Page 48 - Vol 28 Issue 29 2019

mining legislation

Now is the time to relook

collaborative contracting

By Euan Massey, Director: MDA Construction & Technology Attorneys

be some challenges, if One of the best examples of collaborative
Euan Massey, employers drive the process partnership is the Andrew Oil Field
Director: MDA gradually, it is my view that in the North Sea. The North Sea is
Construction notoriously difficult with prohibitively
& Technology collaborative contracting costly development costs. BP recognised
Attorneys has much merit. that a fundamental shift in the traditional
Collaborative contracting adversarial contracting model was
encompasses various essential to break through the cost barrier.
initiatives aimed at building An alliance was set up with seven
long-term relationships. contracting parties and target cost models
Ultimately, it aims to achieve were used to incentivize the parties.
cost, efficiency and financial Contractors were paid target cost and
outcomes that benefit all measured against cost incurred. There
contracting parties. was an incentive to beat the target, and a
cost if the target was not met. The model
Partnering and alliancing reduced life cycle costs of the project and
contracts significantly reduced the design interface.
Partnering involves a Framework agreements
contractor and an employer
and can be project-specific Typically, framework agreements involve
or long term. Alliancing separate long-term contracts and call off
contracts are only used arrangements. This means that as work
long-term and involve all becomes available, it is awarded to a
major participants. contractor on a pre-qualified selected
Both models use initiatives panel of contractors. These agreements
shorten procurement timeframes and
to promote co-operation offer contractors a degree of certainty
and include ‘softer’ issues in terms of possible future work. Having
like trust. They include said that, many contractors report that in
a statement of goals to some cases, the time and effort to pre-
ining, construction and oil & ensure alignment and the qualify doesn’t match the anticipated
gas (O&G) projects are usually integration of management systems. reward.
Mtechnically challenging and often Shared resources are attractive as single
result in price and time overruns with management teams remove duplication In a collaborative environment, the
resultant large and expensive disputes and inefficiency. Open book accounting framework is aimed at incentivising all
and claims. In this tough economic requires parties to share their supply parties. They can be binding or non-
environment, we should be actively chain arrangements and how they can be binding. Contractors may enter into such
looking for possible alternatives. used for benefit of all parties. contracts on the knowledge that there is
a strong possibility of work, but there is
While collaborative contracting is not There are a number of benefits in no consequence if they are not awarded
the panacea to construction and mining partnering and alliancing contracts. There work.
are fewer disputes and less litigation,
industry woes, it can be valuable in time and quality outcomes are better and Motivation is the key
reducing costs, creating efficiencies and administration and legal costs are lower
providing more financial security. To have (at least on paper). However, a massive Parties must be motivated to work
significant impact, several critical success effort is required to manage the rigorous together, which hinges on putting
factors need to be addressed: traditional implementation measures. In addition, appropriate payment options in place.
Traditional payment options introduce
procurement processes will need to parties must make the distinction competing interests, but target cost
change, incentives must be carefully between conceptual partnering and and cost-reimbursable payment options
crafted, and the right contracts must be contractual partnering. motivate parties to collaborate.
in place. While there will undoubtedly

48 | AFRICAN POWER Mining & Oil Review Vol 28, Issue 29, 2019 Celebrating 10 years of excellence