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Rise and rise of collaborative contracting

12 August 2019
The New South Wales Government's push to a more collaborative approach to infrastructure delivery has gained greater momentum as a major Government water agency adopts a collaborative delivery model and international contractual framework to deliver three major water infrastructure projects in Sydney. 

Government focus on collaborative contracting

In 2018 the NSW Government released its 10 Point Action Plan (Action Plan) for the construction industry, encouraging NSW state agencies to procure and manage projects in a more collaborative way. This has fuelled interest and adoption of collaborative contracting, creating a strong procurement trend in recent years. 

Collaborative contracting means engaging more actively with industry participants, utilising digital technologies (such as Building Information Modelling (BIM) and moving away from a reliance on more traditional fixed price and lump sum procurement methods in favour of more collaborative contracting models such as alliancing, Public Private Partnerships (PPPs) or delivery partner models. 

The Action Plan also promotes looking abroad to more mature international markets with a view to adopting international best practice and learnings in the procurement of major infrastructure projects in Australia.  


Gaining traction

In light of the Action Plan's focus, Sydney Water developed the 'Partnering for Success' project framework to deliver the Lower South Creek Treatment Program (Program). In short, the Program will see the staged development of three processing facilities (Riverstone, Quakers Hill and St Marys) to address the increased demands on wastewater treatment due to population growth in Sydney's North West corridor. Sydney Water has adopted the delivery partner model as the preferred project delivery method appointing UGL and WSP as delivery partners. The delivery partner model was also the preferred delivery method for the Western Sydney Airport, a $5.3 billion greenfield facility in Badgerys Creek.

The delivery partner model seeks to improve commercial efficiencies and adopt a 'no blame' or 'one team' policy. The Program seeks to achieve this by fully integrating Sydney Water's owners, operators, maintainers and engineers into the design, construct and commissioning processes. A unique aspect of this project is the staged delivery of three separate projects, under the same project documents, allowing the transfer of learnings from one project to the next.

In order to achieve the integration and project outcomes of a delivery partner model, Sydney Water has utilised progressive approaches to procurement in the Australian market namely utilising BIM and the NEC4 contract suite. 

BIM is the digitisation of the construction and procurement process. Benefits that can be realised from BIM include providing a holistic view of the project (via digital models), greater coordination across the design disciplines and greater accuracy on quantities and pricing.

The NEC4 suite is a more agile procurement suite when compared to the Australian Standards contract suite and relatively new to the Australian market, being born out of the UK. 


NEC contract suite

In another positive step for the NSW Government in delivering their Action Plan and commitment to the construction sector, Sydney Water is one of the first major Government agencies in Australia to use the NEC contract suite approach in conjunction the delivery partner model to deliver major infrastructure. The Action Plan seeks to promote the standardisation of contracts and procurement methods which (amongst other things) looks to adopt best practice internationally and harmonise contract terms to open the NSW construction market to international firms. 

The NEC3 contract suite was successfully used to deliver major infrastructure for the London 2012 Olympics and other major water projects in the UK, Hong Kong and New Zealand. Through such projects, the fourth iteration of the NEC contract suite (NEC4) was updated by utilising both user and industry best practice learnings, designed to support innovation through digital advances and encourage collaboration. NEC4 is tailored to operate in a digitally sophisticated construction environment suited to design, build and operate, engineering and construction, alliance, framework and supply contracts. 

This is not the first use of the NEC contract suite in the Australian market. It is currently utilised by Main Roads Western Australia for construction of a portion of the Great Northern Highway and it successfully delivered the A$260m Mt Mercer wind farm in WA. However, Sydney Water's adoption of the NEC4 contract suite is an interesting development for the Australian market as it is a step toward filling the void in the procurement landscape the AS11000 was coined to fill – being a modern contract for the modern age. The days of heavily amended Australian Standard contracts for discrete parcels of work may be numbered. 

The benefits Sydney Water are seeking to realise by utilising the delivery partner model in conjunction with the NEC contract suite include: 
integrated team adaptable to needs of the program; 
full design control to enable best value life cycle cost; 
learnings from the Riverstone project to be carried through to subsequent projects; 
opening up the contractor field; 
agreeing pricing across three projects early; 
continuity of work for project teams and subcontractors; and 
no premium for transfer of design risk. 


Final remarks

It appears to be the case that the Australian market is beginning to move away from traditional delivery to embrace more collaborative contracting models, which is a positive step for the Australian construction industry. It is likely that this trend will continue into the future as both public and private sector industry participants become more comfortable with collaborative contracting. 

If you require further information or have any queries in relation to this legal update, please contact a member of our national Construction & Infrastructure team.

Further Reading