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Briefing Sheets are provided free of charge to help increase knowledge and awareness. They may be freely copied. Care is taken to ensure information is correct, however readers are advised to consult source documents for authoritative information. The Institution of Civil Engineers is a registered charity No 210252, 1 Great George Street, London SW1P 3AA.

ICE MANAGEMENT BOARD GOOD PRACTICE GUIDE TO PARTNERING IN THE CIVIL ENGINEERING SECTOR

SUMMARY Partnering is a contractual arrangement between two parties for either a specific period of time or an indefinite period. The arrangement features teamwork, continuous improvement, openness, and acceptance of new ideas, trust and mutual benefit. The Reading Construction Forum suggests that this approach is only the first step and a new, much more sophisticated second generation style of partnering has emerged. Second Generation partnering is defined as a set of strategic actions which embody the mutual objectives of a number of firms achieved by co-operative decision making aimed at using feedback to continuously improve their joint performance. Research suggests the emergence of Third Generation Partnering where the construction industry manufactures and markets products to sell to clients. BACKGROUND In the Final Report of Constructing the Team, the Government/Industry Review of Procurement and Contractual Arrangements in the UK Construction Industry1, Sir Michael Latham described a partnering agreement as a contractual arrangement between two parties for either a specific period of time or an indefinite period. Rather than the agreement being limited to a particular project. Under the agreement, the parties work together in a relationship of trust, to achieve specific primary objectives by maximising the benefit of each participants resources and expertise. The Report summarised the following features of partnering: - Teamwork between the supplier and client Total continuous improvement Openness between the parties Ready acceptance of new ideas Trust and mutual benefit The Report notes that partnering can only be successful with the commitment of the Chief Executives of the organisations involved, and by the selection of individuals with a determination to work together. It adds that partnering arrangements can also be beneficial between firms. The Report states that partnering can improve quality and timeliness of completion whilst reducing costs. In construction partnering can be applied to term or option contracts. For public organisations a partner needs to be initially sought through competitive tendering for a fixed period of time. The Report sets out the main features of an effective form of agreement (conditions of contract), these are summarised as follows: - A specific duty for all parties to deal fairly and co-operate with each other,

and with other subcontractors, specialists and suppliers. A duty for the parties to work together as a team, with a shared financial

incentive to achieve this objective, i.e. a general aim to achieve win-win solutions to challenges during the course of the project.

An interrelated package of documents, which clearly defines the roles and duties of all involved parties. The documents should be suitable for all types of project and any procurement route.

Written in clear language with Guidance Notes appended. Separation of the roles of contract administrator, project or lead manager

and adjudicator. The project or lead manager should be clearly defined as the clients representative.

Choices of allocation of risks, so they can be placed with the party best able to manage them.

Minimise changes to pre-planned works information. Where variations do occur, price in advance with provision for independent adjudication if agreement cannot be reached.

A clear method of assessing interim payments e.g. milestones, activity schedules or payment schedules. The arrangements are to be reflected in subcontractor documentation.

Set out the period in which interim payments must be made, together with the automatic right to compensation in the event of late payment.

Provide for payment by secure trust fund. Provide speedy dispute resolution (as a last resort) by impartial

adjudicator/referee/expert.

Provide incentives for exceptional performance. Make provision for advance payments including the cost of mobilisation

and prefabricated components. THE REPORT NOTED THAT THE NEW ENGINEERING CONTRACT (NEC) CONTAINED VIRTUALLY ALL THE FEATURES REQUIRED IN A BEST PRACTICE CONTRACT IN THE CORE CLAUSES AND PRIMARY AND SECONDARY OPTIONS. PARTNERING In 1995 the Construction Industry Board (CIB) set up its twelfth working group at the request of the Construction Clients Forum (CCF) to promote the uptake of good practice in partnering between client and supplier at any point in the supply chain. The Report they prepared2 is summarised as follows: - FUNDAMENTALS The working group noted that partnering as three essential components: - Establishment of agreed and understood mutual objectives Methodology for quick and co-operative problem resolution Culture of continuous, measured improvement. Partnering is most likely to succeed where: - The clients procurement strategy takes account of the fact that the project

or programme is high value/high risk The contractors interest is generated by the prospect of a central, high

value attractive account being added to the business

PROCUREMENT METHODS AND CONDITIONS OF CONTRACT For partnering to be effective, it needs to be applied throughout the supply chain i.e. between clients, consultants, lead contractors and suppliers and specialist contractors. It can be applied with any of the procurement methods currently in use e.g. traditional, design and construct and management contracting. The form of contract should be modern and include the main features described in constructing the Team. The Partnering approach should minimise the need to resort to the contract.

COMMITMENT AND CULTURE Commitment from the Chief Executive and through all management levels is essential to effective partnering. For a company to change from an adversarial approach to a partnering approach requires much dedication and hard work. The first step is to achieve a whole team co-operative approach within the organisation i.e. internal partnering. This needs to be achieved horizontally between departments and vertically in the management structure. The culture is summarised in the table below: -

What How Co-operative Championing Competent Training and development Problem solving Internal partnering Mutually supportive Role swopping Empowered Team building Trusting Leadership Improving Can-do

Briefing Sheets are provided free of charge to help increase knowledge and awareness. They may be freely copied. Care is taken to ensure information is correct, however readers are advised to consult source documents for authoritative information. The Institution of Civil Engineers is a registered charity No 210252, 1 Great George Street, London SW1P 3AA.

SELECTION The following methods can be used to develop a list of potential partners: - Previous client experience. The previous experience of the clients professional advisers. Advertisement in the appropriate journals, care must be taken to emphasise

the partnering aspects. The client then usually issues an information pack, and the contractor responds with a presentation. At this stage a contract can be negotiated or tendered to a short list of contractors.

THE WORKSHOP This is vital to any partnering project, even if the partners have worked together before. Key features of the workshop are summarised as follows: - It should be run by an independent facilitator It should be held in a neutral location The length of the workshop should be one to two days (dependant on the

size and complexity of the project) The workshop should facilitate team building and be attended by all key

organisations and individuals who will be working on the project, however the total attendance should not exceed thirty

A typical agenda for the workshop would include the following: - Agree mission for the project Identify key issues Mutual objectives Brainstorm problems Agree solutions Action teams Role swopping Exclude misfits Problem resolution procedure (agreed procedure) Agree a review workshop Continuous improvement/measurement of key performance indicators (for

all parties) Charter all to sign BENEFITS These are summarised as follows: - Cost savings, typically 2-10% on a project basis and up to 30% on a

strategic basis Better programmes with time saving of 20-30% Improved working relationships and team working especially on site Repeat work and improved work flow Less administration RETHINKING CONSTRUCTION In 1998 the Report of the Construction Task Force3 noted that Tesco Stores had reduced the capital cost of their stores by 40% since 1991, through partnering with an established smaller supplier base. Argent, a commercial developer has reduced the capital costs of its offices by 33% and has achieved significant savings in total project time by partnering with a limited number of contractors, specialist sub-contractors and designers. It is however the supply chains that is the main focus of the Task Force. The Task Force considers the supply chain is critical in driving innovation and sustaining an improvement in performance. They also consider it is essential that participants share in the rewards of improved performance. SECOND AND THIRD GENERATION PARTNERING The Partnering Task Force of the Reading Construction in the Seven Pillars of Partnering4 suggests that the foregoing approach to partnering is only the first step and a new, much more sophisticated second generation style of partnering has emerged. They believe this strategic approach can deliver cost savings of up

to 40% and programme savings of 50% or more. Partnering is now defined in the following terms:- Partnering is a set of strategic actions, which embody the mutual objectives of a number of firms achieved by co-operative decision-making aimed at using feedback to continuously improve their joint performance. Second Generation partnering begins with a client, consultants, contractor and specialists co-operating in a series of projects. They jointly build up a Strategic Team that builds up the Seven Pillars of Partnering as follows: - Strategy developing the clients objectives and how consultants,

contractors and specialists can meet them on the basis of feedback Membership identifying the firms that need to be involved to ensure all

necessary skills are developed and available Equity ensuring everyone is rewarded for their work on the basis of fair

prices and fair profits Integration improving the way firms involves work together by using co-

operation and building trust Benchmarks setting measured targets that lead to continuous

improvements in performance from project to project Project Processes establishing standards and procedures that embody best

practice based on process engineering Feedback capturing lessons from projects and task forces to guide the

development of strategy Research carried out by the Partnering Task Force also suggests the emergence of Third Generation Partnering where the construction industry manufactures and markets products to sell to clients e.g. land, new or refurbished facilities, plant and equipment, finance options and facilities management. SELECTION OF CONDITIONS OF CONTRACT There are two main contract options, the first is to use partnering as a project management approach with a conventional construction contract. The second is to use a contract, which embodies a partnering approach e.g. The Engineering and Construction Contract (formerly the NEC) and PPC 2000. Use of PPC 2000 has been endorsed by both the Movement for Innovation and the Construction Industry Council. Care needs to be taken when using (and signing) a Partnering Charter in conjunction with conditions of contract, as the Charter may affect interpretation of the contract if there is a dispute. SOURCE DOCUMENTS 1. Sir Michael Latham, Constructing the Team, HMSO, London 1994, ISBN 0

11 752994 X. 2. Construction Industry Board, Partnering the Team, Thomas Telford,

London 1997, ISBN: 0 7277 2551 3. 3. Department of the Environment, Transport and the Regions, Rethinking

Construction, DETR, London 1998, ISBN: 1 85112 094 7. 4. John Bennett & Sarah Jayes, The Seven Pillars of Partnering, Thomas

Telford, London 1998, ISBN 0 7277 2690 0. John Hitchings, White Young Green, March 2001 using the source documents listed above.

SUMMARYBACKGROUNDTHE REPORT NOTED THAT THE NEW ENGINEERING CONTRACT (NEC) CONTAINED VIRTUALLY ALL THE FEATURES REQUIRED IN A BEST PRACTICE CONTRACT IN THE CORE CLAUSES AND PRIMARY AND SECONDARY OPTIONS.PARTNERINGFundamentals

Procurement Methods and Conditions of ContractCommitment and CultureSSelectionThe Workshop

BenefitsRETHINKING CONSTRUCTIONSECOND AND THIRD GENERATION PARTNERINGSELECTION OF CONDITIONS OF CONTRACTSOURCE DOCUMENTS