The discussion of Partnering Contracts is a high talking point in the Danish construction industry at the moment. Both Bygningsstyrelsen & Region H have both openly discussed there favorable view of using this type of contract on their projects in the future. While Partnering is, in our opinion, a far superior contract structure compared to any other in the industry, it takes a knowledge and a know-how from all stakeholders for it to be successful. Here are our top five needs before entering in to a partnering contract.
1 – It is vital that the main stakeholders leaders have a clear understanding of what partnering means and how a contract of this type is managed.
People will normally do what they are used to, so if the key people are coming from traditional contractual background it will be very difficulty for them to change their mindset and way of working.
2 – Partnering requires trust and trust is only achivable through transparency & openness.
Transparency generally relates to the commercial (economy) aspects of the contract. This is a vital aspect of partnering and it is important that the client gets the correct advice of how to set up the partnering contracts from experienced specialists.
3 – Clear processes in the contract to support the project delivery.
Partnering work great when everything is running smoothly but when the relationship is strained the only tool that left is the contract. If the contract is poor and poorly structured it will not support the strained relationship. Vital that the contract is clear, structured and instructive.
4 – The client needs a contract administrator on their side to assist in delivering the contract so from the offset the contract is used to deliver.
This will give all stakeholders a clear picture of how the client wishes to deliver. Again this contract administrator needs to have experience in partnering contract.
5 – Partnering works better when all stakeholders feel that they have an equal share of the risk and the return.
So incentivised agreements will always be preferred by stakeholders to feel more committed.
the one weakness that partnering agreements will have in Denmark is around the commercials (economy). The understanding of good quality commercial documentation is quite poor and it leads to allot of issues between stakeholders and more often than not costs clients due to over paying. In order to have transparency in the commercials (economy) it is important to understand what is meant by transparency.
We are NOT talking about every nut and bolt but a level of detail that is sufficient to assess additional work. If you are only asking for a total price for foundations or ventilation systems you are going to be in trouble. You need the detail so that the commercials (economy) can be managed.
It is also important to have a clear picture of when to transfer elements of risk, or when you need a fixed price and a remeasure able or a cost plus element to the contract. These can be mixed, and I would advise should be mixed, depending on the project and risk profile.
If you would like to discuss this in more detail or have any questions please contact us.