the relationships involved in a project. The joint mission of the entire project team is to deliver the project. </li></ul></ul>
  21. 21. Key Clause Comparison <ul><li>Parties to the contract </li></ul><ul><ul><li>PPC2000 – Client Representative, Constructor, Specialists, multi party </li></ul></ul><ul><ul><li>TPC2005 – Client Representative, Service Provider, Specialists, multi party </li></ul></ul><ul><ul><li>ECC Option X12 – More than two parties </li></ul></ul><ul><ul><li>ICE Addendum – Two parties or more </li></ul></ul><ul><ul><li>PSPC – 9 out of 10 options are for 2 parties only </li></ul></ul><ul><ul><li>Be – Purchaser and Supplier on;y </li></ul></ul>
  22. 22. Advisers <ul><li>PPC2000 – Client Representative and Partnering Advisor </li></ul><ul><li>TPC2005 – Client Representative and Partnering Adviser </li></ul><ul><li>ECC – Project Manager and Employer </li></ul><ul><li>PSPC – Contract Administrator </li></ul><ul><li>Be – Purchasers Representative </li></ul>
  23. 23. Contract Documents <ul><li>PPC2000/TPC2005 – specified within the contract </li></ul><ul><li>ECC – standard content with each option </li></ul><ul><li>PSPC – Varies according to which option has been selected </li></ul><ul><li>Be – No documents specifically referred to </li></ul>
  24. 24. Partnering Obligations <ul><li>PPC2000/TPC2005 – Objectives defined within the Partnering Agreement </li></ul><ul><li>ECC – Option X12 </li></ul><ul><li>PSPC – Defined in the partnering agreement </li></ul><ul><li>Be – Overriding principles listed only </li></ul>
  25. 25. Allocation of Risk <ul><li>PPC2000/TPC2005 – Required in the contract to work through risk and incorporate a risk register </li></ul><ul><li>ECC – No specific reference </li></ul><ul><li>PSPC – No specific reference </li></ul><ul><li>Be - Required in the contract for the supplier to develop a risk register </li></ul>
  26. 26. Activities Undertaken Before a Contract is Concluded <ul><li>PPC2000/TPC2005 – Pre-possession agreement and pre-commencement agreement </li></ul><ul><li>ECC – No specific reference </li></ul><ul><li>PSPC – Pre start agreement in option 10 only </li></ul><ul><li>Be – No specific requirement </li></ul>
  27. 27. KPI’s and Continuous Improvement <ul><li>PPC2000/TPC2005 – KPI’s to be completed prior to the finalisation of the partnering agreement or in accordance with the partnering timetable, obligation to provide information, obligation regarding continuous improvement and to review performance </li></ul><ul><li>ECC – Option provides for KPI’s </li></ul><ul><li>PSPC – Obligation to agree KPI’s and monitor/review them thereafter </li></ul><ul><li>Be - Obligation to agree KPI’s and monitor/review them thereafter </li></ul>
  28. 28. Partnering Team Meetings <ul><li>PPC2000/TPC2005 – Specific reference in partnering agreement </li></ul><ul><li>ECC – Early warning meetings only </li></ul><ul><li>PSPC – No specific reference </li></ul><ul><li>Be – Regular progress meetings required </li></ul>
  29. 29. Contract Price <ul><li>PPC2000/TPC2005 – Flexibility via a price framework with emphasis on a agreed maximum price </li></ul><ul><li>ECC – Lump sum, cost reimbursement depending on option selected, no reference to a GMP </li></ul><ul><li>PSPC – Lump sum, Target cost with cost reimbursement, depending on option selected, GMP possible </li></ul><ul><li>Be – Target cost, Contract sum, GMP possible </li></ul><ul><li>Open book accounting available in every case </li></ul>
  30. 30. Problem Solving and Dispute Avoidance <ul><li>PPC2000/TPC2005 – Notice required, problem solving hierarchy, guided by the partnering advisor, core group meeting, conciliation/mediation/ADR, adjudication </li></ul><ul><li>ECC – No reference </li></ul><ul><li>PSPC – Agreed via a 2 day workshop </li></ul><ul><li>Be – Negotiation by senior managers </li></ul>
  31. 31. Selecting Partners <ul><li>Generally governed by the OJEU procurement process but issues to consider are: </li></ul><ul><ul><li>How important is the service? </li></ul></ul><ul><ul><li>What does the end Client want and need? </li></ul></ul><ul><li>Define the criteria for selecting partners </li></ul><ul><ul><li>Management style </li></ul></ul><ul><ul><li>Company culture </li></ul></ul><ul><ul><li>What experience do suppliers have? </li></ul></ul><ul><ul><li>What has been the suppliers performance to date? </li></ul></ul><ul><ul><li>How important is your business to a supplier? </li></ul></ul><ul><ul><li>Does the relationship offer the potential for improvements and rewards? </li></ul></ul>
  32. 32. Selecting Partners <ul><li>Cost vs price </li></ul><ul><ul><li>Lowest price is never the sole measure </li></ul></ul><ul><li>Long term vs short term </li></ul><ul><ul><li>The focus is on the long term </li></ul></ul><ul><li>Quality control vs quality checks </li></ul><ul><ul><li>Promotes health rather than curing sickness </li></ul></ul><ul><li>Single sourcing vs multiple sourcing </li></ul><ul><ul><li>Emphasis is on quality Partners </li></ul></ul><ul><ul><li>Decisive factor is performance </li></ul></ul>
  33. 33. Potential Difficulties <ul><li>There are no precise and universal rules </li></ul><ul><li>The relationship must be tailor made to the organisations in question </li></ul><ul><li>Partners must clearly state what they wish to achieve from the relationship, to do this they must understand their own requirements </li></ul><ul><li>Partners must establish both internal and external procedures in order to cope with the new philosophy </li></ul><ul><li>The relationship must be managed continuously </li></ul>
  34. 34. Potential Difficulties <ul><li>Impatience </li></ul><ul><li>Arrogance </li></ul><ul><li>Different cultures </li></ul><ul><li>Unrealistic aspirations </li></ul><ul><li>Complacency </li></ul><ul><li>Reluctance </li></ul><ul><li>Openness/confidentiality </li></ul><ul><li>Fear of the unknown </li></ul>
  35. 35. Summary <ul><li>Partnering is 95% perspiration, 5% inspiration. </li></ul><ul><li>Partnering requires more time, not less </li></ul><ul><li>Requires the full support of all involved </li></ul><ul><li>Partnering places ‘value above price’ and ‘quality above quantity’ </li></ul><ul><li>Focuses on continuous improvement </li></ul><ul><li>Key principle is that the customer and supplier is in the same business and should work together </li></ul>
  36. 36. Essential Ingredients <ul><li>The successful ingredients of a Partnering relationship are: </li></ul><ul><ul><li>Commitment from senior management from both organisations </li></ul></ul><ul><ul><li>Recognition that Partnering requires effort from both parties </li></ul></ul><ul><ul><li>A clear strategy that defines the aims, objectives and long term goals </li></ul></ul><ul><ul><li>Clear communication of these aims etc, to employees within the Partnering organisations </li></ul></ul><ul><ul><li>Clear measurable, value for money benefits </li></ul></ul><ul><ul><li>Agreed, measurable, and realistic performance indicators </li></ul></ul><ul><ul><li>Candid, frequent and open communication between all parties </li></ul></ul><ul><ul><li>Effective mechanisms for dispute resolution </li></ul></ul><ul><ul><li>An exit strategy that specifies under what circumstances each party would want to withdraw from the Partnering relationship </li></ul></ul><ul><ul><li>Above all TRUST!! </li></ul></ul>
  37. 37. <ul><li>Questions……… </li></ul>