Relationship Contracting The Main Roads Experience

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Relationship ContractingThe Main Roads Experience

• Menno Henneveld
• Commissioner
• 7 August 2007

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Outline of Presentation

• Relationship contracting
• Main Roads contracting history
• Development of Relationship Contracting in Main
  Roads
• Implementing Relationship Contracting
• Examples

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Relationship Contracting

• Definition
• A structured approach to ensure relationships
  are made to work so all parties achieve their
  desired outcomes
• Alliancing is probably the purest form of
  Relationship Contracting

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Dont have good relationships, Have problems.
Have good relationships, dont have problems.
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Contracting Spectrum

• Build Own Operate
• Build Own Operate Transfer
• Alliancing and ECI
• Partnering
• Design and Construct
• Construction Management
• Traditional Lump Sum Contracts

Relationship Contracting Principles
Increase use of
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Relationship Contracting Key Attributes

• Equitable sharing of risk and opportunity
• Mutually aligned goals and objectives
• Governance framework
• Selection process
• Payment mechanisms
• Joint commitment to achieve the project
  objectives
• Relationship based terms and conditions of
  contract
• Principle based decision making and governance
• Open book management
• Integrated management (team, processes and
  systems)

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History of Contracting in Main Roads
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History of Contracting in Main Roads
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Drivers for Alliancing
Rapid Escalation of Cost
Higher Stakeholder Expectations
Skills Shortage
Demand for GoodCommunity Relationships
Inappropriate Contracting
Strategies inefficiency
Pressure and Uncertainty
Changing Client Needs
Increasing Regulatory Demands
Industry Capacity to Meet Demand
Staff Retention Issues
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Supporting Principles

• Embodied in 2K7 Strategic Plan
• Improving project delivery
• Building and expanding capability
• Improving relationships
• Involving the community
• Sustaining Operations
• Better asset management

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Transition - Steps

• Identify the need to change
• Understand Total Quality Mgt principles
• Commit to
• Change
• Principles of Relationship Contracting
• Develop
• Roll out plan
• Supporting policies, processes and procedures
• Engage with industry throughout the process

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Structured roll out

• Executive Managers lead the process
• Include Relationship Contracting in Strategic
  Objectives and corporate business plans
• Provide for the transition in Business Plans
• Provide education and training
• Restructure to accommodate Relationship
  Contracting
• Implement supporting policies, processes and
  procedures

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The must haves

• Strong corporate commitment
• A supporting corporate philosophy
• A culture that is compatible with Relationship
  Contracting
• A degree of faith and resilience

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When to consider an alliance
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Project Delivery vs Project Circumstance
Fixed Scope Fully documented Routine Few
stakeholder aligned Multiple Offers Politically
Routine Project approvals straight forward
Fast Track Many Unknowns Complex Multiple
Stakeholders not aligned Few Offers Politically
very sensitive Project approvals complex and
interdependent
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Some recent examples

• Woodman Pt WWTP
• Lawrence Hargraves Drive
• Middleborough Road
• Roe 7
• There are many more

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Woodman Point WWTP
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Woodman Pt Pump Station
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Lawrence Hargraves Drive
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Middleborough Road
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Roe 7 Alliance
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Development of Alliances Aust.
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Current situation

• Relationship Contracting strategies are
  delivering good outcomes
• Industry are seeking out Relationship contracts
• Changing requires commitment, time and resources
  
• There is an increasing use of Relationship
  Contracting Strategies (NSW, VIC, SA, QLD and WA)
• Being applied equally in Public and Private
  Sectors

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Relationship ContractingThe Main Roads Experience