Construction partnership projects – a success story?

A new method to improve efficiency, work smarter, faster and cheaper is creeping into all industries, even in the tradition-bound construction industry. Partnerships were introduced to the Swedish market more than 10 years ago, a more modern form of cooperation where the watchwords of trust and understanding would enhance cooperation between parties. Partnership projects mean a deviation from traditional roles and working methods; the formation of a joint organization, with shared finances and common goals. But has this modern form of cooperation been more efficient at building projects and resulted in fewer conflicts with more satisfied clients?

A construction project is a complex process characterized by the interaction between the primary developer and contractor, but also tenants, consultants, suppliers, subcontractors and others. In a partnership project all work, no matter which side they represent, for structured collaboration and best results.

Typically in these projects, there is an explicit dispute resolution process with common goals beyond what is stated in the contract, and a system for monitoring the goals and improvements to the project.

Procurement of a partnership project

Clients subject to the rules on public procurement must initiate a partnership project by tender. The contract can either include: only the planning/design stage, and then culminate in an inquiry into the construction project, or an entire partnership project. Procurement of so-called strategic partners usually includes the entire partnership process, and may, amongst other things, be done through a framework agreement. Where the contract only covers the planning stage with works procured separately afterwards it’s important to know that any contractor who has been in a partnership that produced contract specifications cannot normally participate in the procurement of those works.

The risk of losing the knowledge of contractors is a compelling reason to procure for an entire partnership project at the same time. Procurement of a partnership agreement contains considerable amounts of soft evaluation criteria. This always makes it difficult for a contracting authority to find appropriate and clear criteria to apply.

Implementing a partnership project

Once a partnership agreement has been concluded, it’s time to start work on the project. Normally this begins with a joint workshop where respective teams are integrated with each other and work is allocated on the basis of shared competence. Parties go through the goals and strategies of the project with frequently highlighted issues being: the cost, technical performance and quality. The integration between parties aims to inhibit the propensity for conflict and, where a conflict arises, it will be resolved as quickly as possible, at the right level.

There is great interest for partnerships in the construction industry

It is often claimed that partnerships create a more efficient construction process with shorter construction times, lower costs and higher quality. Contractors are attracted to the openness and trust that characterizes a partnership project, and see the opportunity for a better and longer-term customer relationship. In Sweden, the number of partnership projects has increased since 2003. Public procurers, however, display a certain scepticism about LOU/LUF and soft evaluation criteria, and there is a common belief that partnerships are primarily for largescale building projects. Clients in the construction sector generally have a more positive attitude towards partnerships and “projects with enhanced cooperation”.

It is always important to remember that the underlying agreement governing the contract is still an ABT/AB agreement. Negotiated standard terms for a partnership project do not exist; all the formalities and detailed rules applicable under the ABT/AB apply between the parties. And so, if the parties ultimately cannot resolve a conflict within the collaboration, the rules of the ABT/AB agreement will apply. Parties must ensure that all notifications and other formalities required by the ABT/AB are followed. Our experience shows that it can be especially difficult to maintain the discipline needed to follow the construction contract when working on a partnership project.

A new survey of partnerships

In June 2013 the “Productivity in Swedish Construction 2013” was released, a report in which 444 newly completed residential and commercial projects were examined. The report, based on interviews with the building project and construction company managers, has been compiled in a joint project between Sveriges Byggindustriers Region Väst, Byggnads, Chalmers and Sverige Bygger with Per-Erik Josephson, Professor at Chalmers, as chairman of the report.

The report has been highly praised for what it reveals about partnerships. Among other things, it clarifies that partnership were applied at 26% of housing projects and at 33% of office projects. The overall conclusion was that the client’s project managers do not perceive any difference between partnership projects and other projects, but rather that there was a tendency for clients to be less satisfied by partnership projects than with other projects. Furthermore, the process of partnership projects are deemed to be more prone to disorder. The reasons for this are not developed further. However it’s important to remember, as the report emphasizes, that partnership are applied in different forms. Therefore, the authors argue that in-depth studies of individual partnership projects are required to truly understand the impacts of this form of cooperation.

The report’s conclusion is a setback for partnerships. Consequently, once again, it’s important to emphasize that partnerships are not a form of contract but a form of cooperation. What exactly a partnership involves and how partnerships will be defined within the construction industry, are matters for debate. There are a number of different descriptions of the meaning of partnerships and how they should be used and understood. The definitions vary partly because each partnership project is unique, and also due to the different levels of reliance by each party on shaping the collaboration. Each project must be tailored to the project’s size, nature, users’ needs and activities, as well as the client’s ambitions. In our opinion, partnership projects are no different to any other building project and do not involve less work for the client when the project is defined, but rather more. Despite the report, we believe that all the necessary prerequisites are there to execute constructions by a partnership project with results that meet the high expectations of both the client and the contractor.

Tips for successful partnerships in construction projects

Implementing a successful partnership project requires all parties to be aware that partnerships are a way of working and nothing else. The client and the contractor need to differentiate between the form of cooperation, construction shape and form of compensation. Notifications and other requirements of the ABT/AB must be also followed by the partnership. A party’s failure to comply with the procedural requirements contained in the ABT/AB will lead to a weaker legal position in any future conflict between the parties. A client must involve both themselves and the occupant during the early stages and be wary of the specification of contractor’s requirements. The common objectives should be clear and measurable and stated in the tender documents.

Construction contracts must contain clauses promoting transparency, structured meetings and clear communication. Likewise, the approach to technical cooperation and dispute resolution should be agreed. Organisation within a partnership project will serve as an integrated organisation. It is at an individual level that the success or failure of a project will be determined. And if it isn’t successful, there must be a good contract to rely on.

Elisabeth André – Construction and Real Estate
Lawyer and Partner

Written for the newspaper Offentliga (Public Affairs), August 2013