Recently, the Singapore government announced a slew of construction and infrastructure projects planned as part of its long term infrastructure programme. Notably in the pipeline are the development of Changi Airport Terminals 4 and 5 and the much talked about “Project Jewel” at Terminal 1, the relocation of the existing southern port to Tuas and the development of the “Southern Waterfront City” along Tanjong Pagar. These are on top of the perennial projects involving the creation and reinvention of residential space in the island state. As ambitious as these projects are, the key to their successful delivery is invariably the financing and procurement model adopted at inception. Cost, time and quality are critical matters. While the traditional procurement models, including the design & build model and its hybrids, have served the Singapore industry well, they are not without constraints. Avoidable disputes continue to arise, particularly from ineffective interfacing and communications among the employer, designers and constructors. While some are clearly unforeseen, others seem to germinate from the lack of trust among contracting parties, owing to the adversarial contracting system imposed by traditional procurement models of most standard forms of contract used in the Singaporean market.
Are there alternative procurement models? Yes. However, this requires project developers and financiers to commit to a radical paradigm shift, even as the legal infrastructure appears ripe for their adoption. Over the last decade, the industry has seen the emergence of incentivised costreimbursable, target-cost and open-book contracting models. The evolution towards partnering as a feasible procurement model seemed inevitable. Specifically, project partnering sheds some light on the possibilities for this exciting area of practice.
At the core of project partnering is the formation of a project team at project inception, where its members sign a multi-party partnering contract. Under this framework contract, the project team members agree to co-operate, deal with each other in good faith and to accept mutual obligations with respect to project interests, such as adopting an early warning system for delaying events.
The process of project team selection, design, construction and completion are facilitated by a partnering adviser engaged by the developer or financier. Its role is to guide the team in managing their partnering relationship, dispense fair and constructive advice and be the first port of call in the event of misunderstandings or disputes.
The project team comprises key stakeholders in the project such as the designers (architect and engineers), consultants (project and cost managers) and specialist constructors. This integrated design, supply and construction process allows for early involvement of constructors, which is extremely valuable in design development, value engineering, selection of subcontractors/suppliers and finalising prices with minimal contingencies.
Recognising that every stage of a project life cycle entails evolving roles and responsibilities, the partnering contract attaches pro-forma agreements which each project team member agrees to execute at the appropriate stage of the project. These include the pre-construction agreement and commencement agreement (which replaces the need for letters of intent and award, respectively). These specify the project commercial terms including price, project timetable, risk management and insurance obligations. In addition, the partnering contract also specifies the procedure for managing variations and each member’s obligations with regard to issues such as delay, extensions of time to completion, intellectual property and health & safety.
Of greater interest is the flexibility in which the project team may agree on incentives payable to each other for achieving certain key performance indicators such as completion by certain milestone dates or meeting certain buildability scores or Green Mark criteria, which are encouraged by the Building Construction Authority. These could be structured as shared savings that may be derived in completing the works below a target price or guaranteed maximum price as agreed among the project team members. In fact, the partnering relationship can be created alongside an existing contractual relationship or form the basis of the contractual relationship.
In the same way the project team works toward the completion of the project, post-completion matters such as defects rectification and procuring of specialist warranties are similarly dealt with in a cooperative manner. While the intent of the project partnering contract is primarily to increase co-operation and trust among the project team members, disputes that arise along the way can be dealt with swiftly by a project control core group which is established at the project inception. While this does not limit the rights of disputants to refer their disagreements to statutory adjudication or arbitration, it can reduce the incidence of disputes. In a sense, it distils disputes by bringing the alternative dispute resolution process up-front.
There are of course concerns about how project partnering may operate in practice, its pitfalls and how it sits within the existing legislative framework, particularly with regard to current tendering practices under the Government Procurement Act (Cap. 120) and the Competition Act (Cap. 50B). These issues require closer study, but are not insurmountable. The snapshot of projects below bear testimony to the workability of project partnering in their respective jurisdictions, and it is hoped that developers and financiers in Singapore will start rethinking procurement models for upcoming projects.
- Manchester Airport Terminal Upgrade, UK. Developer: Manchester Airport Group.
- Tottenham Court Road, London Office Development, UK. Developer: City of London Corporation.
- Woodford Prison, Brisbane, Australia. Developer: Queensland Corrective Services Commission.
- Port of Brisbane Motorway, Australia. Developer: Queensland Department of Main Roads.