It is better to build than to argue – the alliance model works well in complex projects

Rail traffic is now a growing trend that reduces traffic emissions and there are rail projects amounting to dozens of billions of euros in the pipeline in Europe. In Finland, there are many ongoing light rail projects – Tampere Tramway, Jokeri Light Rail and the recently launched Crown Bridges project – as well as many other projects in the preparation phase. My argument is that, for light rail projects, the alliance is the best execution model as extensive projects are complex due to the execution environment and have many interfaces and uncertainties. Cooperation between the parties, with all the parties responsible for the successes and failures of the project, yields benefits that also save taxpayers’ money.

The larger the project is, the more help the client will need in its planning. The client also gets the best support when, right from the start, they work together with the designer and the builder around the same table, without being separated from each other by contractual boundaries that could cause delays and, at worst, arguing. When the objectives are shared by all, everyone works for the common good in the project. When it comes to flexibility, the model is unbeatable if the order and schedule of execution need to be rethought during the project due to administrative permits, for instance. The acceleration of processes and the optimisation of design and execution solutions are among the biggest advantages of an alliance. Impacts can already be seen in Tampere, where the light rail project is proceeding on schedule and the costs have also remained under control during construction. The first construction period of the Jokeri Light Rail project has also succeeded as expected. 

Other kinds of projects as well as smaller projects benefit from the alliance model and it is not necessary that one of the parties is a public organisation. The Naantali power plant, Suomenlinna’s service tunnel and the Tampere Rantaväylä tunnel are good examples of cases in which the model increased flexibility and ensured that money was used efficiently in the right places. The difficulties in major public projects have invoked a lot of well-deserved discussion. Erkki Virtanen, who used to work as Permanent Secretary at the Ministry of Economic Affairs and Employment, looked into the State’s construction projects and recommended the adoption of the alliance model in demanding public construction projects that amount to millions of euros and mentioned the Tampere Rantaväylä tunnel as a good example of a successful alliance model.

There is also opposition against the alliance model, with criticism usually targeted at costs. For the project to succeed, it is very important that the target cost level is determined correctly from the point of view of all parties. There are many tools for ensuring this.  When estimating costs, you should consider the project in its entirety and also be aware that in an alliance, a significant portion of the tasks and costs for which the client is conventionally responsible are transferred to service providers. As a result, the execution of an alliance contract requires more extensive competence than conventional contract forms. Therefore, in alliance tendering, the focus should be on the utilisation of professional skills, and comparison criteria should be set to ensure, by all means possible, that the client has the opportunity to choose the best service provider. You rarely get the best result at the cheapest price and the more the clients emphasise the price, the smaller the freedom is to choose the best option. The most crucial factor for the project is the parties’ ability to produce the technically and qualitatively best and most cost-efficient plan and to execute it. With the most functional overall solution, the significance of small differences in fees tendered is low.

There are rarely any arguments in alliance projects. I don’t know of any cases in which problems occurring in an alliance would have been taken to court. People working in the construction industry are fed up with conflicts and, consequently, it is easy to recruit people into alliance projects that do not involve any juxtaposition. Nevertheless, an alliance is not just group hugging: alliance projects have challenges similar to any projects, regardless of their execution model. The best feature is that the model creates an environment in which people can tackle challenges together. When I have discussed with people working in alliances, they say that they especially appreciate the fact that they can fully concentrate on their core competence, that is: design and construction.

Member of the alliance management team in the Lahti Travel Centre, Naantali power plant, Tampere Tramway, Jokeri Light Rail and Crown Bridges alliance projects, among others