An alliance is “an agreement between two or more individuals or entities stating that the involved parties will act in a certain way in order to achieve a common goal.”
An alliance is, in effect, a virtual organisation. The members of an alliance drive a synergy where the benefits are greater than those obtained by acting individually.
Collective ownership of opportunities and responsibilities together with shared decision making create a collaborative environment without the need for new organisational forms.
Alliances can take many forms and they all have the above definition in common. Alliancing can be applied to delivery of services, co-design, research and development, innovation and change programmes. See here for examples of why alliancing will add value in various situations.
An alliance is typically set up for a specific purpose and is disbanded when that purpose has been achieved.
Alliance contracting is the term usually applied to project or service delivery where there is one contract between the owner/financier/commissioner and an alliance of parties who deliver the project or service.
See our video for a 2 minute explanation of alliance contracting
An alliance contract creates a collaborative environment without the need for new organisational forms. By having one alliance contract, all parties are working to the same outcomes and are signed up to the same success measures. There is a strong sense of your problem is my problem, your success is my success.
Typically there is a risk share across all parties and any ‘gain’ or ‘pain’ is linked with good or poor performance overall and not to the performance of individual parties.
The distinctions between alliance contracts and traditional service contracts are broken down in the diagram below.
|Separate contracts with each party||One contract, one performance framework|
|Separate objectives for each party||Aligned objectives and shared risks|
|Performance individually judged||Success judged on performance overall|
|Commissioner is the co-ordinator||Shared co-ordination, collective accountability|
|Provision made for disputes||Based on trust and transparency|
|Contracts based on tight specification||Contract describes outcomes and relationships|
|Change not easily accommodated||Change and innovation in delivery are expected|
Alliances are not a recent phenomenon, they have been used for centuries. In the last couple of decades however they have evolved very quickly. Many people will be familiar with the airline industry’s One World Alliance and Star Alliance for instance. There are scores of examples of alliances in most sectors.
Nowadays the focus is around the synergies gained through collaboration and the provision of complementary expertise. It is the added value to a product or service rather than a simple joining of resources.
Alliance contracting for delivering projects has grown rapidly since it was first adopted with outstanding results in the early 1990s for the development of the BP Andrew oil field in the North Sea.
The first public sector alliance projects were undertaken in Australia in the late 1990s. Since that time methodologies have developed and the alliance approach for projects has been adopted in other sectors of the economy.
Alliance contracting has since been used in thousands of projects and continues to produce outstanding cost outcomes, early completion, exemplary health and safety records and award winning solutions.