International Construction Law Review
ALLIANCING IN DELIVERY OF MAJOR INFRASTRUCTURE PROJECTS AND OUTSOURCING SERVICES IN AUSTRALIA — AN OVERVIEW OF LEGAL ISSUES
ANDREW CHEW
Solicitor of the Supreme Court of New South Wales, Australia Senior Associate, Mallesons Stephen Jaques, Sydney. *
1. INTRODUCTION
1.1 Types of alliances
In recent years, there has been a rapidly growing trend to style business relationships as “alliances”. The term, however, covers a multitude of sins in practice, and all that can be said with absolute certainty is that, in each case, the relevant alliance contract (assuming there is one!) requires careful scrutiny to ascertain just what sort of legal “animal” or relationship has been created. The type of alliance entered into often depends on the industry (from airlines to IT, oil and gas to construction) involved. Alliances range from full blown joint ventures for one-off projects to enhanced long-term supplier outsourcing relationships or alliances.
This paper deals with alliances between contractors and suppliers for delivery of major projects and for outsourcing of services. Traditionally, principals have paid contractors a straight lump sum fee or on a schedule of rates, for services or goods supplied. In some industries, these long-established contracting bases are being replaced by enhanced principal/ contractor relationships, with joint decision-making replacing traditional direction by an owner or his superintendent, and towards greater sharing of risks and more sophisticated and complex rewards/sanctions structures.
Alliancing began in the construction industry, with its roots in North Sea oil and gas projects. British Petroleum’s experience with the Andrews Field project in the North Sea shows how major oil companies and major construction companies work and benefit together from an alliance relationship. In that project, BP formed an alliance of seven partners to plan and execute the development which resulted in cost savings of 20 to 30% and time savings of six months.
Alliances in outsourcing are also becoming increasingly common including in areas such as accounting and finance, logistics, facilities
[2004
The International Construction Law Review
320