Partnering

1. Partnering CEE 474 – Engineering Project Management Lecture 2

2. Partnering • "The significant problems we face cannot be solved at the same level of thinking we were at when we created them." Albert Einstein • Partnering, the modern day handshake, works!

3. Construction Old-Style • Contractors would bring lawyers on the jobsite • Totally adversarial between contractor and owner • Claims were the normal • Black Hills Area Office had a full-time claims engineer • I spent two years on a $20M+ claim on a $24M project

4. Partnering History • INTRODUCTION • The United States Army Corps of Engineers (USACE) began using Partnering, a process that seeks to promote dispute prevention, in construction contracts in 1990. Initially, Partnering was used primarily in large projects. As of early 1992, USACE policy is to develop, promote, and practice Partnering on all contracts (Commanders Policy Memorandum #16 on Partnering, February 18, 1992.)

5. Associated General Contractors • OK, so they don’t know how to spell partnering

6. The Process • The Project Partnering process creates a new team building environment which fosters better communication and problem solving, and a mutual trust between the participants. These key elements create a climate in which issues can be raised, openly discussed, and jointly settled, without getting into an adversarial relationship.

7. Process (cont’d) • Through this process of teamwork and problem solving on a construction project, the Corps’ goals of Safety, Quality, Schedule, Budget, and Disputes are more easily met. We want the quality of the work to be right the first time, the project to be completed on time, the final cost to be within budget, and disputes & litigation to be minimized.

8. Process (cont’d) • The goals of the contractor are very similar (Safety, Quality, Schedule, Budget & Disputes) , thus the process benefits both parties through the teamwork and pursuit of mutual goals. The use of formal and informal partnering techniques now has widespread use across the Corps during the construction phase of our projects, and has been adopted by many other Federal, state, and local agencies based on the Corps success.

10. Corps ECB 2003-9 • 1. Partnering, just like the Project Management Business Process, is a teamwork approach to achieving success. The team is made up of all the stakeholders in a project. This begins with the customer and includes others such as the Corps of Engineers, the Architect-Engineer, the construction contractor, and subcontractors. It is a way of doing business based upon trust, dedication to common goals, and an understanding and respect of each other’s expectations and values. Our business philosophy is to use a partnering approach in everything we do. This means all projects and actions, and with all customers. Our goal is to extend the concept to embrace any effort requiring significant communication and coordination. Partnering embodies a perceptual attitude that builds working relationships. It takes the commitment of the entire project delivery team to make partnering work effectively.

11. ECB 2003-9 • 2. One of the most common complaints we receive from contractors is that the Corps does not uniformly practice construction partnering. Our response is that the policy on partnering has not changed. The policy is to offer to partner on all contracts, large and small, and whether it is to be formal or informal partnering. That policy evolved from a commitment to use partnering in all business relationships, especially on construction contracts. The reason that construction partnering is felt to be special is because the goals of the government and the contractor are so similar. The process creates a teambuilding environment which fosters better communication and problem solving, and a mutual trust between the participants. These key elements create a climate in which issues can be raised, openly discussed, and jointly settled, without getting into an adversarial relationship. In this way, partnering is a mindset, and a way of doing business. It is an attitude toward working as a team, and needs to be adopted for successful project execution.

13. Introduction • Since the late 1980s we have seen the development and use of different partnering models in the construction industry. This has been a primary management strategy for improving organizational relations and project performance (Li et al. 2000). The driving forces for this strategy have been studies based on the concepts of total quality management (TQM) and business process re-engineering (BPR). These studies of the construction industry have documented an industry with low productivity and efficiency.

14. Intro, cont’d • To increase productivity and efficiency in the construction industry, a strong focus has been set on better integration of the different parties (including the client, architects, engineers, general contractors, subcontractors, suppliers, etc.) in one integrated project organization. The different parties are normally independent firms and organizations, with separate goals and objectives and different operation procedures. Typically problems that occur are lack of communications and co-ordination leading to changes and alterations during the process. This again causes disputes, rising costs and reduced performance and quality.

15. International Partnering • From a website: Compared to the international arena, the development of partnering models in Norway started in the early 1990s. Our experiences started with the research project “The Integrated Building Process 1996 - 1999” (Haugen 1999), where we developed and tested partnering models in different small scale building projects. Our basic findings (Bølviken 2000) regarding the establishment of a successful integrated organization are: • • Focus on the process • • Common goals and objectives • • Mutual trust - openness • • Knowledge transfer between the parties • • Teambuilding • • Project management . routines • • Commitment from top management • • Rules for conflicts and sanctions

16. PROJECT PARTNERING IN THE INTERNATIONAL CONSTRUCTION INDUSTRYCHRIS SKEGGSBE Civil, MBAProject Manager, Abigroup Contractors, Sydney

17. AN INTRODUCTION TO PROJECT PARTNERING • 1.1 Background and history • 1.1.1 American Initiative • The first broad application of partnering in the construction industry was by the US Army Corps of Engineers in the late 1980s. Traditional methods of competitive tendering together with one-sided contracts and ineffective administration were leading to cost overruns and late completion. Furthermore litigation was becoming a significant problem. The Corps proposed a process whereby, post-tender, the successful contractor and the employer would discuss the nature of the project they were building and their mutual expectations. Goals would be defined and issues of concern and potential challenges openly discussed with a view to identifying and sharing risks. The result was a partnering agreement or charter jointly signed by all participants outlining mutually agreed-upon goals and principles (Jones Day, 2002).

18. 1.1.2 The United Kingdom introduces partnering Partnering was first applied in the UK in the North Sea oil and gas industries in the early 1990s. Major industry players such as BP were driven to this new model in an attempt to achieve profitability from what would have been otherwise uneconomic oilfields. The new approach (also known as alliancing) proved successful in achieving significant cost savings in platform construction for the employers and in creating increased profits for the participating partners (Bennett, 2000). The form of partnering differed typically from the US Corps of Engineers' approach with individual contracts between the employer and each alliance member and an additional umbrella agreement binding all parties to the alliance (the alliance members being the employer, the contractor, the designers and the key subcontractors).

19. Partnering in the UK civil engineering and building industry emerged from the background of the initial successes of this new approach in the oil and gas industry and the US building industry. In 1994 Sir Michael Latham, commissioned jointly by the government and the construction industry to conduct an independent review of what was generally accepted to be an under-performing construction industry, produced his Constructing the Team report. The central message of this report was that the employer should be at the core of the construction process. The use of teamwork and co-operation was advocated to improve employer satisfaction. One specific method recommended was the use of project partnering. When commenting on how to implement partnering, Latham noted that the New Engineering Contract (NEC) from the Institute of Civil Engineers (ICE) contained most of features./

20. From Bruce Garwood, COE’s Transatlantic Division • Successful partnering is the result of an issues-oriented process. Each contract is unique and each group of partners is unique, therefore each partnering session is unique. But I have concluded that there are seven fundamental conditions, the seven habits for successful partnering, that must be satisfied: • Choose the right attendees. • Choose the right facilitator. • Identify the issues. • Resolve issues with a formal resolution process. • Create and sign the partnering agreement. • Conduct periodic evaluations. • Select an honest broker.

21. Homework 2 • Write down, but bring to the next class: • Goals for this course • Desired outcomes • Homework desires • Term project desires • Do “Moon Mission” ranking • NEXT CLASS – We will partner