United Kingdom

Emergence of Alliancing

Alliancing only emerged in the UK after the 1980s, when much of the UK’s economic infrastructure was transferred to the private sector and competitive tendering was the main method for appointing a contractor. This meant that the contractor offering the lowest price and the highest transfer of risk was generally awarded the project. As a result, projects were often delivered late and over budget and a “claims culture” was prevalent.

In response, the 1990s saw a re-evaluation of the procurement process. Reports by Sir Michael Latham (Constructing the Team, 1994) and Sir John Egan (Rethinking Construction, 1998) recommended a more cooperative approach to infrastructure projects.

An early example of this partnership model in the UK was the construction of a Honda Car Plant in Swindon, which completed in 2001. The Honda team adopted a ‘one team, one goal’ approach to the development, which ultimately delivered a 40% improvement in cost, compared to the previous plant built nine years earlier.

Gaining Momentum

The publication of PPC2000 in 2000 pioneered the project alliance model. Launched by Sir John Egan, it was described by Sir Michael Latham as “the full monty of partnering and modern best practice.”  It has been used extensively, achieving notable cost savings:

• The Department for Work & Pensions launched its GBP737M nationwide Job Centre Plus Programme for refurbishment and creation of 969 integrated Job Centres and Benefits Offices, utilising PPC2000.  It achieved audited savings of 18% using a group of 14 contractors.  It also achieved a 25% saving on its original forecast price of GBP981M and Sir Michael Latham congratulated the project “for the success in [its] drive to introduce a new approach, based on the creation of a partnering culture across the entire supply chain.”   
• The London Borough of Hackney commissioned the first local government PPC2000 partnering contract for its GBP13M Hackney Homes Improvement programme achieving savings of 20%.
• For its GBP5.8M four-year programme of new builds and refurbishments, the Vehicle Operator and Services Agency’s Estate Modernisation Programme was the first project constructed in the UK using the JCT Construction Excellence Contract.  Developed by JCT in collaboration with Constructing Excellence, the JCT/CE contract promoted collaborative and integrated working, providing a single contract to regulate all relationships within the project.

However, arguably the first major infrastructure project to employ a partnership strategy in the UK was the complex Heathrow Airport Terminal 5 expansion. The expansion, funded by the British Airport Authority with Sir John Egan as CEO, reached practical completion in 2008. This GBP4.3B project was a rarity for its time, finishing on time and within budget. Although opinion is split regarding the overall success of the project, as there were several teething problems after the building opened, the project was a pioneer for large scale developments. Since then, it has become a principle objective of the Government Construction Plan 2016-2020 to “deploy collaborative procurement techniques” and “drive whole-life approaches” to construction projects.

Standard Form Framework

It became clear, however, that there was a need for a standard form framework.  Developed in consultation with 120 organisations, the FAC-1 (Framework Alliance Contract – published in June 2016) is a versatile, multi-party standard form compatible with and designed to integrate projects under JCT, NEC, FIDIC, ICC and PPC contract forms, sub-contracts and term contracts as well as consultant appointments under ACA, ACE, CIC, FIDIC, JCT, NEC, RIBA and RICS.  Endorsed by the Construction Industry Council and Constructing Excellence, it draws from a range of already successful bespoke frameworks, combining these processes with the more collaborative features of alliancing contracts. 

Key features include setting out:

• alliancing members and objectives;
• targets, performance measurements, incentives etc and the mutual commitments of each of the alliance members;
• multi-party structure in line with the Alliancing Code of Practice 2015 recommendation of “[a] horizontal agreement between the respective partners capture(s) the principles within the commercial model, particularly those that jointly incentivise performance and create collaboration”.  Launched by the Infrastructure Client Group and ICE, the Alliancing Code of Practice is designed to help infrastructure companies work together more effectively on joint projects and avoid disputes;
• how “improved value” for the project will be achieved, with the use of agreed Alliance Activities linked to agreed deadlines under the Timetable;
• use of the Supply Chain Collaboration system: a system to enable and support the development of improved tier 1/2/3 Supply Chain relationships, proven to deliver improved value through post-tender cost savings, whole life value and increased quality control; and
• how risks will be managed and disputes avoided with the operation of a risk register, early warning system and forum to raise and resolve problems as well as options for ADR.

The use of BIM is also encouraged with a view to achieving improved value.

FAC-1 has been well-received and used on procurements totalling over GBP42B in five different countries.  In the UK, it has been embraced by, for example:

• The Scottish Procurement Alliance: with a GBP1.5B, four-year house-building framework.  Developed to help accelerate the delivery of 50,000 new affordable homes, the framework is divided into regional lots and by project size, with provision for additional FAC-1 contracts to be created by one or more clients;
• The Football Foundation and its partners including the Football Association and Sport England: procurement of a GBP150M modular supplier alliance for changing room buildings as well as a GBP 60M mini-pitch programme alliance; and
• The Crown Commercial Service (CCS): in April 2019 the government launched its GBP1.2B modular alliance: a seven-lot, multi-party collaborative four-year framework created by CCS focussing on education, healthcare, housing, defence, commercial and retail sectors.  The foundations for this lay in a previous alliance set up by the CCS which saw suppliers working together to improve value for public sector clients.  A further alliance was launched in October 2019 – a seven-year GBP30Bn collaborative construction works and associated services framework.  Both alliances will allow clients to select from most of the commonly used standard form contracts at call-off with standard central government amendments but the framework is built around an alliancing structure, using FAC-1 documentation and featuring advanced alliance facilities with a focus on supporting the implementation of BIM, life cycle cost, prompt payment, project bank accounts, early contractor involvement and social value and aligning suppliers and customers in achieving agreed success measures for each of the 11 lots.

A term alliance contract (TAC-1) followed on the heels of FAC-1, launching in June 2017 and including many of the features and benefits of FAC-1, in addition to mobilisation and handover procedures, engagement with Stakeholders and a clear Order Procedure (supported by Template Order Documents).  The Southern Housing Group (SHG), which is one of southern England’s largest housing associations, was the first company to use TAC-1 for its Planned Maintenance Term Contracts.  SHG’s objectives were to “work collaboratively to achieve value for money, efficiency and best working practices” through an alliance “dedicated to agreed common goals and an understanding of each other’s expectations and values.”

Maturing the Alliancing Model

More recently, the alliancing model has matured further in the UK with the introduction of the industry-wide ‘Project 13’ and the publication by NEC of its first Alliance Contract.  In addition, there is a small but developing appetite for a new generation of insurance-backed alliancing which seeks to ensure superior outcomes and create value for all stakeholders.

Project 13: In May 2018 the Infrastructure Client Group (ICG), together with the Institute of Civil Engineers (ICE), introduced Project 13 because they felt that “the transactional model for delivering major infrastructure projects and programmes is broken [and it] prevents efficient delivery, prohibits innovation and therefore fails to provide the high-performing infrastructure networks that businesses and the public require.”

Project 13 is made up of a Blueprint, which offers an enterprise model for infrastructure delivery, and a Handbook, which sets out the core principles which should be followed to allow this model to succeed. The Project 13 enterprise model looks to jointly mitigate risk rather than transfer it, and rewards parties based on the overall outcome of the project.

In a move away from the more traditional, vertical structures, the Blueprint looks towards creating “enterprises” amongst five core roles (the “Pillars”): owners, investors, integrators, advisors and suppliers. It promotes a long-term, cooperative relationship between these parties with a value-driven approach.

Since the establishment of Project 13, several infrastructure projects have followed the alliancing Blueprint, for example:

• Anglian Water (as asset owner in its Capital Delivery Alliances, which already have strong track records, delivering significant improvements in cost, carbon and time);
• the Environment Agency (Next Generation Supplier Arrangements);
• National Grid (London Power Tunnels (LPT2) project, which looks to rewire London for the future at a cost of GBP750M);
• Network Rail (North, Central and South Alliances, which are considered some of the most sophisticated forms of alliancing in the UK currently); and more recently
• Sellafield Ltd which is responsible for the safe and secure operation and clean-up of the Sellafield nuclear site.

NEC4 Alliance Contract: June 2018 heralded the publication of NEC’s Alliance Contract “designed for use on major projects or programmes of work where longer term collaborative ways of working are to be created”. Given the absence of a standard form alliancing contract prior to FAC-1, NEC4 was a welcome addition to the industry suite of alliancing contracts.  Because all parties involved sign up to the same single contract, the NEC4 Alliance Contract describes itself as a “true alliancing contract”. 

The parties have detailed and specific obligations to work collaboratively together. There is provision for an Alliance Board, with each member nominating a representative.  The Alliance Board determines the Alliance’s objectives, agrees the work (and can alter the scope), makes decisions as stated in the contract, appoints and instructs the Alliance Manager (whose role is similar to the Project Manager in other NEC contracts, except that the Alliance Manager acts on behalf of the Alliance Board and not the Client), and resolves any disputes between the Alliance.   There has been a good uptake of the Alliance Contract on major projects:

• The GBP20B Hinkley Point C nuclear power station project in Somerset has witnessed the industry’s increasing acknowledgement of the benefits of alliancing contracts.  In September 2018, the NEC4 Alliance Contract was selected by EDF and its Chinese partner CGN to deliver GBP1B of MEH (mechanical, electrical and HVAC) services on Hinkley Point.  The MEH partners must work together to design and install complex cabling (c.3000km of electrical cables), pipework (c.110km of piping systems) and ducting in the power station’s 2500 rooms in line with the project’s priorities of safety, quality, time and cost.  Hinkley Point also gave rise to a multi-million-pound technical and engineering services agreement (HTSA) comprising existing Tier 1 services suppliers who will work collaboratively as a single alliance. When fully operational, Hinkley Point will supply about 7% of the UK’s electricity; and
• Highways England has long championed the use of collaborative working to achieve effective results. Its successful delivery of the A14 Cambridge to Huntingdon Improvement Scheme is attributed to bringing together what were originally separate construction teams into a single alliance.  In 2020/21 one of the biggest public sector contract awards was for Highway England’s upcoming 10-year GBP4.5B Smart-Motorways programme which will use the NEC Alliance Contract. 

Integrated Project Insurance: To enable successful alliancing, developments following this model are often backed by costly insurance policies. The UK has trialled Integrated Project Insurance as part of the Cabinet Office’s Trial Projects Programme, following the Government Construction Strategy 2011. The first project to use IPI under the Programme was the Dudley College Advance II development, which completed in September 2017. In reference to the Dudley project, Innovate UK stated that this form of insurance-backed alliancing has the “potential to transform the construction industry”. Although the Dudley project was relatively small, costing just under GBP12M, the project was considered such a success that the same IPI backed alliancing model is being used to deliver Dudley College’s new Institute of Technology which has a value of GBP32.5M.