The conventional approach to infrastructure development has undergone a paradigm shift in recent years, with a growing emphasis on efficiency, cost-effectiveness, and timely project completion. These goals are becoming increasingly more difficult to achieve in a market facing significant challenges such as shrinking capacity, labour shortages and economic fluctuation. Collaborative delivery methods have emerged as powerful tools in the arsenal of infrastructure developers, offering innovative solutions to address the challenges faced by developers seeking to employ more traditional methods. This article explores the significance of collaborative delivery methods in complex infrastructure projects such as delivery partner models, highlighting their benefits, challenges, and the transformative role they play in the development landscape.
Setting the scene – Conventional infrastructure delivery methods defined: Conventional infrastructure delivery methods, such as the design-bid-build model favouring a fixed price model of remuneration, were perceived as business as usual in the infrastructure project delivery world for decades. In this model, each phase of the project is completed sequentially, with distinct entities responsible for design, bidding, and construction. While this approach provides a clear delineation of responsibilities and can be well suited for smaller scale projects, it often leads to extended timelines, potential cost overruns and more recently an imbalance or contractual risk allocation skewed towards parties unequipped to manage them.
Towards Collaboration – Public Private Partnerships (“PPP”): Before looking at a couple of examples of collaborative contracting, it is worth noting that collaborative contracting comes in a spectrum of contracting models. PPPs involve collaboration between a government agency and private-sector company(ies) that can be used to finance, build, and operate projects, such as public transportation networks, parks, hospitals, convention centers and more recently renewable energy projects. Traditionally the PPP model was utilised to shift funding of large-scale infrastructure projects off the government’s balance sheet and onto the private sector party who has access to a myriad of debt and equity sources of funding. This can allow a project to be completed sooner or make it a possibility in the first place. However, the benefits are not restricted to financing access. PPPs allow public sector parties to better leverage the smarts and innovation of private sector parties which can help improve the operational efficiency of providing public services. The private sector can also rely on the public sector to provide incentives for the private sector to deliver projects on time and within budget – this can include remuneration incentives, eliminating or managing revenue risk in the project, contributing much needed land or facilitating more efficient planning approvals to better manage the planning approval risk at the beginning of the project.
Innovating Collaboration – Delivery Partner Models: Under delivery partner models of contracting, the Owner engages a delivery partner. Typically, the delivery partner will assist the client in the initial stages of the project with project planning, programming, design management and construction management services. The next stage can come in many contracting forms ranging from design and build contracts to PPP contracts. The process of procuring contractors (and suppliers) is overseen and managed by the delivery partner, however, the Owner (or delivery partner acting as the Owner’s agent) usually engages the contractors directly.
Benefits of Delivery Partner Models: The delivery partner model enables owners to achieve significant client savings compared to a model whereby they engage a major contractor to manage the risk for them at a time where certain risks are difficult to understand and manage thereby attracting a premium from those contractors. In addition, by engaging the expertise of a delivery partner, the client is able, with the assistance of its delivery partner, to manage unknown project risks in a more sophisticated manner. Too often in complex projects, it is tempting as an owner to attempt to pass unknown planning risks such as delays in planning approvals, other planning risks such as heritage flooring space, latent defects, and other site contamination risks, and even the risks associated with a poorly defined scope onto contractors. However, all this really achieves is building unnecessary contingency into the overall project cost and in the long term delays the appropriate mitigation of these risks by the parties.
Limitations of Delivery Partner Models: Reader beware – Delivery Partner Models are not suitable for all types of infrastructure projects. These models are ideal for complex long-term projects with unknown risks that have not been ironed out at the origination stage of the project and where clients are open to the opportunity that awaits them if they work with a capable Delivery Partner to manage these risks. For example, in the transport infrastructure sector, the Delivery Partner Model has allowed State Government agencies to appropriately and innovatively problem solve through planning risks, scope uncertainties and funding constraints early in a number of its transport projects whilst minimizing extra cost being priced in by developers and contractors at a time they are unable to appropriately scope or price the risk. However, the benefits have not come without their challenges. For example, successfully navigating the challenges associated with collaboration, stakeholder management and integration requires a robust framework and skilled project management. In addition, the delivery partner model is relatively new in infrastructure so engaging private entities in public infrastructure projects under this model or other collaborative contracting models can raise concerns about transparency and accountability. Striking the right balance between private sector efficiency and public sector oversight will therefore be critical to maintaining public trust.
Towards a better tomorrow – Transforming the infrastructure development landscape: By fostering collaboration, innovation, and efficiency; delivery partner models and other collaborative contracting models hold the potential to revolutionize the way we conceive, plan, and execute infrastructure projects. As the world faces growing infrastructure challenges, embracing collaborative delivery methods becomes imperative for creating resilient, sustainable, and value for money solutions.
Our team is ready to support you in planning and drafting the appropriate delivery model for your project. We are experienced in delivering projects using innovative and collaborative infrastructure delivery methods and can support you on a cradle to grave basis. For further guidance, please reach out to our team who are well placed to assist.
