Maximizing value through alliance contracts in program management
Laura Toporowski leads our Energy business for the Americas regions. She and her teams have partnered with clients across both continents to deliver projects and programs on time and under their target price. From natural gas combined cycle, to transmission lines, to distribution undergrounding, our Energy Practice partners with clients to enable overall project success.
In the ever-evolving landscape of infrastructure and construction projects, alliance contracts have emerged as a transformative approach to program management. These contracts, rooted in collaboration and shared goals, offer a compelling alternative to traditional EPC (Engineering, Procurement and Construction) or staff augmentation models. By aligning all stakeholders — owners, designers and constructors — toward achieving a target total cost and key schedule milestones, alliance contracts create an environment where success is shared and challenges are collectively addressed.
The core of alliance contracts: Risk and reward sharing
Alliance contracts are built on the principles of shared risk and reward. Unlike traditional frameworks where risks are allocated to individual parties, alliances distribute these risks equitably. This is achieved through mechanisms like the “pain share/gain share” model, where participants collectively bear the consequences of cost overruns or share the benefits of cost savings. This alignment fosters a culture of collaboration and innovation, as all parties are incentivized to make decisions that are “best for the project” rather than solely protecting their individual interests.
Delivering cost savings and agility
One of the most significant advantages of alliance contracts is their ability to reduce overall project costs. By focusing on the total value delivered rather than the dollar-per-hour cost of individual contributors, these contracts encourage efficiency and innovation. For example, integrated commercial models within alliances often include performance pools tied to non-cost-related key result areas, such as schedule or quality. This ensures that every decision made by the team aligns with the overarching project objectives, ultimately driving down costs and enhancing value.
Moreover, alliance contracts offer unparalleled agility. In times of market or financial uncertainty, the collaborative framework allows for rapid adjustments to project scope, timelines or budgets. This flexibility is particularly valuable in today’s volatile economic environment, where the ability to pivot can mean the difference between project success and failure.
Beyond cost: The value of collaboration
The collaborative nature of alliance contracts extends beyond financial benefits. By integrating supply chains and fostering open communication, these contracts mitigate risks associated with project interfaces and dependencies. For instance, practices like design and schedule integration ensure that all stakeholders are aligned, reducing the likelihood of delays or cost overruns.
Additionally, the emphasis on shared goals and transparent decision-making builds trust among participants. This not only enhances team performance but also creates a legacy of best practices that can be applied to future projects.
Conclusion: A paradigm shift in program management
Alliance contracts represent a paradigm shift in how we approach program management. By focusing on shared objectives, total project cost, and schedule milestones, these contracts deliver superior outcomes compared to traditional EPC or staff augmentation models. They enable clients to achieve significant cost savings, adapt to changing circumstances, and foster a culture of collaboration and innovation.
In an era where agility and efficiency are paramount, alliance contracts offer a proven framework for success. At AECOM, we leverage our extensive experience in program management and alliance contracting to help clients navigate complex projects, ensuring that every decision made is aligned with their long-term goals. Together, we can build a future where Energy infrastructure projects are not just delivered on time and under budget but also set new standards for excellence and sustainability.