“Facts About Alliance Contracts” describes how this type of contract can shape a collaborative process that promotes trust between clients and contractors.
The underlying premise of a traditional contract is adversarial in that each party seeks its own best commercial interests. In an alliance contract both parties, contractor and client, accept a collective responsibility for risk, performance and outcome (gain-sharing / pain-sharing) and avoid a blame culture. They will as soon as possible form integrated teams to work out strategies, which will align their commercial interests and from which both parties, and the progress of the project, will benefit.
When client and contractor work more closely as a team and are more cooperative and less competitive, it becomes easier to mitigate conflicts and settle disputes which leads to increased efficiency.
A traditional contract will be confined by the details of the contract which have gone through a long negotiation process. In contrast, a good alliance contract has a major instrument to promote the spirit of co-operation: The alliance board. The alliance board has a mandate to deliver the project in accordance with the agreed goals. Many of the decisions of this board will be taken in the planning phase, but some will be taken during execution.
An alliance contract is most appropriate when there are not more than two parties in the client-contractor and when the projects are large. For smaller projects, or large projects with multiple partners, its functionality needs to be considered on a case by case basis.
“Facts About Alliance Contracts” answers certain basic questions like:
- What is an Alliance Contract?
- What is an Alliance Contract strategy?
- How does an Alliance Contract differ from a traditional contract?
- How does an Alliance Contract differ from partnering?
- What does the Alliance establishment process look like?
- What does an Alliance Contract look like?
- What are some of the characteristics of an Alliance Contract?
- Does an Alliance Contract pose the danger of leading to conflict?
- Is an Alliance Contract more complex and time-consuming?
- What is the role of the Alliance Board?
- How are disputes resolved?
- Do Alliance Contracts lead to a different way of risk allocation?
- What are the major advantages of Alliance Contracts?
- What are the disadvantages?
- Can Alliance Contracts be financed?
- Is an Alliance Contract always the best option?