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Alliance contracting gains pace in major rail projects

19/02/2010

The use of alliance-style contracting is gaining momentum both in Australia and globally for large scale infrastructure projects.

At O’Donnell Griffin, we have embraced an alliancing model for most of our major national rail infrastructure projects, and we have recently signed a joint venture partnership with Hong Kong engineering company Kum Shing.

Why is this model, which emerged originally in the oil and gas industries, now proving successful?

Alliancing is proving superior to the traditional design and construct (D&C)tendering process because it is co-operative and outcome specific rather than budget driven. An alliance contract requires a number of civil and/or state partners to pool their resources and knowledge to deliver detailed, large scale projects to budget and on time.

Rather than producing a fixed budget price and details of delivery prior to selection of contractors, as in traditional D&C, the alliance sets a delivery date and budget and a managing board (comprising different alliance members) then project manages the delivery for optimal results. The client is a member of the alliance to facilitate the combined decision making processes and assist with the flexibility that is the hallmark of the process.

O’Donnell Griffin recognised the opportunities with alliancing several years ago and it presently has General Managers seconded to three alliances: the $1 billion South Improvement Alliance (SIA), the $1 billion Novo Rail Alliance in Sydney, and the recently announced $265 million Sunbury Electrification Alliance in Victoria.

Alliancing is not a copyright idea, it is a method of delivering programmes and projects that can be used on every major project under consideration in Australia. In recent years the rail sector has adopted alliancing strategies to pursue many opportunities. It is also used in mining and water projects.

The South Improvement Alliance (SIA) – involving the Australian Rail and Track Corporation (ARTC), with O’Donnell Griffin, John Holland Group, MVM Rail, Kellogg Brown and Root, and Aurecon – has invested $1 billion upgrading existing rail corridors between Sydney and Melbourne.

The Novo Rail alliance, set up to upgrade Sydney’s urban rail passenger network, comprises O’Donnell Griffin, Laing O’Rourke and Aurecon, and the owner participant RailCorp. The Sunbury Electrification Alliance is to be run by the joint venture of O’Donnell Griffin and Laing O’Rourke, and the Department of Transport and its rail operators.

Optimal results with large scale programmes such as SIA are delivered as the alliance is able to constantly update on technology and budgets for an improved outcome. Another critical element of a project of that scale is that resources are secured at the start of the alliance as a result of the breadth and depth of the partnerships’ resources pools. This is of great importance due to the pressure on human and material resources in this new infrastructure-focussed age.

Project management skills also are maximised due to the level of industry knowledge that can be gleaned from the many different divisions of these high-level companies.

As can be seen, this also makes alliancing a dynamic, interactive form of public and private relationships.

There is no doubt that alliancing produces the best outcomes in these large projects, with best value of money, the ability to be flexible and adapt along the way, while still meeting budgets, and with trillions of dollars to be spent in the global infrastructure market in coming decades, its foothold is simply set to strengthen.

Francis Dwornik is Rail Engineering Director, O’Donnell Griffin Rail.

O’Donnell Griffin is part of the Electrical & Communications division of Norfolk Group Limited, an ASX listed company.

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