Mainstay’s Alliance Consulting helps organisations align commercial objectives, optimize knowledge and expertise and appropriately allocate risk in order to deliver outstanding outcomes on complex projects.

What is Alliancing and Alliance Contracting?

Alliancing is an approach through which organisations can work together to achieve a desired outcome. Effectively implemented the approach should optimize knowledge and expertise from participating organisations and should appropriately allocate risk according where the risk is best managed. Critical to the success of Alliancing arrangements are aligned commercial objectives. And of course trust.

When these factors are aligned Alliancing can deliver outstanding outcomes.

The Problem with the Traditional Contract Approach

Is it any surprise When an organisation decides to initiate a major project the traditional approach has been to issue something like a Request to Tender (RFT) to the market. This approach is invariably used regardless of the nature of the project - Industrial Automation, IT, Building and Construction, Mining or to Outsourcing and Service Contracts.

The objective from the customer’s perspective in following this approach is to engage a supplier who will deliver the scope of works at the lowest possible price. The objective of the supplier is to win the business knowing that in all probability their bid price must be lower than that of their competitors. So the supplier examines the scope documents and builds their proposal based on the lowest margins acceptable to their business and the minimum supply to the customer they think they can get away with. Over the life of the project the customer may dispute the supply but will invariably modify some aspects of the scope. The supplier knows that this is an area where they can not only grow their revenues but significantly improve their overall project margins.

Following this tender ritual the parties then proceed to lock in the absurdities of these arrangements through a contract which also allocates the project risk, often to the party who has least control over the management of that risk, then that many projects not only run over time and over budget but fail to deliver the desired outcomes?

Purchasing Departments and Lawyers will of course maintain that the approach works and delivers the best pricing. After all it’s easy for Purchasing Departments to demonstrate how well the process works when buying commodity products like ballpoint pens and reams of paper. The savings are there for everyone to see. The Lawyers of course make a lot of money sorting out the mess when the approach fails yet again to deliver on the more complex purchases.

Traditional tender and contract arrangements are a recipe for failure and smarter organisations are looking to the more sophisticated approaches such as Alliance Contracting.

How can Mainstay Business Services Help?

We can help Customers - Project Owners - identify potential Alliancing partners.

We can help Suppliers propose Alliancing arrangements to their Customers.

Our approach is then to first work with both Customers and Suppliers to understand the potential for the organisations to work together. Trust is a very big part of Alliancing and we pull no punches in our assessments of whether organisations are likely to be able to align the necessary factors and succeed with the approach.

In some cases we might propose a facilitated workshop of the key players from each organisation. Preferably not involving the Supply Department or Lawyers in the first round.

When we are confident that there is sufficient goodwill and trust between the organisations and that objectives can ultimately be aligned we can move onto the next steps. That is:

• helping to develop appropriate delivery structures

• developing performance objectives

• formulating agreements

• monitoring delivery performance

Organisations can at any stage ask us to step back and leave them to manage the process.

If you feel that an Alliancing arrangement could help achieve better outcomes on your project please contact us or call us for a confidential discussion about how we might be able to help.