This form of procurement and associated contracts are very uncommon in Canada. There is significant interest in the Alliance form of contract; however, there are relatively low levels of knowledge and understanding in the Canadian infrastructure community. This resource page provides an overview of the Alliance procurement model.
This form of procurement and associated contract are very uncommon in Canada.
There is significant interest in the Alliance form of contract, however there are relatively low levels of knowledge and understanding in the Canadian infrastructure community. Below is an overview of the Alliance procurement model. Within this resource page, Infrastructure BC has assembled several reference documents, including an Infrastructure BC Project Alliance Agreement Template
The Alliance model is a three-stage partnership procurement model. The first stage is an RFQ whereby respondent teams submit qualifications, which are evaluated by the owner. In comparison to other delivery models, there is a greater emphasis on key individuals and their suitability to implement the project collaboratively with the owner. The RFQ evaluation results in a shortlist of proponents of which three respondents are then invited to submit short proposals and participate in behavioural assessments for the second stage of the procurement model (RFP Phase 1). RFP Phase 1 evaluation considers additional key individuals and the proponent team’s collaborative behaviour in aligning with the owner on the substantive commercial and legal terms of the project agreement and the participation agreement for the final stage of the procurement model (Alliance Development Phase). During the Alliance Development Phase, the owner would continue to evaluate collaborative behaviours of the proponent teams as well as written proposals with a focus on the project technical solution, key individuals, target margin and overall project target cost. The estimated target cost is not the primary determination of which entity becomes the preferred proponent. Both the successful and unsuccessful proponents would receive partial compensation that would be higher than stipends offered in other models.
The alliance contract is a multi-party contract, which does not allow parties to take legal action against each other, thereby eliminating claims, outside of highly defined occurrences of wilful default. It is a true collaborative contract. The Alliance model utilizes a joint governance and management structure between the owner and the private sector parties. The contract aligns the interest of the parties through pain-share/gain-share provisions which share risk and reward among the parties of the alliance. If the actual cost of the project exceeds the target cost, the extra costs are shared between the public sector and private sector participants on a 50/50 basis until the overhead and profit of the private sector participants reaches zero. After this point, all extra costs are borne 100 per cent by the public sector. The same principle applies to situations where the actual cost of the project is less than the target cost, where the public and private sector share savings on a 50/50 basis.
In addition to the pain-share/gain-share provisions around cost, there is normally a pain-share/gain-share mechanism around key performance indicators that are directly related to the owner’s project objectives (e.g., apprentices trained, sustainability targets, stakeholder engagement).
The Alliance model is typically associated with complex infrastructure projects where the project scope is difficult to fully define, risks cannot be adequately defined or measured, or the cost of transferring risk to the contractor is too high. Additionally, this model may be chosen for projects with tight timeframes, where the owner is able to provide value through involvement in the delivery and implementation of the project, or in the case of challenging stakeholder issues that need to be managed.
Infrastructure BC’s Use of Alliance
Infrastructure BC is piloting the Alliance procurement on the Cowichan District Hospital Replacement Project. Upon completion of the Cowichan District Hospital Replacement Project procurement, Infrastructure BC will publicly post redacted documents.
Infrastructure BC will be considering the Alliance procurement for future infrastructure projects and looks forward to discussing potential projects with design firms and construction companies.