Collaborative Procurement Introduction

Procurement (CONS6817) Lara Tookey & John Boon
PROCUREMENT – SESSION #7
Introduction to Collaborative Procurement
Partnering

Procurement Context: A Construction
team
‘….so called building team. As teams go it is rather
peculiar, not at all like a cricket eleven, more like a
scratch bunch consisting of one batsman, one goal
keeper, a pole vaulter and a polo player.
Normally brought together for a single enterprise,
each member has different objectives, training and
techniques and different rules. The relationship is
unstable, even unreliable, with every little
functional cohesion and no loyalty to a common
end beyond that of coming through unscathed.’
(Denys Hinton 1976)

Procurement Context: Interdependence
between role Players
‘It would be nice to assume that such participants
shared common objectives and observed
common rules for achieving them: unfortunately
this is seldom the case.
The building process is therefore plagued with
unwarranted assumptions, flouted regulations,
parallel circuits, informal arrangements and ad
hoc adjustments necessary to reconcile the
reality with its abstract representation
(Turin 1975)

WHAT’S THE PROBLEM?
The behavioural aspects of projects

Typical organisation on DBB project
(with MC appointed)
All parties selected on
the basis of lowest price
• Need to minimise
expenditure
• Need to increase price
wherever possible
Architect Engineers QS Management
Contractor
Sub-contractors &
Suppliers
Project Manager

Normal behaviour is…..
• Tendency is for parties to the project to
stand apart from one another;
• Demand the other party perform as required
by the contract; and
• Pursue claims against them when they fail to
perform.

Normal behaviour is…..
• Not seek to assist the other party to perform;
• Not attempt to help the other party overcome a
problem when they hit one;
• Never consider exceeding the requirements of
the contract; and
• Never consider mutually beneficial ways of
improving on the deliverables

End result tends to be….
• Projects delivered to marginally acceptable
quality standards;
• Contractors and consultants only achieve
marginally acceptable levels of profitability;
• Cost and time overruns; and
• Contract completion involves a process of
resolving significant numbers of claims either by
negotiation or litigation.

Standard Contracting…..
• Requires a relationship between parties so as
to achieve the objectives of the contract;
• Are formal expressions of the relationship
between the parties
• ….. Law of contract, drafting, negotiation and
interpretation of contracts inherently lead to
adversarial relationships……

Disputes are contributed to by:
• Inappropriate allocation of risk resulting in
unfair contracts;
• Poor project definition producing defective
documentation;
• Imprecise definition of the respective roles of
the parties confusing responsibilities of the
parties and leading to deficient management.

Plus the issues of lack of
constructor input into
the design process

Changing the Paradigm
Owner
Facilities
Manager
Construction
Manager
Lighting
Designer
Structural
Engineer
Architect
Civil
Engineer
HVAC
Shared
Project
Model
OWNER DESIGNER
CONTRACTOR
SUB SUPPLIER DB/SUB

• An overlay of normal procurement methods that seeks to
create a culture of collaboration within the project team.
Partnering
• Seeks to align the objectives of the parties through the
structure of the contract.
Alliancing
• Creation of relationships that allow the parties to learn and
improve their performance from one project to the next
Strategic long term relationships
Public Private Partnerships (PPPs)
Relationship/
CollaborativeContracting

Essential Principles
• Mutual Respect
• Mutual Benefit
• Early Goal Definition
• Enhanced Communication
• Clearly Defined Standards
• Appropriate Technology
• High Performance

• Used to describe delivery methods that
concentrate on relationships between the
parties to a construction contract as well as the
project’s requirements.
• Encourages parties to move from confrontation
and encourages them to work together to
achieve outstanding results.
• Covers various forms
• So, ‘contracts’ are flexible enough to address
uncertainties.
Collaborative / relational
contracting

• Allows
• Mutual future planning
• Sharing of both benefits and burdens
• Eg gain share or pain share in target cost contracts
• Principles underpin co-operative working
arrangements

•Project partnering (short term,
often non contractual)
•Strategic partnering (long term
relationships, contractual)
Partnering

Project Partnering

Basic concept of partnering …
• … is relatively simple and is not intended to give
rise to a change in legal structures.
• … is best described as a management
philosophy or tool.
• improved methods of communication;
• the escalation of disputes quickly from the site to
senior management; and
• the encouragement of lateral thinking to overcome
problems which arise during the construction
phase, without necessarily reverting to the contract
as a matter of first resort.

Partnering aims at:
• Meeting the project objectives by
cooperation, team building and mutual trust
rather than by confrontation;
• Developing a cooperative culture;
• Placing a value on long-term relationships;
• Developing an environment for long-term
profitability;
• Encouraging innovation;
• Achieving better project buildability;

Partnering aims at:
• Lowering the project cost through the
process of value management
• Reducing the project time and improving
quality;
• Eliminating contractual conflict
• Establishing a more dynamic project
organisational structure and clear lines of
communication.

Key Elements of Partnering
• Commitment
• Equity
• Trust
• Mutual Goals / Objectives
• Helpful Systems and Procedures
• Continuous Joint Evaluation
• Timely Responsiveness

Commitment
Partnering requires the commitment of senior
management as well as the project team
• Invitation and response needs to be at CEO level
• Attendance by CEOs at workshop
• Partnering evaluation reported to senior
management
• Partnering success part of performance
management criteria for Project Managers
• CEOs willing to meet as part of the issue
resolution process

Equity
• Recognition of the need to satisfy each
parties requirements for a successful project.
• Recognition that many goals are in fact
MUTUAL GOALS.
• Problems are seen as goals
• Decisions based on long-term interests of all
the partnering companies.

Trust
• Partnering relies on conducting business in
an open and trusting way.
• Trust is earned by mutual endeavour
• Requires a major shift in attitude

Mutual Goals and Objectives
As part of the partnering workshop parties
identify where their interests overlap:
• Completion on time
• Avoid cost overruns
• No lost time injuries
• Minimise paperwork
• No litigation

Helpful Systems and
Procedures
• Value management
• Communication and problem solving
• Continuous evaluation of Partnering Process

Continuous Joint Evaluation
• How is evaluation done – what needs to be
measured when?
• What action should unsatisfactory evaluation
trigger?
• Should there be follow up workshops?

Timely Responsiveness
Rapid issue resolution process:
• Encourage project team members to resolve
issues within their authority, at their level,
without help or direction from above.
• If unable to resolve within a stipulated time
frame, they must escalate to the next level.
• Cannot chose not to make a decision – resolve
or escalate.

THE PROCESS

Review workshops
Ongoing evaluation
Initial workshop
Charter
Partnering
champions
Evaluation process
Dispute escalation
process
Invitation to partner
Education Commitment

Design Bid Build
Contract
Invitation to
partner
Partnering is an overlay
to the traditional
procurement method.

Invitation
• One party invites the other to enter into a
partnering agreement
• Pre or post contract
• Either client or contractor can extend the
invitation

Education
Parties entering into the Partnering Process
need to understand:
• What it is
• How it works
Both at senior management and project team
levels.

Design Bid Build
Contract
Invitation to
partner
Partnering is an overlay
to the traditional
procurement method.
Partnering
Workshop
Collaborative behaviour

Workshop and Project Charter
• Workshop is facilitated by an independent
facilitator – clear structure and agenda
• Introductions
• Team members as people
• Interest in the project
• Interests outside of work
• Preferred workstyles
• Issues of team imbalance
• Issues and concerns
• Listed and parked up

• Development of goals and objectives
• Each party develops list of own goals and objectives
• Reports back to whole workshop
• Mutual goals and objectives identified and agreed
upon
• Goals and objectives of each party that the other
party is prepared to support agreed (eg profit goals)
• Small working party develops a draft charter for
reporting back to the meeting.
• Charter agreed.

• Development of an Issue Resolution Process
• Resolve the problem at the lowest level
• Unresolved problems to be escalated upwards -
quickly
• No jumping of levels of authority allowed
• Ignoring the problem or no decision is not
acceptable
See matrix in appendices appropriateness of
matrix tested by discussing typical problems

• Development of a joint evaluation process
• Agree process
• Agree timing of process
• Delegate to working group development of an
evaluation tool

• Check all issues and concerns have been
addressed and parties are genuinely willing
to commit.
• Identification of Partnering Champions
• Formal signing of the Charter

Implementation and Continual
Evaluation
• Parties should be working cooperatively
• Evaluation process should be measuring
whether agreed goals and objectives are
being achieved – requires openness and
honesty
• Corrective action is often necessary
particularly in the early stages (or when the
going gets tough)
• Follow up workshops are normally necessary

WHAT COULD GO WRONG?

Problems
• Its voluntary
• Its about getting the right attitudes and mind
sets
• It requires openness and trust
• It requires bravery
• Its hard to break old attitudes and mind sets
• Can break down when difficult issues arise

What Partnering is NOT!
• It is not a cure-all
• It is NOT a procurement route!!!
• Partnering is not a contract !
• Not mandatory.
• Parties must agree to cooperate in a partnering
relationship.
• It has no legal effect
• Cannot be used to alter the terms of contract, nor
does it effect the legal responsibilities of the parties.
• However, yes, it will facilitate additional communication
and understanding of the requirements!!

Collaborative Procurement Introduction

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