In an alliance, trust is built through openness and interaction
The more demanding the project, the more open and collaborative the implementation model needs to be for the parties to establish a shared understanding of the challenges and objectives as well as the optimal model of implementation.
The most important things in every project are cooperation and discussion. With this in mind, YIT recommends the use of collaborative operating methods regardless of the project’s implementation model.
“The choice of project model is a crucial decision for the customer which can dictate the success of the project,” says Antti Inkilä, Interim Executive Vice President, Infrastructure segment at YIT.
He says the choice should be based on identifying and defining not only the project’s objectives – including scheduling, qualitative, operational and budget-related targets – but also your organisation’s size, competence and decision-making capacity as a contractor.
“It’s particularly important to determine the extent to which the customer’s own organisation can participate in the project’s development, planning and management,” says Timo Lehmus, Interim Executive Vice President, Partnership Properties segment.
Design management and project management are key aspects of construction projects that take up time and resources even when highly competent partners are involved. You can buy practically anything as a service, but Lehmus points out that you can never outsource the buyer’s responsibility.
“Coordination and managing specialists – whether they are your own specialists or external experts – is demanding and needs sufficient resources.”
Organisations that are accustomed to large projects often use their own resources to a large extent in implementing construction projects. When an organization has its own professionals available, it has a broader range of project models to choose from. For example, using more demanding contract models is possible when the content of the model and the division of responsibilities are familiar to both parties.
However, rather few large companies or organisations have their own builder department. If the construction of a school or business premises, for example, is a one-off project, it makes sense to use specialised service providers.
“Clarity and understanding the responsibilities are key. A fully planned contract takes a lot of advance work on the customer’s part. If the plans are incomplete in the tendering phase, the quoted prices will be higher due to risk provisions and the total cost may differ from the customer’s expectations,” Lehmus explains.
The project development phase usually takes six months at a minimum and often longer. It is unwise to rush into starting construction, but large construction companies have the resources it takes to get started quickly and provide services that complement the customer’s competencies – or they can take care of the entire project, all the way from needs assessment to implementation. Regardless of the project model, the contract model needs to include an adequate development phase. Managing the entire construction chain from idea to maintenance produces the greatest benefits for the customer.
Municipal projects are also influenced by political decision-making, which can be complicated. In that case, it makes sense to choose a contract model that enables the success of the project: one that is sufficiently comprehensive and allows the participation of all parties.
The larger the number of parties involved in a project, the more interfaces there are between them. Interfaces tend to be where problems arise: there may be insufficient flow of information or the plans may be incomplete, preventing the work from progressing as intended. The parties may also have conflicting interests.
When one service provider has comprehensive responsibility – including planning, design, the effectiveness of solutions, permits, subcontractors and so on – these interfaces disappear, which leads to flawlessness and efficiency in the project.
“Aligning interests between the customer and the contractor provides the parties with a shared understanding of the challenges and objectives as well as the optimal model of implementation,” Lehmus says.
This is the reason why comprehensive implementation models such as alliances are perceived as good alternatives.
“A customer that chooses a comprehensive contract model benefits from design management related to project management on the part of the service provider. The project can then be divided into subcontracts as necessary based on the shared objectives and conditions, which is the case in the Jokeri Light Rail project, for example,” Antti Inkilä adds.
“If the project is divided into very small subcontracts, cost-efficiency may become the single guiding factor. This increases the risks with regard to social responsibility and quality,” says Marko Oinas, Interim Executive Vice President, Housing Finland and CEE.
Oinas echoes the view that customers should consider whether it is more productive to allow their personnel to spend their time on other things and choose a turnkey solution. The larger the project is, the more significant the efficiency and cost impacts are regarding the choice of an implementation model.
“Projects are different. Some have a tight schedule, while others have more time available. Some projects are so unique and/or complex that finishing the plans before the start of construction is impossible. In that case, the planning, design and implementation need to be done in parallel. This is typically what happens in the alliance model.”
“We have the ability to offer a full range of services, starting from plots of land. We implement projects in accordance with the customer’s wishes, with an understanding of the customer’s business and in a manner that serves and engages the users. For example, we can investigate various energy solutions, take responsibility for property maintenance or even ensure that the property’s hours of use are maximised, as in the case of a well-being centre in Sodankylä.”
We can also offer various alternatives with regard to financing.
“In Life Cycle Contracts and projects that include a financing package, the customer may achieve a higher return on invested capital than by tying up the capital in physical structures and construction,” Marko Oinas points out.
The economic cycle should also be taken into account in the choice of project model: are subcontractors available? When you put together a request for tenders and choose a project model for which there are no available providers, you may find that you do not receive any tenders or the tenders you receive are overpriced.