Alliancing: All For One And One For All?

Alliancing: All For One And One For All?

Louise Bloxham:

Welcome to the Kier Beyond the Build podcast, where we get together with Kier and industry experts to explore the big issues affecting our sector. Today's episode is about alliancing and we're kicking things off with Professor David Mosey of King's College London, and Rebecca Boundy, sector Director of Custodial and MMC for Kier.

I began by asking David what alliancing is.

David Mosey:

It's a word that's been around for a while and the problem is that it's often talked of in quite vague terms in sort of behavioural and aspirational terms. What's new is that we are clarifying it in terms of commercial commitments. So, in that respect, it amounts to a way of sharing objectives and success measures and targets and incentives.

And then backing that up with joint activities designed to improve value and to manage risk with a timetable for those activities. And a governance system that supports them with transparency in terms of crucial information, sharing of that information, clarity and commitments, and then also an exit route if things go wrong.

So, in other words, taking that collaborative concept and putting it into accessible and bankable commercial terms.

Louise Bloxham:

So, in terms of the benefits of alliancing and why we should be doing it, as the rubbers hit the road, if you like, on this concept, are we realizing those benefits?

What would you, Rebecca, from a contractor perspective, what would you say to that?

Rebecca Boundy:

Absolutely. I think for me it's the way the industry needs to be working going forward. If we are going to deal with our most difficult and challenging concepts, actually we need that musketeer mentality of all for one and one for all.

There will of course be issues that are outside of the control of an alliance, things that, that we can't deal with, but actually the things that we can, why not get the best of everyone's abilities together working on those difficult issues. When we look at the new prisons program, what we see that we've been driving forward in terms of not just economies of scale, which I think is one of the first things that comes to mind with alliancing, but actually certainty of delivery. So that drive in terms of understanding the supply chain, getting the line supply chain across multiple projects, the importance of capacity mapping, securing common commercial terms and incentives as David's mentioned with the supply chain, and actually being able to really drive innovation and digital.

So as part of the new prisons program, collectively, we developed, 126, what we referred to as big ideas. Now, by their nature, they didn't necessarily have to be big ideas, but it was the fact that you could implement them over multiple projects to really gain the best value from them. And so, it was very much the idea of driving forward, continuous improvement, bringing the best of everyone's abilities together to create a better end product for the client.

David Mosey:

You asked the question about whether alliancing is delivering results. And I think that's a really interesting question because people always ask that and always seem to be a bit cynical about the response on the basis of well yes, that went well, but what about normal projects? And they're always looking for evidence.

What is interesting is this inference that a traditional, non-collaborative system is working perfectly well. Which it clearly isn't. If you look at the money spent on disputes, on lawyers and adjudicators and arbitrators and expert witnesses, it is enormous. If you look at the track record of traditional projects in terms of cost overruns and time overruns and shortfall in delivery, it is pitiful.

And this is a global issue. The McKinsey report suggested that the construction industry is very poor on productivity compared to other industries, and that the contractual framework needs to be rewired. That was their proposal. Very interesting, they're not lawyers, they're not trading contracts, but their view was that if we're going to get the industry to work efficiently, we need to rewire the contractual framework, and that is what is occurring here.

Louise Bloxham:

It sounds like there's some strong evidence as to the fact that alliancing is working and it does deliver value, what's your perception in terms of whether or not the industry is sold on this? Cuz really, we're talking about massive cultural shift, aren't we talking about rewiring the contractual framework?

That's major.

David Mosey:

People are hugely suspicious. This is a high risk, low margin, fragmented industry. You have these areas of expertise, people doing research and development, people coming up with bright ideas organizations like Kier shouldering enormous commercial responsibilities. And when that is distilled into a new procurement and contracting system, they're very suspicious cuz they say can't we just do it anyway?

The evidence is that you might, or you might not do it anyway, but if you don't understand each other's position, and the only way to do that is contracts. If you don't understand each other's position, you will hesitate. You will get disappointed because there will be misunderstandings or delays and then we revert to something more traditional.

No, this is, as you rightly say, Louise, a transformation, but it is not an idealistic one. I talk about the Bermuda Triangle of Collaboration, which is idealistic debates and then cynical criticism, and then unrealized good intentions. And we've seen that time it again over the years. People talk in very flowery terms about collaboration - if only we could act in good faith if only there was a no blame culture, but often they expect other people to do something else first. And become very disappointed when that doesn't happen. We do have opportunities here, but it is not a given. I think people need training. They need mutual exchanges of best practice.

They need some kind of obligation. And that starts with clients, by the way, so that we get encouragement because unless it is clearly beneficial and obligatory frankly, then we won't necessarily happen.

Rebecca Boundy:

I'd really echo what David said there. Cause I think for me from a contractor's perspective, it's quite a bold step into alliancing because actually who we collaborate with today we are competing against tomorrow.

So, the concept of sharing our, learning, our best ideas you do have to be brave. And actually, we often have the conversation internally. The rate of acceleration of our peers learning will be much greater, but actually that's to the huge benefit of our clients and it's no bad thing if it gives us further impetus to think of what our next ideas are and keeps striving to be better.

So, I think, for me actually, if we could track the rate of continuous improvement, be that, as David was mentioning earlier, productivity or other metrics, how we are driving digitalization, et cetera, I think you'll really see an accelerated period of growth within the industry by virtue of alliancing. And I feel it's incumbent on, on those of us that have experienced alliancing to not quite lobby, but actually shout about the benefits of it from various perspectives. Because actually, how else will we drive this forward in the importance of collaboration without being able to sell the positives that we are experiencing.

Louise Bloxham:

Yeah, absolutely. And you obviously, you've touched on digitalization there and you've talked about, how we can drive those benefits in terms of our development and so on as an industry.

Rebecca Boundy:

And I think it's also the sustainability of those improvements. So, picking up on social value, obviously close to the Ministry of Justice's heart is obviously driving kind of opportunities for prison leaver employment, actually the scale of something like the New Prisons Programme gives those opportunities in a way that a project in isolation or a contractor working in isolation can't.

So, for example, we are seeing, it could be prison leaves working on prison A, moving on to prison B. But actually, for me, there's then the broader question around how do we, when we're part of an alliance, continue the legacy of the alliance when that comes to an end? And actually, everything that David said in terms of be that around sustainability or other aspects, we almost raised the bar because that becomes the new norm for then going into, be it a collaborative or a more traditional form of contract following.

We, we are taking all that learning with us.

Louise Bloxham:

There might be people who are like yeah, get the idea of alliancing, but actually. I prefer to go down that traditional methods of construction route or that will suit me in terms of my projects and so on, and what I'm doing more. How do we overcome those sorts of barriers to, to thinking about this?

Rebecca Boundy:

For me, any form of collaboration works better when you've got a common goal.

And actually, what better a common goal than when you're working on standardization of design components and how you're going to deliver because everything we said about the potential for economies of scale becomes that much more great in terms of the opportunity. So, I think when you look at, clients such as the Ministry of Justice, actually they're trail blazing not just in the use of an alliancing form of contract, but their drive towards platform design for manufacturing, assembly and the digital thread that underpins that is so intrinsic to the contract and you can't deliver modern methods of construction without the digital sphere as well. So, I think you need to have that intelligent client. You need to have someone that's driving at all of them, because I mentioned earlier, we had 126 big ideas to drive and improve value. Actually, if you are doing that on a common set of components, again the opportunity for uplift is so much greater than those, if those big ideas are spread across a disparate design. So that for me is where the kind of the inextricable link between them comes in.

David Mosey:

So often people think they're in a restaurant choosing things from a menu. And I think this is an indulgence. We have a coherent set of recommendations for the first time in the construction playbook with the government committed to it.

And I have to say a word here for Crown Commercial Service. Because they created the alliance model that the Ministry of Justice picked up on. That is embedded in the Crown Commercial Service Alliance program under FAC-! Which is the biggest FAC-1 procurement at £30 billion pounds. In fact, it was two of them at £30 billion each.

They looked to an integrated range of objectives and systems of which MMC was one. Digital information management was another. Engaging with the tier two supply chain was a third, and collaborative governance was a fourth, and they realized that clients need autonomy in the way that they deliver that.

So, they offered the notion what they call a sub alliance, but in MOJ terms and Kier terms, it's the alliance. So that clients calling off on the Crown Commercial Service Framework Alliance could create their own alliances. Now that is huge, because one of the problems we have with long-term framework commitments is that people see them as a quick fix, and they don't really take an interest in the wider strategic objective.

So, popping in and out of a framework for a single project doesn't really get us very far. But if we have this concept that Rebecca has described, so articulately, of competitors developing a one for all, all for one mentality around a specific program of work within the context of an overarching strategic framework.

We are getting collaboration at every level.

Louise Bloxham:

And that's what drives the improvement I suppose, so the things which are too difficult if we're committing to this type of contract and we're working together to, to do those too difficult things, and obviously that will drive the innovation. Stop being so difficult.

David Mosey:

Exactly, the contract is easy. The contract is the, just the shortest, easiest contract you could want. What we are combating is the notion that real collaboration is counterintuitive because of the risk, because of the lack of time, because of the lack of familiarity. People have so many ways of saying no.

We are combating that by suggesting firstly, it's essential, and secondly, that it is in their commercial interests. If things are not in people's commercial interests, they're not going to do them. So, getting across the message that it really is to the benefit of the contractor, the subcontractor, the design consultant, that it de-risks the project that enables them to excel, enables them to win more work - is really important. And to conclude on that Rebecca's point, that people don't really want to share information, why would they, their hard-earned innovations belong to them? Changing that paradigm is the biggest challenge of all. FAC-1 has two crucial clauses on this. Clause 11 talks about the licensing of intellectual property and the protection of intellectual property.

And Clause 13 talks about confidentiality and recognizing that what you own is what you own until you agree to share it. So, this is not a demand from MOJ that people give away their intellectual property rights. It is the creation of an environment. In which the four contractors work together with the supply chain to agree to share what it's in their interests to share for firstly the good of the programme, and secondly, the advancement of Kier's reputation.

Rebecca Boundy:

So, for me, I think if you are, if you're not open to other ideas and sharing yours, it will never work. And that for me, exactly as David said, whilst the contract provides a framework and a really critical and positive framework, it's ultimately like baking a cake. And if you have missing ingredients, it still won't be a success.

So actually, having the right people around the table driving it, understanding not just the contract terms, but the ethos of the contract, the importance of behaviours underpinning it. It's only when you've got that kind of, and the governance and process aligned to the contract that it'll truly be a success to ensure that we do reap the benefits and go into it with the maturity of saying, we will share. It's for the benefit of not just the project, but us longer term as well, and being receptive to new ideas and challenge.

Louise Bloxham:

It's so interesting, isn't it? Cause I think collaboration is often used in construction, I'm speaking here as a head of comms, in the construction industry, we often use the word collaboration. It almost takes on buzzwords type qualities. And this sounds like this is, it's actually making it meaningful. Yeah. Yeah.

David Mosey:

There's a really important point I want to make here, which is that FAC-1 does not stand on its own. The delivery of each project is governed by individual project contracts and the FAC-1 does the things that those project contracts don't do. Which is the early engagement, the supply chain engagement, the joint approach to risk, the joint innovation, all of the collective decisions and all of the collective activities.

Now people are very used to the minutiae of JCT and N E C contract management and manoeuvring and claims and liabilities. What FAC -1 does is enable them to see the wood for the trees. To step back and say, okay, we have an NEC or a JCT or a PPC for the running of the project on site. We get that.

And the buck stops with Kier for the delivery of a project where they're appointed as main contractor under one of those contract forms. But there are other issues here. Where we're trying to improve and we're trying to de-risk a project, we need the thinking time before those contracts are awarded. Where we're trying to collaborate, we need the machinery for engaging with parties outside of those individual project contracts. And that is where the big changes are coming because FAC-1 is a completely different type of contract. But the interesting thing, Louise is it doesn't increase your risk. Nobody is at risk. At the end of the day, you go back to, I don't know about the comfort zone, but you go back to the traditional paradigm of an N E C form or a J C T form or a PPC form for delivering the project.

That is what it is in terms of how it's been amended or how you translate it into your subcontracts, but what you have the benefit of is an enormous amount of additional information and control and incentivization that you've obtained under the FAC-1. So, to cut a long story short, if there's a conflict between the two forms the NEC in this case takes precedence.

Nobody interferes with the way you run your project under NEC or indeed the work of the project manager. But in preparing for that NEC contract, you have the benefit of all of this supply chain engagement, all of this peer group engagement, the development of consistent digital information the development of an MMC approach that is sustainable, as Rebecca said, because of the quantum.

And that means that you are much more secure in performing your NEC obligations.

Rebecca Boundy:

So, I think that's a really important point that alliancing isn't about us trying to lessen our role as a kind of a D and B contractor, but exactly as David said, actually the fact that we've taken much more proactive and collaborative approach to risk management during that pre-construction period provides much more certainty for all parties concerned when you then move into the delivery phase.

Louise Bloxham:

We've spoken a lot about contracts today. Is alliancing all about the contract?

David Mosey:

Great question because, hey, I'm a lawyer. I like contracts. Most people don't really care for contracts. It is one of four elements. Now I've talked about the four "I"s in constructing the gold standard. And the four "I"s are intention, information, integration, and incentivization.

And only one of them relates to contracts. So, the first, intention is the client setting a strategy, creating a pipeline of work. We have 70% of contractor participants in constructing the gold standard will not bid if there isn't a proper pipeline of work. And we've had people wasting their time with those very high bid costs on speculative frameworks where there isn't actually a pipeline of work.

I've already said that we need to use the procurement process firstly, so that the client shares the right level of information and secondly, so that bidders submit qualitative information that is then used rather than having this fragmented approach where you've gone through a highly complex competition and you never hear about it again, because you move into some other phase.

So, information from the client, information from the bidders is the procurement stage. Contracts are the integration stage. We think of contract as allocating, transferring risk, or merely dealing with administration and measurement of frameworks and awards of project contracts. They're the integrator, there isn't another way to integrate everything else is just honeyed words.

Unless you clarify your mutual commitments in an integrated way through, as I've described a multi-party contract that draws these different players together, you're not going to get the integration you need for efficiency. But then the fourth I, incentivization is in the management. And that's not just chucking extra money at people, it is managing in a supportive manner, seeking to help the suppliers and the supply chain to deliver what they've agreed to deliver. Trying to avoid wasteful disputes, trying to avoid a wasteful approach to performance measurement and to excessive mini competitions. So, to me, there are four dimensions, Louise contracts are one of them, but strategy, procurement, and management are the other three, and they all need to work together.

Rebecca Boundy:

Absolutely echo that. David speaks about the four "I"s, I mentioned ingredients when cooking, and it's the same mentality. You have one of those missing and you won't achieve success. In terms of that intention, David referred to the intention from the outset of the client, and I think that's fundamental, but it needs to be the intention and commitment coming from all parties joining an alliance as well, because actually you won't get the buy in of the supply chain.

They'll see through us if they think it's empty words and gestures. It needs to be fully brought into at all levels within an organization and with the governance and process that underpins, the essence of the contract.

Louise Bloxham:

If there was one golden nugget or one key takeaway, what would it be?

I'll start with you David.

David Mosey:

You need to use a different form of contract to achieve different results and an FAC-1 alliance enables us to see the wood for the trees, and it enables us to escape from that Bermuda Triangle of idealistic, collaborative debate, cynical criticism, and unrealized good intentions.

Rebecca Boundy:

I think my nugget would've probably been a less articulate version of what David said actually, in terms of if we want to really approach the tough issues that our industry's facing be that around the green agenda and carbon productivity, then actually that we need to work better in terms of the sum of our parts, and we need to have a framework that enshrines that from the outset.

So actually, what better way to do that than under an alliancing form of contact?

Louise Bloxham:

So, we've talked about how critical clients are to the successful delivery of alliancing frameworks, so it would be absolutely remiss us not to have a client perspective. We're delighted to be joined by Sue McElroy and Robin Seaton from the Ministry of Justice, who've both been instrumental in the delivery of the alliancing contract for the new prisons program. So, thank you both for joining us today. Obviously, an alliancing framework as we've discussed is very ambitious and very different, I guess to the traditional forms of procurement. Can you let us know what were your drivers behind introducing the alliancing framework?

Sue McElroy: So, I think when we when we set out on this journey, it was really thinking about what are we trying to achieve as an outcome? And many of the barriers around how significant a programme this would be. How would this land with the market, how would the supply chain meet the capacity that we needed?

So, lots of this was about how do we deliver this? And it's going to need everybody's involvement. It's going to need more than one provider. And so, it was really thinking about what were the barriers to success and then how we do that. And then it was broader than that.

It was about what do we want to achieve from these programs and around driving that and driving the, driving to the outcome. And that's where, we have to work really closely as a business. I pick up the commercial but it's around making sure that we align to the customer needs and I think that's where I should stop.

And Robin should start.

Robin Seaton:

Thanks, Sue. Yeah, so I think when we were at the start of this journey, we thought about where we are in the kind of the continuum of what we are doing as an organization. When we started on the four new prisons program and thinking about alliancing as an option, we were partway through Kier delivering HMP Five Wells for us.

The first new prison of that design and I think we were probably just about kicking off with HMP Fosse Way being delivered for us as well, the second prison of that design. But we were going into a, I guess a bigger world and a more ambitious programme than we'd been in as an organization for a really long time.

his scale was probably around: 2006

And alliancing offered us a way forwards to capitalize on that, manage some of the challenges of delivering at that scale. And at the pace that we needed to.

Louise Bloxham:

The prison service services obviously been the trailblazer, I would say, in terms of the development and significant rollout of this type of contract. What's the appetite like in other government departments do you think? Is this the future?

Sue McElroy:

There's been so much engagement from other government departments in what we're doing, how we're doing it. And it will come down to, how successful is it?

And that is also, it's you, it's the market, it's stepping up to show that this delivers better value, and we are asking for everyone to work in a really mature way. This drives all the kind of transparency, trying to avoid the race to the bottom that has pulled down the industry for so long.

And this is trying to break that, but it's got to be successful, and it means that everyone's got to work in a collaborative manner but show that drives value. So, we certainly have interest from everybody.

Louise Bloxham: I'd be interested to know how your personal perceptions have changed of alliancing from that initial idea and that initial aspiration or ambition, if you like, through to where you are now.

Sue McElroy: I think the openness that we have seen between contractors has been brilliant. And I think this fear of if I share, I'm going to lose my competitive position has been broken through because technology now moves so quickly. Everything is moving so quickly, that's not where your competitive advantage comes from and there is so much work in the industry. Collaboration, how you can unlock that, what you can learn from it and how you move forward is going to drive more and more of the work and winning work in the future. So, I think that's certainly been a really interesting learning curve and it's really interesting to see it happen. Because just because we set out on a contract and we ask everyone to do it, doesn't mean they need to buy in and make it happen. And that's certainly what we've seen. It's very united team supporting the kind of ups and downs on all parts of the project and across parts of the program and across the projects.

And also watching the team support each other through that, with advice, with lessons, with innovation, with ideas and that's been great to see.

Louise Bloxham:

And Robin, I put the same to you.

Robin Seaton:

I think it's been both a learning journey for the contractors in the alliance and a learning journey for us as a client as well.

The people working in our teams have had to get to grips with a new way of working, and that's been that's been a learning process for us as much as it has for any of the contractors actually. I think it's been a really rewarding one for the people involved because it does feel like a different way of working and maybe a more rewarding one, I think in terms of that kind of collaboration.

That it has that it has incentivized

Louise Bloxham:

For alliancing to be successful it requires really close collaboration between the various parties. How has that changed perceptions between different industries or the different partners that, that we normally work with? Have there been any changes in that respect?

Sue McElroy: It's a really interesting question. I think there's a few different elements to it. But perhaps. Some of the unexpected things was actually, far greater understanding of how government operates by contractors. So how we make decisions, the stages of decisions, just things like cash flows - it's as important to us as it is to you. And I think some of the perceptions, breaking down those barriers has meant that we've got far better information in a timely way that can support those decisions that support, the right value for money decisions for the taxpayer.

And I think that's been a really interesting element. And I think that we've, and the teams here, we work really closely alongside policy, so they've got to understand how do you really build something? What are the stages in that process? And that will shape policy, I'm sure for many years to come.

Louise Bloxham:

Speaking to David Mosey and Rebecca Boundy, they were talking about the wider benefits that can be delivered through an alliancing framework - it's not just about delivering a building. Robin from your perspective could you give us a view on the benefits that you think these sorts of contracts drive in that respect?

Robin Seaton:

It's almost the crucial point really, isn't it? One of the things that I always talk about is that in many ways we're not really a construction programme, we're not purely a construction programme. The reason we are here is to deliver four high performing prisons that have got prisoners in them and are giving a chance to those people to change their lives. I'm not naive enough to think that we can get everyone inside prison to change their lives, but in terms of what we've done around design and creating the opportunities for people now that's really important and that's where we really drive value for the taxpayer from this process.

rison program back in sort of: 2016

Now, I think what alliancing does for us is that it enables us to drive that level of understanding and that level of buy-in into the absolute end goal throughout everyone in our supply chain. And if you can get that greater depth of understanding of purpose, you can make sure that people at every level within those organizations are taking the right decisions to drive the right outcomes for the project.

Louise Bloxham:

Thank you to all our guests for their time and sharing their expertise. I'll be back next month with a new episode. And don't forget, you can head to Kier.co uk/podcasts to find out more.