Partnering

01 May 2008

Partnering in the construction industry began in the 1980s, promoted by the US Army Corps of Engineers, and it takes many forms. Sometimes participants ‘partner’for a single project only, while sometimes it is a long term commitment lasting many years.

Management Approach

As a result, partnering has many definitions. A useful guide would be ‘a management approach or process between two or more organisations, for the purpose of achieving specific business objectives, by maximising the effectiveness of each participants’resources'.

With some notable exceptions (the UK and Denmark), recent studies have revealed that partnering is not as prevalent in the European construction industry as it is in the US or in other European industries such as oil and gas. This is despite the fact that the EU public procurement regime encourages (or at least facilitates) the use of long term partnering relationships by the permitted use of framework or “term” contracts.

This is likely to change as the integration of the industry gathers pace. As a result, partnering is likely to become far more widely used in Europe over the next few years.

Key Features

What then are the key features of partnering and what are the benefits it can bring?

There is no set format that must be followed. Most partnered projects do however follow several of the following key management principles: shared risks and benefits better communication (known as'open book') team building workshops and other exercises to break down organisational barriers and foster a united, problem solving approach shared objectives for continuous improvement (often by reference to measurable ‘KPIs’- Key Performance Indicators).

The benefits of this approach include: • an end to the traditional

'adversarial or ‘claim/blame’culture that exists in the construction industry

• a focus on the longer term objectives for the project (e.g. reduced whole life costs by improved design and construction quality)

• repeat business-negotiated work for contractors and ‘tried and tested’supply chain partners for clients

• reduced costs and defects (proven by several studies of pilot projects in the US and UK) reduced disputes.

Legal Effect

What is the legal effect of partnering?

This depends upon the form of documents used to record the partnering relationship, as well as the legal system of the country whose law applies. Very often the partnering aspects are not recorded in the construction contract at all, but in a separate ‘partnering charter'.

This can create unhelpful risk, as the parties are uncertain as to the legal effect of the charter-is the charger legally binding, or is it an aspirational statement of intent? As a result, the legal status of any separate charter is now often expressly described. For example, in the UK's JCT contract the partnering option is stated not to be binding, whereas in the NEC form “Option X12” the Charter is to be made legally binding, by incorporating it into each bi-party contract. This clarity of intent is to be welcomed.

Conclusions

Partnering now has an established track record of proven success in many countries and many industries. As the integration of the construction industry in Europe gathers pace, it is likely that the use of partnering techniques will also spread much more widely. To capture the benefits it can bring, parties should record their intentions carefully and clearly, so as to avoid the very misunderstandings and disputes which partnering is designed to avoid.

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