Building Contracts: Is the Alliance Model Best for Construction Projects?

Alliance projects are often million-euro investments and require years to complete, such as rail, tram and hospital projects. They naturally interest the public because of the impact they have on society and so get a great deal of media attention.

The ‘best for project’ principle developed in alliances is now trending in other implementation models, particularly because the quality of construction is currently a subject of heated debate. The general terms and conditions for alliance projects drafted by the Building Information Foundation RTS have also been in force for some time now.

Is the alliance model a good fit for all kinds of construction and is it always for the good of a project?

The Alliance Model and the ‘Best for Project’ Principle Support Enhanced Cooperation

An alliance is an organisation formed by the client, designers and contractors responsible for the design, implementation and other tasks in a construction project. All of the parties are responsible for the development and implementation of, and are subsequently liable for, the project together. The alliance members share the financial risks and benefits of the project and work closely together following principles of transparency.

The ‘best for project’ principle sets out that all of the actions taken within the alliance, such as tasks, organisation, resourcing, procurement and decisions, are aimed at achieving the common goals set for the project. The goals and actions of the parties to the alliance cannot be in conflict with the shared goals set for the project.

Cooperation during Design Phase a Clear Benefit, but Unfamiliarity with the Model is a Challenge

The alliance model may seem difficult and maybe even confusing to some operators in the contract chain. This can particularly be the case for subcontractors operating outside the core of the alliance, who are more used to ordinary projects run under the Finnish General Conditions for Building Contracts YSE 1998.

Alliance methodology may also be unfamiliar to parties joining the alliance, which can lead to the costs and efforts of the alliance being spent in the development phase on things that are not vital to the actual design.

The contractual relationships and liabilities between the parties may also get mixed up along the way. Continuous communication and transparency between all of the parties throughout the project is vital, as parties outside the core alliance are often tied to the alliance’s internal processes.

On the other hand, the alliance model has been found to work well in the project planning phase, as the various contractors can have their say alongside the client and main contractor before the implementation phase starts.

The best features of the alliance model shine in challenging and complex projects involving numerous parties. When properly applied, more traditional models, like total and turnkey contracts, are better suited to typical housebuilding or civil works than the alliance model. 

The upcoming reform of the Land Use and Building Act could also have a major impact on the use of the alliance model.  According to current information, the reform is intended to enact a variety of liability periods for the parties involved in building projects, which is a poor fit for the joint liability for the project and any defects that is the hallmark of the alliance model. 

What Is Best for a Project?

The amount of attention that construction problems receive in the media can easily drive the conversation towards using the alliance contracting in projects that the model is not a good fit for. The alliance model is very front-loaded with respect to resources and costs.

The advantages of the model are also wasted if the design stage is already well under way when the alliance is formed or if extensive cooperation is not necessary in the project.

It is important to keep an old wisdom in mind here: choosing the right implementation model for a project between and with help of the developers and consultants right from the start will promote good building— and that is what is best for any construction project.