Alliance contracting

Alliance contracting

The alliance contracting model is a project model used in construction projects, in which the parties to the project are responsible for the project’s planning and construction and they share the risks and benefits.

The alliance project is built together

The parties to the alliance project are jointly responsible for the project until the end of the after-sales responsibility phase. This makes it important that all of the parties involved understand the implementation of the alliance model and act accordingly.

For example, when estimating costs, it is important to consider the project in its entirety and be aware that, in an alliance, a significant portion of the tasks and costs for which the customer is conventionally responsible are transferred to service providers. Therefore, in alliance tendering, the main focus should be on the utilisation and ensurance of professional skills so that the customer has the opportunity to choose the best service provider.

A successful construction projects starts by choosing the right implementation model

Tips for choosing the appropriate implementation model

The implementation form of the construction project is important for the success of the project. In the project model guide, you can find different project models, the kinds of projects the model is suitable for, and the benefits and challenges of the different project models. Download the project model guide so you can choose the right implementation form for your project.

Download the project model guide

What is the alliance model?

The alliance contracting model is an open and cooperative project model in which the parties operate in a shared project organisation. An alliance model is an implementation model for projects that involve many challenges, stakeholders and uncertainty; for example, hospital and health centre projects, renovations, industrial projects and infrastructure projects.

In an alliance project, all of the parties – the customer, the designer and the constructor – operate in a jointly formed organisation and possibly also in a common workspace known as the Big Room. This project team is responsible for the project’s day-to-day management and is led by the Project Manager, who reports to the management team. The project is led by the alliance management team, in which each party to the alliance agreement is represented.

Openness, development, agreements and the formation of the project organisation must be achieved in a way that supports cooperation and commitment as well as honest and trust-based relationships. For this reason, an alliance model requires special alliance competencies from the customer and the service provider selected for the alliance.

Joint project organisation and open cooperation lead to the solving of problems in the alliance project, not to the creation of new ones. In addition to a good team spirit, alliances are characterised by innovations which help to achieve better quality and safety as well as influence the environment and cooperation, for example.

YIT employees in tunnel

Applicability of the alliance model

  • A project that includes risks that can be better managed through cooperation
  • There is a desire for greater certainty in managing costs and turnaround time
  • There are several stakeholders involved, such as residents, service and traffic providers, and businesses
  • There are significant benefits to be gained from cooperation, and various opportunities are sought flexibly through discussion
  • There are requirements for transparency

Benefits of the alliance model

  • Shared organisation
  • Shared contract: transparency and open books
  • Shared objectives: combining different competencies to achieve shared objectives
  • Key control elements: a jointly agreed target cost, bonuses can be increased by reaching a cost level below the target cost
  • Operating methods that support cooperation: Big Room, Open Book, Target Value Design, Last Planner System
  • Shared distribution of risks and benefits: profits and losses are distributed equally, each party’s risk premium is equal to the bonus, sanctions are achieved at the same time by the parties
People in a construction site office

Cooperative contracting model

The alliance model is a cooperative contracting model. Cooperative elements are also included in many other construction industry implementation models these days. With this in mind, YIT recommends the use of collaborative operating methods regardless of the project’s implementation model.

Design management and project management are key aspects of construction projects that take up time and resources even when highly competent partners are involved. The choice of a construction project model 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. The cooperative project model enables the disappearance of interfaces, which leads to flawlessness and efficiency in the project.  

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