How-to Guide: Relationship based contracting for complex projects
Find out how this procurement and contract strategy works.
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Who this is for?
Any organisation considering alternative approaches to procurement that require a high degree of collaboration between the client, consultants, and contractor to achieve successful project outcomes.
Build a team with the right experience and capability
Good delivery outcomes can be achieved when the project team consists of people with a passion for the project, matched by a competency to perform. The right contract model will set the foundations for a collaborative, transparent working environment where everyone can contribute their expertise. Establish a core delivery team that includes the client, contractor, and consultant; these people should be experienced and extremely capable practitioners that have a passion for doing better.
Get buy in from senior leaders
Your senior responsible person, Board, Chief Executive or budget holder need to be avid supporters of your project. This includes supporting the objectives of the projects and the approach to delivering them and being fully informed so they can accept the trade-offs and uncertainties that are inherent in complex projects.
For example, in the SH2 W2O project the Waka Kotahi team worked with the Board to agree the urgency to deliver the project and gained support for a target cost contract as it was the best option to deliver at pace. Despite the inherent cost uncertainty from this model, the team gained support from the Waka Kotahi Board by agreeing a "Not to be Exceeded Price" and committing to progressing work in earnest and confirming there would be no additional funding requests.
Cultivate commitment from all parties
It's important to build a collaborative and transparent project culture through strong commitments that provide a source of truth for all parties. The commitments could be developed through co-creating a project philosophy statement and project charter. For example, once the procurement model was approved for by Waka Kotahi, a philosophy statement was developed to provide clarity for all participants and included the intentions and mechanisms of the delivery model. A Project Charter captured the underlying behaviours that were critical to a successful project outcome.
Defining the required behaviours is critical, as it helps clarify what success look like, what behaviours each participant had to exemplify to deliver success, and how everyone would commit to helping team members perform to their best.
A relationship-based delivery model can be set up for success with the right tender process.
In this project, the process to determine which contractor(s) would deliver the works commenced with a Statement of Interest and Ability (SIA), which selected four candidates to go forward to the tender stage. The SIA scores did not carry over for the rest of the process.
Tenderers were required to submit two sets of non-priced attributes that were required to be uniquely resourced and were separately evaluated by the Tender Evaluation Team. The non-priced and priced attributes were weighted as 50% each, and after the evaluation process the top scoring tenderer selected which of the two contracts they wished, and second scored tenderer confirmed their willingness to accept the remaining contract available. A negative response would result in the third tenderer being offered the remaining contract and so on.
For this project, an NZS 3910:2013 contract was amended to enable a target outturn cost approach, with an incentive share scheme.
Build the Culture Needed for Success
Any project, especially something grounded in a relationship base procurement model, must focus on building trust and collaboration among the team.
The Construction Sector Accord's four key principles provide a blueprint for developing a strong team culture through: building trusting relationships, being bold, valuing our people, and acting with collective responsibility.
Read more about the Accord principles
Read more about the Waihi to Omokoroa project(external link) - nzta.govt.nz