PIANC

The World Association for Waterborne

Transport Infrastructure

A FRAMEWORK FOR
EARLY CONTRACTOR INVOLVEMENT
IN INFRASTRUCTURE PROJECTS

MarCom Working Group Report N° 194 – 2022

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 PIANC REPORT N° 194
MARITIME NAVIGATION COMMISSION

A FRAMEWORK FOR
EARLY CONTRACTOR INVOLVEMENT
IN INFRASTRUCTURE PROJECTS

2 August 2022

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PIANC has Technical Commissions concerned with inland waterways and ports
(InCom),coastal and ocean waterways (including ports and harbours) (MarCom),
environmental aspects (EnviCom) and sport and pleasure navigation (RecCom).
This report has been produced by an international Working Group convened by the
Maritime Navigation Commission (MarCom). Members of the Working Group
represent severalcountries and are acknowledged experts in their profession.
The objective of this report is to provide information and recommendations on good
practice. Conformity is not obligatory and engineering judgement should be used in
its application, especially in special circumstances. This report should be seen as an
expert guidance and state-of-the-art on this particular subject. PIANC disclaims all
responsibility in the event that this report should be presented as an official standard.

PIANC HQ
Boulevard du Roi Albert II 20 B. 3
1000 Brussels | Belgium

http://www.pianc.org

VAT BE 408-287-945

ISBN 978-2-87223-018-1

© All rights reserved

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TABLE OF CONTENT

Table of Content .............................................................................................................................. 4

CHAPTER 1: INTRODUCTION............................................................................................................. 6

1.1 Background: History & Context ....................................................................................... 8

1.2 What is Early Contractor Involvement? ........................................................................ 10
1.3 Objectives & Structure of the Report ............................................................................ 13
1.4 Acknowledgements ...................................................................................................... 14

CHAPTER 2: FACTORS INFLUENCING ECI CHOICE & SETUP ........................................................... 15

2.1 Influencing Factors......................................................................................................... 16

2.1.1 Principal Benefits ........................................................................................................ 16
2.1.2 Recurring Barriers ........................................................................................................ 21
2.1.3 Project-Specific Factors ............................................................................................. 25
2.2 Selection & Setup........................................................................................................... 25
2.2.1 Differing Formats of ECI.............................................................................................. 26
2.2.2 Setup Choices ............................................................................................................ 28

CHAPTER 3: GUIDANCE ON ECI IMPLEMENTATION ....................................................................... 31

3.1 Testing Feasibility/Appropriateness ............................................................................... 32

3.2 Selection of ECI Contractor(s) ....................................................................................... 32
3.3 Transparency, Trust and Confidentiality ....................................................................... 35
3.4 Defining Objectives & Scope ........................................................................................ 38
3.5 Financial Aspects ........................................................................................................... 40
3.6 ECI at Work/ECI in Action/How to Reap the Benefits .................................................. 41
3.6.1 Performance Specifications Versus Technical Specifications ................................. 42
3.6.2 Risk Management ...................................................................................................... 44
3.6.3 ECI as Facilitator for Innovative and Sustainable Solutions...................................... 45
3.6.4 Environmental Regulatory Regime/Permits .............................................................. 50
3.6.5 Supply Chain as ECI Partners ..................................................................................... 54
3.6.6 Stakeholders ............................................................................................................... 55
3.6.7 Role of Consultants .................................................................................................... 56

CHAPTER 4: FRAMEWORK FOR ECI ................................................................................................ 59

4.1 Procurement Framework ............................................................................................... 60

4.1.1 Procurement Regulation – General Guiding Principles ........................................... 60
4.1.2 Compliance with Procurement Regulations ............................................................ 63
4.1.3 Incentivisation ............................................................................................................ 66
4.2 ECI Agreement............................................................................................................... 68
4.2.1 Analysis of Relevant Current Standard Forms........................................................... 71
4.3 Operational Practises & Management ........................................................................ 77
4.3.1 Conduct ..................................................................................................................... 78
4.3.2 Approvals, Consents & Decision Making .................................................................. 79
4.3.3 Knowledge & Information Sharing ............................................................................ 81

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CHAPTER 5: RECENT DEVELOPMENTS & ECI .................................................................................. 84

5.1 BIM .................................................................................................................................. 85

5.2 Systems Engineering....................................................................................................... 86
5.3 Lean Management........................................................................................................ 86
5.4 Conclusion...................................................................................................................... 86

CHAPTER 6: CASE STUDIES/EXPERIENCE TO DATE.......................................................................... 88

6.1 Beatrix Locks ................................................................................................................... 89

6.2 Port of Melbourne .......................................................................................................... 93
6.3 Onagawa Fish Market ................................................................................................... 99
6.4 Odense Terminal .......................................................................................................... 104
6.5 Space for the River ...................................................................................................... 108
6.6 Gemini Wind Park......................................................................................................... 112
6.7 Swansea Bay Tidal Lagoon.......................................................................................... 116
6.8 A2 Highway Passage Maastricht ................................................................................. 121
6.9 Fremantle Deepening.................................................................................................. 125
6.10 Kangaroo Island ........................................................................................................... 131

CHAPTER 7: Epilogue: Recommendations for Future Revisions ................................................. 135

7.1 General Topics ................................................................................................................... 136

7.2 Procurement Topics........................................................................................................... 136
7.3 Contractual Topics ............................................................................................................ 137
7.4 Managerial Topics ............................................................................................................. 137
7.5 Other Specific Topics......................................................................................................... 138

APPENDIX A: TERMS OF REFERENCE............................................................................................. 141

APPENDIX B: CHECKLIST ECI APPROPRIATENESS ......................................................................... 145

APPENDIX C: CONTRACT STRUCTURE COMPARISON CHART ...................................................... 147

APPENDIX D: LIST OF DEFINITIONS ............................................................................................... 169

APPENDIX E: LIST OF ABBREVIATIONS .......................................................................................... 171

APPENDIX F: TRADITIONAL VS ECI APPROACH TO FACILITATE INNOVATION & SUSTAINABILITY173

BIBLIOGRAPHY ............................................................................................................................. 175

REFERENCES.................................................................................................................................. 180

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CHAPTER 1: INTRODUCTION

KEY TAKEAWAYS

• Understanding by all parties of the implications of going down any ECI

route, and a shared willingness to accept the implications, are crucial to the
achievement of benefits.
• Structuring an appropriate contractual framework to deal with the ECI
stage may be needed to provide the necessary confidence and protection
• Definition: ECI is a strategy initiated by infrastructure owners (clients)
towards main contractors, optionally expanded with stakeholders and
subcontractors. The purpose of this is to optimise values in project delivery
and objectives, through their participation and knowledge-sharing in stages
of project planning and design, prior to execution contract award.
• The hallmarks of a successful ECI process:
- Good faith
- Transparency
- Equal treatment of all parties
- Fairness
- Clarity through clear rules of engagement
- Protection of intellectual property

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The input of contractor expertise into the development of design and the definition of client
requirements during the preconstruction phases of a project is particularly relevant to
infrastructure projects, including maritime and inland waterway related projects. Such projects
depend heavily on construction methods and equipment. Contractors have expertise on
possible methods of construction, the availability of equipment and alternative materials, the
implications of design for the ease and safety of construction, the resiliency and sustainability
of the constructed works or dredged channels, and the cost and time required to provide the
designed works. This expertise can be taken into account not only in developing the designs
and defining client requirements, but also in facilitating active stakeholder involvement and
environmental protection. It can be used both on innovative and standard projects.

Early involvement of contractors during design is not new. Even when client-design was the
norm, clients and their consultants often recognised that contractors had expertise which
could beneficially be considered in the design. Construction sector reviews regularly called for
greater involvement of contractors in design, or for alternative designs (by contractors) to be
allowed. There was a shift in the building and civil engineering sector, starting in the 1970s,
towards design and construct contracts, whereby contractors take on the responsibility for
design and, theoretically, this should enable integration of design and construction.

However, obtaining high quality inputs of contractor expertise, and then deriving or maximising
value from the inputs in the marine infrastructure sector is not a straightforward matter.

Also, the advent of procurement rules requiring transparency and equality of treatment of
suppliers has brought new challenges.

Practical experience and academic research relating to Early Contractor Involvement have
raised questions regarding:

• timing of inputs,
• client preparation to invite inputs,
• client self-awareness and capabilities,
• selection of contractors to participate,
• clear definition of responsibilities and tasks between client, designer/engineer and
contractor,
• process of price determination,
• attitudes, trust, relationships and behaviour,
• confidentiality and protection of intellectual property rights,
• binding arrangements (contracts) to support understandings.

This report deals with all these questions under the general heading of Early Contractor
Involvement (ECI) but recognising that there is a broad spectrum of arrangements which might
qualify for the description and that there are also many names used to describe supporting
contractual arrangements. It is also to be noted that ECI as used on major construction and
infrastructure projects is a very specific implementation of, what in the wider procurement
world, is a generic procurement tool entitled ESI (Early Supplier Involvement). The emphasis in
this Report will be on the content, rather than the name.

The key word is ‘Early’: involvement of contractors at an earlier stage in the project
development phase can produce benefits, such as cheaper, faster, better quality and

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reliability, fewer stakeholder objections or complaints, better collaboration and attitudes, less
disputes. In some cases, late involvement of contractors can miss opportunities completely, for
example where a change proposed by a contractor cannot be accommodated into the
design or is precluded by permits or approvals already obtained. The challenge is to achieve
the benefits through an integrated and collaborative approach, since they are not an
automatic result of ECI.

Understanding by all parties of the implications of going down any ECI route, and a shared
willingness to accept the implications, is crucial to the achievement of benefits. Structuring an
appropriate contractual framework to cover the ECI stage may be needed to provide the
necessary confidence and protection in the process; it may also be necessary to ensure
compliance with applicable procurement regulations. The aim of this guidance is to provide
such an understanding and some assistance towards setting up appropriate frameworks.

1.1 Background: History & Context

ECI Initiatives

In various parts of the world, the potential was identified for improving outcomes by various
approaches. One group of approaches includes project alliancing, project partnering and
integrated project delivery. The relevant years and the origins of these initiatives are captured
on a map. i These approaches were collectively described as relational project delivery
arrangements (RPDAs), as well as ‘collaborative working’ or ‘integration’.

Emergence, dissemination and interaction of different RDPAs

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ECI initiatives emerged separately when project partnering, alliancing & integrated project
delivery were being developed as solutions as it was realised it was possible to improve
outcomes by:

• formally involving contractors and specialist subcontractors earlier and more

effectively in the design process,
• improving integration of designs from different designers
• improving integration of design and construction methods,
• social outcomes like overcoming cultural differences between owners and
contractors,
• improving collaboration between stakeholders,
• enhancing better understanding of the requirements,
• improving cost awareness in design,
• improving schedule integration by participating organisations,
• ensuring more robust construction phase prices based on fuller appreciation of how
the client requirements will be satisfied and awareness of the risks involved.

This report focuses on the various aspects which fall under the umbrella description of Early
Contractor Involvement (ECI), whereby contractors, subcontractors and suppliers are involved
more effectively in the early phase of a project. This is prior to awarding a construction phase
contract, thereby improving value through integration, innovation, cost awareness in design,
and validation of the costs involved in the construction phase. This report is not concerned with
integration, collaborative working or relational project delivery arrangements outside the ECI
phase except insofar as they involve, depend or impact on ECI and the ECI phase.

Design Process

Design is a creative process which also

requires careful systems integration to
ensure complexities are adequately
resolved. The design process is sometimes
treated as a solitary activity, or something
to be carried out by a team within an
organization. ECI recognises that if a
problem is complex, different inputs and
ideas may usefully contribute to the
creative process by people in a number of
participating organisations. Joint working
sessions to address and solve particular
problems can speed up and enhance the
Design is an iterative process
creative process.

Design is an iterative process, in that any proposed design solution needs to be reviewed and
verified, leading either to endorsement of the proposal or identification of need for
modification. Joint creative working sessions include some review function, but they are not a

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substitute for formal review. Reviews should be completed before proceeding to the next
stage of design development. Engineers are accustomed to review design proposals on
engineering grounds, but designs also need to be reviewed having regard to cost and
schedule, interfaces, integration, buildability and safety. There may be further facets to be
reviewed such as sustainability. ECI should enable more realistic reviews of cost and schedule
implications, and more effective reviews of interfaces, integration, buildability and safety.

1.2 What is Early Contractor Involvement?

The Early Contractor Involvement concept has been reviewed and defined for the purposes
of this report as follows:

ECI is a strategy initiated by infrastructure owners (clients) towards contractors, optionally

expanded with stakeholders and subcontractors. The purpose of this is to optimise values in
project delivery and objectives, through their participation and knowledge-sharing in stages
of project planning and design, prior to execution contract award.

Unpacking this definition:

“ECI is any strategy (by whatever name) …”

The term Early Contractor Involvement has been popularly adopted to describe a range of
deliberate strategies to promote and facilitate integration of construction and design
expertise during early phases of projects, but other terminology is also used for similar strategies.
All such strategies coalesce around a common belief that improvements and benefits can
and should be obtained in suitable project situations by the input of contractors into the
development and design process at earlier stages where such input can be most effective.

“… initiated by infrastructure owners…”

Although some contractors are enthusiastic ECI advocates, ECI is a top-down strategy which,
in the case of public sector projects, must start from, and be initiated by the infrastructure
owner (the ‘client’). Foremost, the client needs to possess good awareness of their important
role in the ECI process.

Contractor enthusiasm for ECI is largely driven by business development considerations:

contractors see advantage in being selected to be one of a limited number of bidders, or sole
partner developing a price for the eventual works contract, so as to minimise speculative
bidding costs and avoid involvement in race-to-the-bottom pricing by having the process and
opportunity where the contractor can showcase their knowledge to add value in the client’s
project. Contractors also see ECI as helping them to avoid engagement in serious loss-making
contracts.

Success in the collaborative approach of ECI depends inescapably on the adequacy of

appropriate capabilities and attitudes possessed by people in the client’s own organisation.
Clients can choose prospective contractors on the basis of the capability and attitude of the
contractor’s organisations and individuals, but a client does not have such a choice about its

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own organisation. Clients need to ensure that all the people they intend to deploy from their
own organisations or consultants have (or can be educated to have) the necessary
capabilities and attitudes before embarking on an ECI strategy. Success can be thwarted by
the behaviour of a single individual in any of the participating organisations.

“…towards contractors, key supply chain members and stakeholders...”

Client-driven ECI engaging with a prospective contractor is well established, but key supply
chain members and design consultants could be involved simultaneously through the
contractor. Some clients are reluctant to establish direct relationships beyond the contractor.
This then means that these contractors are likewise reluctant to go beyond the usual
involvement ‘at arms length’ and fully step down ECI concepts to their dealings with their
supply chain or even their design consultants when ECI is not mandated by the procurement
regime of the client. This restricts the potential benefits that can be achieved. It is appropriate
that clients ensure that the ECI strategy looks beyond the contractor.

The possibility of early engagement with regulators and key stakeholders as part of an ECI
strategy is different in that regulators and stakeholders are not active partners. However, they
may be more willing to engage constructively in a reactive way at an early stage if the
contractor and supply chain are on board.

“…with the purpose of optimizing values in project delivery and objectives...”

The object of ECI is not a crude minimising of the works contract price or out-turn cost; the
object is to achieve the optimum outcome, taking into account a much wider range of
considerations, by optimising economic, social and environmental values while project design
is reinforced.

The ‘optimum outcome’ is not something that can be defined exactly at the beginning:
unexpected but beneficial improvements may emerge from ideas contributed.

It should be underlined that the specific ‘optimum outcome’ cannot be foreseen at the
beginning but that the relevant objective criteria for defining and evaluating the optimum
solution have to be expressed before commencing the process.

“…through their participation and knowledge-sharing…”

ECI requires that those who contribute to the process devote effort and capable resources to
generate and share ideas without reservation. For any organisation accustomed to keeping
ideas and information confidential within the organisation, this is a difficult step to take. It
requires willingness and commitment from all individuals involved, supported by authority from
their parent organisations. There is a need for commitment, trust and transparency on all sides
to enable ECI to work. All parties need to have the attributes of both trustworthiness and
trustfulness. It requires mutuality. Contracts can provide some underpinning but behaviour can
either reinforce or undermine trust.

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“…in stages of project planning and design prior to awarding the construction
works.”

Planning and design of a project is an evolutionary process, starting from primary drivers and
constraints. Infrastructure owners will commonly carry out preliminary project studies, possibly
stretching over many years, in order to establish requirements, crystallise ideas for a scheme,
develop an initial concept design and explore the possibility of funding, before involving
contractors. Even the idea and conceptual phase itself should be considered as part of the
ECI concept, just as every precontractual stage prior to awarding the construction works.

An important and essential part of all of this is that the ultimate goal of any ECI is to effectively
award the contract. In other words, there is a specific approach at the end of each ECI phase,
namely to proceed with either a competitive or a non-competitive tender.

Potential Stages of Design

Characteristics & Principles of ECI

The principles of ECI are critical as they are in effect the founding aspects that enable the ECI
process to achieve and realise its full array of possible benefits. They need to be
communicated to all participants by the client before the initiation of the ECI phase. The
hallmarks of a successful ECI process generally includes the following:

• good faith,
• transparency,
• equal treatment of all engaged contractors,
• fairness,
• clarity through clear rules of engagement,
• protection of intellectual property.

These principles are highlighted regularly throughout this report and provide a means to remind
the reader of the true enablers of ECI.

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1.3 Objectives & Structure of the Report

The objective of the guideline document is to provide a framework to decision makers for
managing ECI processes. It will show decision makers how to transition from a price-oriented,
diverging and onerous approach to a risk-oriented, focused and lean collaboration.

Each chapter is structured with key takeaways at the start and excerpts of tools, tips and tricks
in the relevant locations within each chapter.

The main objective of chapters 1 to 5 of this guideline is to provide a current state of the art of
ECI approaches, benefits, and other points of view of ECI as a project delivery approach.

To achieve a successful ECI phase it is important to understand the main factors driving the
ECI process. These drivers determine the outcome on how to ‘design’ the ECI process and
when to switch to another model.

Chapter 2 therefore clearly lists the key drivers that would need to be assessed by the ECI
‘process designer’, so that it may design the process by using these guidelines, connecting the
drivers with the design points from Chapter 3 and available frameworks from Chapter 4. In
addition to this, the designer should undertake an analysis (if possible), based on the benefits
versus barriers trade-off of Chapter 2.

The aim of the first five chapters of this guideline can be summarised as follows:

• collate and review all available information and reporting on ECI in its various forms,
• give an overview of the trends and existing approaches driving ECI future
developments,
• analyse relevant factors in ECI (drivers and barriers),
• explore the range of existing ECI approaches,
• evaluate the effectiveness of the different ECI approaches and of the different stages
in the life of the project for contractor involvement,
• assess the application of ECI and how it fits in with the different procurement
regulations for infrastructure projects.

The objective of chapters three, four and five in particular of this guideline is two-fold:

• develop guidance for decision makers to define feasibility/appropriateness, objectives

and scope when starting up an ECI,
• develop a reference framework that deals with responsibilities and conduct between
the stakeholders (e.g., a code of conduct, a template ECI agreement).

Finally, the objective of Chapter 6 of this guideline is to identify and research recent ECI cases,
providing details of how the projects were approached and also detailing feedback from the
various stakeholders who were involved.

As indicated by the report title, the content of this guidance document is relevant for
infrastructure construction projects in general, beyond the construction projects related to
maritime transport. Consequently, the cases addressed in Chapter 6 discuss both maritime
transport ECI’s and ECI projects in other infrastructure domains.

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1.4 Acknowledgements

This report was prepared by MarCom Working Group 194 of PIANC:

Chaired by Kenneth Willems (Vuentica), consisting of the following members in alphabetical

order: John Barber (King’s College London), Els Bonte (North Sea Port), Hartmut Brühl, Maggy
De Man (Jan De Nul), Juan Ramón García Vizcaíno (Freelance Dredging Management &
Consultancy), Craig Johnson (Enuvo), Niels Kiersgaard (Lindo Port of Odense), David Kinlan
(Kinlan Consulting), Takahiko Kishimoto (Central Consultant Inc.), René Kolman (IADC), John
Lally (Lally Consulting), Richard Lewis (HR Wallingford), Marisa Monteiro (MQM Legal), William
Murchison (Gahagan & Bryant Associates), Annemieke Sietses-Olierook (Rijkswaterstaat), Esa
Sirkiä (Finnish Transport Infrastructure Agency), Matt Trowbridge (Moffat & Nichol), Luc Van
Damme (OZConsult), Jan Van Steirteghem (BESIX), Wesley Veekman (Rijkswaterstaat) and
Taishi Yamamoto (Ports & Harbours Bureau, Ministry of Land, Infrastructure, Transport and
Tourism of Japan).

Contributions & support were also received from:

Dirk Bloem (MQM Legal), Mona Mahabadi (MQM Legal), Eirini Palaiologou (MQM Legal),
Germán Ramos (Vuentica), Kevin Vandenbruaene (Vuentica), Leen Verbraecken (DEME) and
Marie Volatier (MQM Legal).

Additional information was acquired by interviewing the following persons:

David Mosey (King’s College London), Simon Addyman (London Underground), Conor
Considine (Laing O’Rourke) as well as the project management of the Beatrix Locks project
during a site visit.

The Working Group is also grateful for the reviews received from:

Sebastian Asbjørn Pedersen (Nielsen Nørager Law), David Ball (Jan De Nul), Olaf Bergen
(Hamburg Port Authority), Daphne Broerse (Norton Rose Fulbright), Alejandro Caicedo (Van
Oord), Andrea Chao (Bird & Bird), Murat Ege (Arti Proje), Jaap de Koning (Witteveen+Bos),
Jérôme Furgé (Bouygues), Ian Heptinstall (University of Birmingham), Nick Longley (HFW), Lisa
Mathias (Hamburg Port Authority), Bert Nap (Port of Rotterdam), Martin O’Connell (Martin
O'Connell Associates), Richard Patterson (Mott Macdonald), Kiri Parr (FIDIC), John Pauling
(Ørsted), Karen Smits (Cross Culture Work), Marnix Vandenberghe (Van Oord), Martine van
den Hurk (De Beste Krachten) and Steven Van Garsse (Universiteit Hasselt).

Our final acknowledgement goes out to the organizations that gave their
support to the Working Group:
DEME for bringing forward the idea for this report to PIANC, the Flemish Ministry of Public Works,
King’s College London, DEME, Rijkswaterstaat, Jan De Nul, IADC, BESIX, North Sea Port and
PIANC-SMART Rivers Lyon for hosting the workshops.

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CHAPTER 2: FACTORS INFLUENCING ECI CHOICE & SETUP

KEY TAKEAWAYS

• Adopting ECI can trigger a wide range of potential benefits in domains such as
design, constructability, costing and risk management.
• ECI is also beneficial in building trust between the parties involved thereby
reducing claims and disputes.
• ECI's are particularly beneficial to use when preparing projects that have a large
degree of risk and/or require innovative solutions.
• Implementing ECI's also comes with challenges and potential barriers that will
have to be overcome. These challenges are often cultural in nature. It is also
important to evaluate in advance how client capture can be avoided and how
much commitment is necessary and realistic to fully gain the benefits of ECI.
• ECI approaches can be categorised by the level of competitiveness (non-
competitive versus competitive) and whether the collaboration is defined
through a contract or a procurement framework.

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In this chapter we will highlight the direct benefits of ECI and their impact on numerous other
aspects of a construction project as it develops. The key takeaway is that there are certain
situations when the full benefits of ECI can be realised, and therefore when ECI is strongly
advocated for. This trade-off in conjunction with other factors described in this chapter
determine the choice for and structuring of an ECI.

2.1 Influencing Factors

2.1.1 Principal Benefits

Principal Opportunities

Adopting ECI does not lead automatically to benefits. There are no simple answers, formulae
or contracts that guarantee success. ECI offers opportunities. Taking advantage of all
opportunities to achieve benefits depends on the motivation of all participants, and their
organisational structure, possessing the necessary capabilities and attitudes, and then
applying the necessary effort and resources according to a concerted timetable.

It is important for the achievement of mutual benefits that the relevant contributors are timely
involved, particularly to avoid proposed solutions or improvements being frustrated by the
terms of any statutory consent.

Phases of development of a project

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In a traditional approach, as elaborated in the figure below, the project is developed in a
staged approach from the early on stage prefeasibility (concept/preliminary), ending
inevitably in delivery of the infrastructure, which meets the client requirements. The project is
staged to ensure that key aspects are defined, captured and included as the project moves
on.

Contractor’s Input

A common problem with this approach is that contractor inputs are not included prior to the
tender phase. Because contractors are typically best suited to scope out the construction
methodology, schedule and costs, it is beneficial that their inputs should be included in the
project. In addition, contractors are best suited at identifying construction risks and apportioning
those risks, in conjunction with the project owner. This is outlined in the figure below for ECI’s
wherein the contractor bears design responsibility – which is not the case for all ECI’s.

++ clearly present + somewhat present = hardly present

* (Knowledge of design codes, materials science, engineering sciences, project management)
** (Knowledge of statutory acts, guidelines and requirements, Approvals.)
*** (Knowledge of preferred or optimal operations and maintenance)
**** (Construction costing, methods, contracts, risks, tendering, supply chain, construction management)

Best parties to undertake each part of the design process in a typical construction project through
its lifecycle phases

In combination, these opportunities can lead to elimination (as far as possible) of surprises and
the need or demand for late change. Cost forecasts will generally be more accurate, realistic
and dependable for the client, contractor and, if possible, include key supply chain members.

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Better Value by Design and Design Integration

Projects where ECI was adopted have demonstrated the possibility of achieving
improvements in the value of the completed project in terms of function, operation and
maintainability. The time, cost and reliability drawbacks associated with changing designs
after construction has started, can be avoided.

An important aspect is the possibility to jointly come to better specifications, not only technical
specifications but also specifications related to the construction processes as well as
stakeholder and client-related processes. ECI accommodates the possibility to challenge
constraints earlier and it allows adjustment of specifications to the selected contractor(s)’
expertise.

Construction Methodology Is Better Defined Early On

As the client and its consultant lack the knowledge and experience to transfer the initial
program into a real construction methodology, the contractor will probably change the initial
assumptions. These changes can lead to conflicts and tuning problems. Early contractor
involvement means a more exact deployment of contractors' equipment than that
contemplated by the client or its consultants and subsequently less changes in the execution
stage. In addition, subcontractors can be brought on board at an early stage, prior to starting
the works, reducing risk and increasing cost certainty.

Improving safety in design and construction methodology starts at the earliest phases of a
project. Exploring risks and options for the best construction methodologies can be best done
in collaboration between the parties with specific know-how during the design and before the
construction contract is awarded.

Integration of Design and Construction

Besides aiming to improve value, clients will also expect to reach decisions balancing cost (or
available budget) and benefit. Integration of designs is important, but there is probably at
least as much significance in the integration of design with construction.

Engineering from an enhanced perspective of constructability can have a positive impact on

early design the development of the technical specifications and safer working process.

Innovatory and Standardised Solutions

A particular benefit that can be enabled by ECI is the development of innovative or

standardised solutions. By having contractors involved in the specification development, the
degree of repetition in design elements or methodology could be increased. By starting early,
ideas can be developed with adequate time to examine not only the possibilities and the
costs, but also the wider implications. Delays in obtaining necessary consents or approvals can

18
be avoided. If off-site manufacturing capability needs to be established, ECI can provide time
to do so.

The viability of an innovative or standardised solution will often depend on a sufficient workload
for its implementation: a single small project or part of a large project may not justify the effort
required to implement the solution.

Inclusion of Sustainability Concepts in Design, Engineering & Permitting Process

By having contractors involved in the early permitting processes, such as an environmental

impact assessment process, the construction methodology will be more detailed and better
aligned with the actual methods that will be employed during construction. It could also be
beneficial for the dialogue with permitting bodies, as cost, schedule, equipment
characteristics and environmental implications will be better understood. By the end of those
early permitting processes, the direct effect will be an improved description of the final
specifications that form the basis for final pricing and contract award and a lower risk of
lengthy approval processes and non-approvals at later project stages.

Cost and Schedule

Besides improving and integrating design and construction, ECI is also about having access to
the costing and scheduling expertise of contractors and key supply chain members
(‘suppliers’), both separately and collectively, during the creative design phase.

Cost certainty should be a shared objective. The aim of ECI should be, so far as is possible, to
eliminate late changes and to avoid for any party to be taken by surprise. Cost certainty should
be based on cost accuracy. Improved accuracy of costing can be enabled by providing
better and more complete information, including designs that are more developed. This
should help avoid the two biggest sources of strife in construction projects, which are demands
for cost forecasts before there is adequate, reliable information, and contract prices that are
inadequate to cover the cost of completing the work.

The challenge for clients lies in the fact that they need expertise and data to be able to judge
whether cost estimates and prices and schedule proposals produced by contractors and
suppliers are competitive and fully inclusive, or inflated and excessive. Particularly with two-
stage tendering, the simple comfort (or illusion) provided by competition as a means of fixing
the contract price is either not available or it is reduced. Open-book pricing helps, but the
validity of prices still needs to be compared by review against other data. Since ECI is based
on trust and transparency, this gives a better basis for proper pricing and joint understanding
and alignment on pricing than traditional tendering.

ECI facilitates a more reliable and accurate business case. Especially in projects with large risks
such as a windfarm, an early discussion on execution methods identification and
quantification of risks will be more accurate, resulting in a more reliable business case. In
addition, it provides the opportunity to reduce the number of risks resulting in lower costs and
an earlier feasible business case.

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Improved Risk Management

Projects can be unattractive for contractors to engage in due to the perceived risk level as it
may take a contractor several successful projects to make up for a loss making one. Therefore,
it is good practise that projects that are considered too risky for the market undergo some de-
risking before a firm engagement with the contractor is made. An ECI approach is suited to
de-risk such projects.

By focusing on risks in the early phases of the project, a more robust basis for the project risk
management can be established. In a traditional approach, the involved parties often think
about risks they usually encounter and do not see the project as a whole. The contractor, for
example, is more interested in identifying risks that can influence cost and schedule, while the
client is more interested in risks that affect project deliverables. An advantage of ECI is that risk
management can be carried out jointly from the earliest phases of the project, bringing all
points of view together hence resulting in a jointly established risk identification, allocation
approach, risk mitigation and potentially a sharing mechanism with a more realistic pricing for
the residual risks.

In addition to those benefits, early risk management gives the team an incentive to jointly
develop and agree upon a risk management framework that will be used throughout the
following project phases. At the same time, it promotes real commitment from all parties or, at
least, clarifies the level of commitment of each party regarding risk-taking. Finally, by creating
such awareness before contract signature or even contract negotiation, the risk management
principles can serve as a basis to define risk-related contract clauses such as form of payment
and collaborative arrangements.

Reduction of Claims and Disputes

ECI can help to reduce claims and disputes during the construction phase in several ways. The
development and integration of designs pre-contact should minimise the need for post-
contract changes.

Disputes concerning clarity and interpretation of the contract documents may be avoided as
the client and the contractor will have the same understanding of the project and the different
contract documents from early on.

Prices should be agreed for the construction phase based on full information and a developed
design, so that they are realistic and robust. ECI leads thus to transparency, trust and openness.

In addition, the use of a dispute resolution board has proved to solve a lot of disputes at an
early stage.

The ECI process has the added advantage of expanding and deepening the relationships
between the ECI parties which is of benefit when disputes arise.

20
Other Opportunities Offered by ECI

There may be other, more specific opportunities for improvement enabled by early
involvement of a contractor and suppliers. For example, by carrying out focused surveys, site
investigations and tests and by implementing research programmes.

Other opportunities facilitated by ECI include setting up training facilities and production
capability/capacity, assessing new materials or components and the quicker achievement of
milestones (acceleration of total process) through parallel public procedure and/or earlier
procurement of materials.

With a relational contract, parties get familiar with each other’s cultural background, values
and motives. A relational contract formally establishes a partnership mentality, mitigating risks
within its structure through continually aligning interests via a rigid framework balanced with
flexibility in its details. This differs significantly from the transactional contract, where an arm’s-
length relationship simply focuses on the deal. Contract partners become a team and strive
for the best result. The traditional culture of adversity is left behind. This mentality also has a
positive impact on the involvement of supply chain partners. Altogether, it will result in a safer
work environment and greater job satisfaction.

Lastly, reaching agreements with key stakeholders and other interested parties and finalising
approvals and consents are also possibilities for improvement offered by ECI.

2.1.2 Recurring Barriers

There are numerous benefits which can accrue to project owners through the implementation
of ECI. However, there are also a few barriers which need to be understood in order to properly
assess the project’s suitability for ECI as well to overcome barriers when setting up and
executing the ECI. Such barriers exist on all sides, with all parties.

21
The purpose of this section is to provide a description of the most important barriers that could
be faced when the decision needs to be made on whether to choose the ECI route or not.
Crucially, it is the extent of control the client has over the barriers and whether they are
capable and willing to overcome them to achieve the extensive benefits that the ECI process
has to offer.

Procurement Rules

In most parts of the world public sector clients need to comply with procurement rules, which
can vary from country to country. When undertaking an ECI phase the framework cannot be
contradictory to these rules. Sometimes it depends on interpretation and the client itself has to
decide how to apply these rules. It is therefore essential for clients to establish an adequate
understanding of the implications of the applicable rules and regulations, of what is possible
and what needs to be done to ensure compliance, before embarking on any procurement
strategy involving ECI. For example, public sector clients should treat all tenderers equally, be
non-discriminatory and act in a transparent way.

Furthermore, public sector clients should take into account both price and quality during the
early team selection in order to comply with the relevant country public procurement
directives.

These regulatory principles require that procurement activities be planned and documented
in detail at a very early stage, and that the plans and procedures must be disclosed to
prospective suppliers together with records of actions taken in accordance with the plans and
procedures. This restricts the scope for subsequent client actions or activities inconsistent with
the documented plans and procedures.

For private sector clients not subject to public procurement regulations, there is greater
freedom. Some principles may nevertheless be relevant. For example, in relation to ECI, invited
bidders will still expect assurance that any selection processes and the ECI phase will be
conducted in good faith.

Anti-Corruption Laws

Both clients and prospective contractors are always subject to anti-corruption legislation
independently of procurement or competition regulations. This might be regarded as
beneficial for applying ECI in that corruption is harmful to the effective use of ECI. However,
stringent anti-corruption approaches can possibly have a negative impact on collaboration.

Collusion

Prospective contractors may themselves be subject to rules and regulations in the form of
competition or anti-trust law. This is unlikely to impact directly on ECI, unless it affects pre-
contract collaboration. However, competition law provides an example of unintended effects
of regulation on procurement. The use of ‘scale fees’ for consultancy services was common
around the world until the 1980s but then outlawed as offending the demand for competition.

22
It constituted the use of benchmarking to fix contractual entitlements. Although there were
certain undesirable side-effects, such as consultants receiving higher fees if the cost of the
works increased (which might be regarded as a perverse motivation) and receiving windfall
payments in times of high inflation, scale fees ensured that consultants were paid adequate
fees to do their job properly.

The enforced introduction of unrestricted competition drove down fee levels, but with the
effect that consultants then started to look for ways to cut their own costs by minimising the
service they provide or to seek additional payment through claims. These consequences are
contrary to the client’s procurement objectives. The example is also relevant to ECI in that
benchmarking is used, in some ECI methods, as an aid to fixing prices for the execution phase
contract.

Resistance to Change

Given that ECI is a relatively underutilised form of project delivery, it requires new ways of
thinking to break down old habits, and therefore a strong willingness to change. Like any
culture change process, the adoption of ECI is disruptive and may result in some growing pains.
People in leadership roles must model collaborative behaviour, explicitly and visibly commit to
ECI goals and continuously communicate their expectations of the team.

From the client side, the most common concerns to apply ECI are related to the lack of control
over the contractor’s pricing and approach. This could lead to a situation where no mutual
agreement can be reached, resulting in typical concerns for the client to apply ECI in how to
replace/terminate the contract(or).

From the contractor side, a first major barrier can be establishing trust, affected by the
objective of finding the right balance between quality and cost (will you get enough money
for the quality you give?) and affected by confidentiality, e.g. intellectual property (how to be
sure that your innovative ideas (as the contractor) will be honoured and not be shared?). Also,
unfair competition can be perceived as a barrier because of the lack of price competition
leading to price increases and an unwanted focus on profitabilityii and because of the focus
on exclusivity leading to client ‘capture’.

There should be a clear agreement on go/no go moments as well as other possibilities such as
other contractor(s) considered in a ‘waiting room’ with a clear definition of those concepts.

In addition, unclear/misaligned liability concerns can be regarded as a barrier as well; e.g.

concern about assuming design risk, an unfair risk share or a too rigid approach towards risk
allocation/sharing. When objectives are not clear and/or aligned, this will result in unpleasant
surprises and consequent tensions.

Human Interaction: Soft Skills and Attitude

ECI needs commitment on all sides; this is one of its founding principles and it cannot be
neglected by typical infrastructure stakeholders by merely relying on written contractual
relationships and believing such a basis is sufficient. ECI requires a commitment and willingness
for re-organisation within the teams, as explained in the previous section. From both the client

23
and contractor perspectives ECI is a far more involved and integrated approach than the
traditional approach of just ensuring that the contractor delivers the required construction
specification requirements. Both sides need people with other competencies and skills than
they are used to in more traditional ways of tendering.

ECI is by its nature a creative process which requires the right people and management skills
associated with this process. The most common mistake is to neglect its overwhelming
importance in an ECI approach which requires co-creation to achieve the defined objectives.

Another important driver is identifying the different roles within all stakeholders to eventually
conduct the ECI in the best possible way. It is important that all team members, from whatever
stakeholder they come, acknowledges the leadership that is taken by a certain ECI team
member on the specific topic at hand.

After the roles are identified, necessary care should be given to team formation. This involves
team dynamics, communication, capabilities, trust building and genuine commitment to
objectives and constraints of the desired results. It is important to create an atmosphere that
favours co-creation, collaboration and open communication. It is a common
misunderstanding that a focus on team dynamics interferes with (contractual) obligations
because responsibilities might get unclear. In well-conducted ECI this is not the case, but it
requires the right and trustful attitude from the parties involved. Collectively defined project
goals and metrics will help the team to measure its performance and to adjust when
necessary.1

Another aspect to consider is if an organisation is fit for an ECI process. Will there be continuity
for the whole project life time? Or will teams disappear once the project is signed? The ECI
process needs to carry on until project completion: if personnel change then the philosophy
may change and the benefits may not be realised.

Financial Commitment & Fair Compensation

There are large financial benefits that can be gained though following the ECI tender route.
However, there are costs in following this route. Typical costs involved in the ECI phase could
be ‘consulting’ fees for the contractor, where the contractor is paid to offer his advisory
services. Other costs would be internal costs to manage and implement an ECI phase,
additional costs for bringing in other stakeholders early on, such as environmental specialists.
The client iii should thoroughly compare the costs against the benefits that can be gained
following the ECI route.

In order for an ECI process to create maximum value, it is important that the manner in which
it is conducted is considered as fair to all parties involved. From a contractor’s perspective it is
important that the investment is perceived as fair. In its ECI approach the client should strive
to find the right balance between scope, contractors’ investment and ECI compensation so
that the investment, when the ECI would turn out to be unsuccessful, is acceptable while

1 A lack of genuine belief in the importance of team dynamics to conduct a successful ECI might be a sign that the
ECI process is not adapted to the company’s culture.

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keeping the right level of incentive that should remain a contractor’s risk. It is important to be
realistic on the necessary investment on contractors’ behalf at prequalification stage.

Clients have become accustomed to tenderers incurring significant tender costs for D&B
projects which the client is not obliged to compensate.

ECI aims to produce a more considered and developed design prior to pricing. This requires
more design input during the ECI phase than during a more traditional delivery approach.
Clients may be able to achieve a greater degree of effort, sharing, development and
certainty by funding the ECI phase to a significant degree, and not expecting contractors and
designers to speculate to provide funding or assume the risk of wasted costs. A client taking
this approach should ensure that it has full access and rights to the design work for which it has
paid.

2.1.3 Project-Specific Factors

The key reasons for choosing ECI for a project, as highlighted by clients2 who have chosen for
an ECI process, are outlined below.iv

Reasons for Choosing ECI as a Percentage of respondents

Rank
Procurement Route choosing this option as a reason

1 Complexity of Project 50 %

2 Timeframe for Delivery 43 %

3 Organisation/Company Policy 29 %

4 Scale of Project 21 %

5 Value of Project 14 %

6 Funding Arrangements 14 %

Reasons for choosing ECI as a procurement route

2.2 Selection & Setup

If contractor input is sought on an open and non-exclusive basis and if there are no regulatory
issues, open competition can be used to obtain prices. On the other hand, the value of the

2 The organisations involved in ECI in this survey (Eadie, R. (2015): “The Feasibility and Rationale for using Early
Contractor Involvement ECI in Northern Ireland”) were asked about their size. All but one had over 500 employees.
The other one had between 100 and 500 employees. This indicates that only large organi sations appear to be
using ECI as a procurement route.

25
input may be limited, as contractors will be reluctant to devote effort or to disclose information
or ideas which might lose an advantage over their competitors.

Two versions of ECI have become established in general use, these being:

• Sole contractor ECI, where the involvement of the contractor in the design phase leads
effectively to a negotiated contract for the implementation phase,
• Competitive ECI where the client engages with two (or more) contractors, subject to
strict confidentiality and IPR protection arrangements, leading to a final competition
based on stated criteria.

It is a general practice of both these ECI solutions that they lead to target cost or lump sum
prices being agreed on the basis of a well-developed appreciation of the work and services
to be delivered, the conditions likely to be encountered, and the risks entailed. This should lead
to realistic pricing and reduce the need for subsequent price adjustment and the occurrence
of disputes.

2.2.1 Differing Formats of ECI

Various formats of ECI engagement exist or have been tried or proposed. They may be
categorised as 4 levels:

When an ECI requires more involvement and sophisticated, in-depth collaboration, another
level is required in which competition occurs but at an earlier stage and/or on other aspects
than purely pricing.

26
 Level Description Detail Example projects

1 Consult Consultation with multiple contractors US Corps of

before inviting competitive Design-Bid- Engineers dredging
Build (DBB) bids contracts

2 Restricted, bid, early- Starting before statutory consents, the

start competition number of bidders is reduced to Beatrix Locks,
between 2 and 4, who then produce Bank Station
competing designs and price bids

3 Single bidder, A single bidder is selected, based on

two-stage pricing an initial competition, to produce a
design in collaboration with the client, UK Highways
with price then agreed on open book Agency
basis having regard to initial
competition

4 Involvement of key Extension of ECI and collaboration to Offshore Oil and

supply chain members embrace key Supply Chain members Gas projects, UK
and/or co-contractors and/or co-contractors Ministry of Justice
projects

Level 1 represents an attempt to take account of contractor concerns and suggestions before
settling a design-bid-build/invitation to tender design. In times past, such an approach might
have been effective because there was an informal understanding that the contractor who
contributed the most significant ideas would be awarded the contract. However, such
arrangements would now lead to legal challenges by unsuccessful bidders due to the lack of
a level playing field and hence a breach of procurement rules. Given this situation, there is
little motivation for a contractor to make meaningful contributions to pre-tender discussions as
any ideas may be shared with other contractors or used by the client without any form of
financial compensation or benefit to the contributor.

Level 2 represents an approach that has found popularity particularly in the Netherlands.
Reducing the number of bidders to 2, 3 or 4 means that the field can be restricted to the
shortlisted bidders who are best qualified to execute the project. Limiting the number of bids
should avoid the likelihood of under-pricing by bidders who have not fully assessed the
requirements for the project.

The enhanced chance of being awarded a contract for the execution phase should
encourage those shortlisted bidders to devote greater effort to the design phase.

27
By bringing in the bidders at an early stage, there is more time for them to develop their designs
before pricing, and their proposals can be taken into account when seeking statutory
consents. Keeping multiple bidders retains competition as a means of reaching the best
contract price, and reduces the possibility of challenges for breach of procurement
regulations. Bidders will involve their intended supply chain and obtain prices without client
involvement.

The Level 3 approach has found favour in the UK, where lawyers have concluded that it can
be justified as complying with procurement regulations so long as the initial competition is
compliant, and a structured, conditional approach is adopted thereafter. Compliance with
procurement regulations based on selection by competition requires a carefully planned
structure. Certain elements of pricing, such as profits and overheads, or particular elements
that are ready to price, can be fixed and ring-fenced in the initial competitive selection
process.

A Level 3 approach enables open collaboration between client and bidding contractor to
develop the design during the ECI phase, taking account of the client’s ideas and concerns.
It enables consultation with stakeholders and other interested parties.

Level 4 recognises the benefits that can be achieved through the early involvement of
specialists in ECI so as to capture their input to designs, costing, programming and risk
management at a time where this can improve value. Level 4 can be split into two
approaches, one involving the supply chain as co-contractors and the other involving them
as early appointed sub-contractors.

A Level 4 approach has been successfully developed and applied in UK sectors such as
prisons, courts, schools, social housing and local government highways. It overcomes the Level
3 lack of competition by arranging for the chosen ECI contractor to invite bids for key supply
chain sub-contracts during the ECI period, selecting subcontractors or suppliers (with client
and consultant approval of processes and decisions) while getting the subcontractors or
suppliers involved in the ECI process.

2.2.2 Setup Choices

Realising and Leveraging the Direct Benefits

The overarching principle which should be followed in the ECI process, is direct participation
and knowledge sharing of key stakeholders. This approach in early project stage is really the
means, or the method of managing or delivering the ECI phase, through which the benefits of
ECI are realised. It is also, however, the most challenging to achieve. Each party (client,
designer, contractor, other stakeholders) can have significantly different goals.

Of course, all parties need to approach the ECI phase with open minds and an intent to
relinquish some of its own goals with the sole objective of achieving those of the client. From
the client side however, there is a more onerous need of obeying the principles of ECI, simply
because it is the party who has the need for the project, and as such owns the vision for the
infrastructure, its needs, its use and therefore its success. The client must lead by example so
that all the other parties can follow.

28
The main benefits are then realized directly through the early phase involvement of
contractors, specifically captured and leveraged through knowledge sharing, relationship
building, team effort and an integrated approach during ECI. This synergy is outlined below.

Realising the Direct Benefits Through Knowledge Sharing

The knowledge sharing process is key. It is during these open and transparent discussions in the
early project phases that each of the involved parties realizes its inherent value add. This is
achieved through the following:

• Better/more efficient use of expertise of different parties

• Contractors’ knowledge of technical process (design/build) (what is possible) and the
financial implications (e.g. pre-financing/cash flow)
• Clients’ knowledge and influence of stakeholder process (what is acceptable from an
approvals point of view)
• Better informed decisions due to more complete knowledge of risks earlier in the
project planning and development phase
• More realistic contract model and specifications (where appropriate use industry
standard contract models and tailored specifications)
• Contractor better understands context, requirements and needs of the project
• Supply chain (suppliers, etc.) can be involved to share their knowledge
• Gives the private sector more influence in designing/developing larger works

Realising the Direct Benefits Through Integrated Team Effort

Team effort here is the acceptance that although each of the parties has its own goals, the
inevitable outcome is success through achievement of client goals, and that the only way this
is achieved, is through team efforts. In other words, each party needs to accept that there are
other members on the ECI team; so, they should make their goals compatible with each other,
including the client, even though cultural and other organisational challenges can make it
difficult for parties sometimes to share knowledge.

29
Single or Multiple Bidders

The ECI preparation phase can lead to either a single bidder or multiple bidders progressing
to the ECI phase. The decision on which route to follow is partly a matter of the applicable
procurement regulations, partly a matter of procurement strategy and qualified contractor
pool/availability.

Procurement legislation in some countries demands that there should be multiple bidders, in
order for the construction phase price to be fixed by competition. In other countries, the
procurement regulations stipulate that it is possible to comply with the applicable regulations
with a single bidder. This guidance is neutral towards all procurement regulations, which will
depend on the detail of the applicable regulations. Obviously, care must be taken to comply
with any steps which the client considers to be necessary to comply with the regulations.

From a procurement strategy perspective, there are arguments for and against both routes.

Single bidder ECI maximises the potential for full collaboration and avoids wasted bid costs,
but it removes competition both for price and for solutions.

For multiple bidders, the number should be restricted to 2, 3 or 4. This has the benefit of
restricting wasted bid costs and, hopefully, avoiding the involvement of less qualified bidders.
However, with multiple bidders there is more competition which will lead to a better value for
money. Nevertheless, it is important to note that a competitive setting has the disadvantage
to counter an optimal trust building, and therefore motivates each of the contractors to hold
their cards to their chest (which has shown in certain legislations to be a reason to seek early
termination of an ECI collaboration).

In summary, the ECI decision process

can be visualised as follows:

30
CHAPTER 3: GUIDANCE ON ECI IMPLEMENTATION

KEY TAKEAWAYS

• To define objectives and scope, it is important is to understand the function,

purpose or use (objectives) of the infrastructure over its life cycle.
• Objectives are best communicated through the ECI Proposal and the ECI
Execution Plan.
• When ECI teams are composed, after qualification, compensation for the
(first) ECI phase based on a lump sum contract is a fair ECI model.
• Effective Risk Management in a ECI phase will lead to a matrix of
responsibilities, with less chance of disputes and a lower uncertainty and
risk provision priced into the Contractor's bid.
• When drafting the performance specifications, details should be assessed
by all parties on a case-by-case basis.
• The specifications and frameworks in an ECI project increase the
opportunities to facilitate more sustainable or innovative solutions.
• ECI provides opportunities to stimulate collaboration up and down the
supply chain and across the project team and/or clients.
• Stakeholder engagement in the ECI Phase and the project’s development
should be closely considered.

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3.1 Testing Feasibility/Appropriateness

The previous chapters have defined ECI and discussed its characteristics, including benefits
and challenges. In this paragraph a checklist (see Appendix B) is presented to give guidance
on the decision whether an ECI approach is suitable in the project owner’s specific situation.
Risks cannot always be well identified by individual parties. The project needs experts with in-
depth knowledge from different backgrounds who have an open mind to the interests of all
involved stakeholders. The participants recognise the bigger picture that overarches their own
interest. A multi-functional approach is a pre-requisite to recognise, valuate and reduce all
risks and can deliver a balanced distribution of the remaining ones.

In addition, to properly assess ECI feasibility, the parties should provide an environment of good
faith, transparency, equal treatment, fairness, clarity through clear rules of engagement and
IP protection. It is useful that these terms are evaluated in the client’s ECI execution plan &
coordination/communication Plan before engaging into ECI.

When is Early Contractor Involvement Appropriate?

The checklist in Appendix B gives a listing of characteristics of which the level of fulfilment
makes an ECI approach more or less suitable for a project. The overall score is an indication
for the degree of suitability of the ECI approach. When a line scores low, it is also an indication
that additional effort might be put into that particular characteristic to have a successful
implementation of ECI.

3.2 Selection of ECI Contractor(s)

Qualification of the Contractors

When a client involves contractors at early phases of a project, the aim of the client is to
benefit from the experience that the contractors have from other (similar) projects. Clients may
invite several contractors to a first round with prequalification questionnaires, in order to be
sure about the qualification of the contractors. Each tenderer/contractor is evaluated on the
basis of several assessments: technical, experience, capacity, Health, Safety, Security, and
Environment (HSSE), quality, legal/compliance, financial, etc. Some of these assessments will
have a weight factor, others can be evaluated by Pass/Fail criterium.

Technically, the contractor is assessed on aspects such as relevant experience, special or

available equipment, specific techniques, which might also be the case by introducing
specialist subcontractors, and design abilities, choice of engineering office and consultancy.
To implement ECI, the focus should not only be on the contractor but also on specialist
subcontractors, suppliers, and consultants that might be proposed as part of the contractor’s
consortium/supply chain. Specialist contractors have special competence and equipment
that both owners and major contractors are dependent on to execute a project.

When tendering for an ECI engagement, it is recommended that the contractor is also
evaluated by the client on the ability to demonstrate his collaborative ability and

32
organisational culture (the so-called soft criteria). The latter can be assessed through a culture
scan: evaluating the similarities and differences in values, backgrounds, work practises as well
as ideas and expectations for the project. Obtaining an alignment between client and
contractor on the organizational cultural aspects will improve the likelihood of success of the
ECI. The competences and willingness to collaborate and learn are utterances. The contractor
must show evidence of having a cooperative mindset and the ability to provide resources that
are capable to integrate within a team. There are several tools to check and evaluate the
collaborative mindset and skills of a contractor’s team. A first approach is performing an
assessment. Such an assessment can be limited to a series of interviews but can also go
broader, by performing simulations (so-called ‘serious gaming’) or roleplay, with challenges
tailored to the ECI objectives. It is important to be careful when setting up such assessments as
this can put quite some pressure on individuals as participants are likely to have the impression
that their behaviour could jeopardise the potential award to their organisation.

Prequalification

Most projects in which the ECI approach can be considered, will involve complex technical
challenges. Therefore, it is crucial to select the adequate expertise at the start of the ECI
process. The necessary technical skills are to be considered as a minimum requirement to
prequalify.

The assessment of the degree of collaboration as a selection criterion is rather new in

tenders for the water infrastructure. However, when selecting contractors for ECI,
collaboration is a primary competence and should be evaluated. That could be next to
the more common criteria or even as a stand-alone criterion. The main objective of such
an assessment is to test the manner of collaboration between contractor’s team and the
client’s team. The main objectives of the assessment are to assess the likely degree of
collaboration between contractor’s team and the client’s team. The secondary objective
could be to evaluate the bidders’ degree of collaboration from a legal or contractual
perspective. In the case of a competitive dialogue process this could be used to eliminate
and thereby reduce the number of bidders in the procurement process. The collaboration
assessment has to be described clearly and extensively in the tender documents including
the purpose, the structure and the method. An independent professional assessor and
facilitator is recommended. All of this is necessary for transparency and fairness which
should result in an reasoned outcome. Implementing an assessment of the degree of
collaboration requires special training and is very intensive. As the assessment method one
can use simulations of cases that are related to the challenges and objectives envisaged
for the planned ECI.

Assessment criteria can be clear goals, responsibility for the project, open
communication, flexibility, etc. After the assessment proper feedback to participants is
important as the results may seem to be subjective. The client has to manage the
assessment of the participants with transparency.

33
The process to organise this prequalification can vary from project to project. Although a
traditional prequalification based on past experience could be considered, it is worth
investigating if a more project specific approach could be beneficial. One could consider
requesting as part of the prequalification document, a project specific approach on a number
of topics. These topics should be chosen based on the dominant risks and opportunities that
arise from the clients’ preliminary assessments.

The advantage of such an approach is that a client will be able to:

• Have a much clearer insight on the relevant expertise the different contractors can
bring to this specific project,
• Test the appetite of the contractors for the project.

In order for this project specific approach to bring as much added value as possible to the
procurement process, it is crucial that the client selects topics that are essential to the
objectives of the desired results. If the project would require specific expertise or additional
parties, this could also be included in this project specific approach. It is expected that the
contractors’ response will have valuable information for the client to help him in his selection
procedure.

Preparations for ECI: Regulatory Perspective

An ECI phase might last up to one year or longer, from the appointment of a single ECI
contractor or multiple competing bidders until the construction-phase contract is agreed and
signed.

Project phases using ECI

The ECI phase is preceded by an ECI preparation phase, which will involve preparation of the
invitation documentation, followed by prequalification, preliminary competition and selection.
In order to comply with procurement regulations, the invitation documentation needs to take
into account not only the ECI phase, but also the construction phase. In particular, the
substance of the intended contractual terms and conditions for the construction phase needs
to be made clear when inviting bids for the ECI phase.

In order to comply with procurement regulations, the invitation document must state the
criteria that will be applied in prequalifying and selecting contractors. This needs to be
considered carefully. The aim is to minimise the scope for argument/recourse by unsuccessful
bidders. However, one must be aware that clarity and objectivity make the process
unforgiving. They leave little flexibility if the prequalification or selection process leads to a
result, for example through the application of some mathematical formula and weighting
factors, which does not appear optimal. Note that selection criteria, objective and non-
discriminatory criteria concern the competencies of the applicant/tenderer. Awarding criteria

34
must concern the specific contract in tender. It is recommended that prequalification and
selection of contractors for ECI should be based primarily on two factors: construction
competence (not a general competence but rather competence to meet the specific
challenges of the project) and organisational culture. It is also recommended that more
weight should be given to records of past performance than to promises of future
performance, assessing the quality of the bidder rather than the quality of the bid submission.

3.3 Transparency, Trust and Confidentiality

Early Contractor Involvement, as a collaborative procurement model to develop infrastructure

projects, has the potential to increase understanding between the parties, to build up and
develop relationships. It creates opportunities to activate and promote trust, an essential
environment to share knowledge and capabilities for achieving the best possible project
outcomes while reducing risks.

Trust, being the removal of doubts about intentions, actions, knowledge and resources from
each other (organizations or persons), is a crucial factor for the relationship between parties
and does not appear spontaneously in a construction environment. It requires driving forces
to allow it to grow throughout the project lifetime. Transparency and confidentiality can be
those driving forces to take in order to build up trust.

The entire ECI process should be conducted in a fair, open and transparent manner. From a
procurement perspective, the most important and broadly accepted principle underlying any
contractor selection system is open competition. However, the confidentiality of the ECI
process is a key consideration when the contract parties enter commercial discussions with
one another. The loss of confidential information, i.e. technical approaches or other trade
secrets is typically a major concern of contractors that needs to be considered carefully and
honoured by the client and ECI team. An adequate balance between transparency and
confidentiality should be defined for each individual project development in order to share
the adequate knowledge, capabilities between parties involved for achieving the best
possible project outcomes.

Transparency

One of the main prerequisites of ECI is a transparent decision-making process. For that purpose,
accountability and transparency principles, frameworks or agreements should be stated in
preliminary stages of ECI in a structured and planned manner.

Transparency in the Selection Process

Transparency begins in the selection process. A transparent ECI selection system ensures that
all qualified contractors have equal access to all elements of the system, including evaluation
criteria and technical specifications, rights and responsibilities of government and a fair and
due process. The selection of an ECI contractor should be based on rules guaranteeing fair
and non-discriminatory conditions of competition.

35
While public clients already include transparency in the selection process to adhere to public
procurement laws, private clients may need to adopt new measures. The following actions
may be required for a transparent development along the selection process:

• Making available all project information regarding technical, financial and

managerial topics,
• Formulate a clear and open tender evaluation process with an objective awarding
criterion,
• Performing a ECI contract risk assessment in order to have a more informed
understanding of liabilities/risks to be addressed and potential mitigation measures,
• Making available equal treatment on significant interactions with bidders during the
selection process,
• Defining clear terms for knowledge flow/transfer management and potential
compensations,
• Creating greater transparency and understanding of finances and budgetary topics,
• Establishing and safeguarding the right to aggrieved bidders can challenge selection
decisions and obtain redress if decisions are made that are inconsistent with the
established rules.

Appointing independent selection panels, to evaluate bidders’ proposals (or parts of them)
separate and independent from the project team and the government, could lead to a more
transparent selection process.

Transparency in the ECI Process

Once the contractor is appointed and the ECI begins, the parties should work together to
identify improvement areas to maintain and develop trust according to a planned
Transparency Agreement or Framework.

The following are examples of actions that can increase transparency throughout the ECI
process:

• Sharing information (e.g. indicators, charts, ratios), software, and knowledge through
systems like Building Information Modelling (BIM) which creates accurate information
of the project and forms a reliable basis for decisions during its life-cycle; from
conception through demolition,
• Sharing cloud computing applications, processes, data structure, and open standards,
• Honest, regular status reporting (good and bad developments)
• Client review and analysis,
• Establishing transparent communication protocols by asking open questions,
• Establishing clear written and agreed action plans to ensure continuous collaborative
management with an up-to-date project schedule,
• Establishing an open book accounting policy to ensure transparency in pricing
cost/compensations,
• Client and contractor making decisions together,
• Implementing mutual accountability rather than by using the third-party control-
processes to manage self-control vs output control,

36
 • The use of independent professionals such as a probity officer, financial auditor,
independent engineering,
• Review, crisis coordinator or recourse to an adjudicator,
• The chairman role of the ECI Team being changed between participants

Trust

Increasing transparency is a first step for parties involved to take in order to build up trust. Some
initial considerations to be borne in mind for building trust between all parties, and in all aspects
of the project development, are:

• adequately compensating corporate information,

• ensuring confidentiality as appropriate,
• knowledge transfer and innovation,
• providing expected results/compensation,
• ongoing and consistent sharing of knowledge and skills,
• continuous support, management, improvements, integration & delivery.

Concepts like mutual respect, good faith, ethics and commitment, should be integrated in the
process for the long-term relationship and adversarial or opportunistic behaviours should be
eliminated in order to create a consistent cooperative behaviour. The participants should be
working as a team.

Confidentiality

Confidentiality is a vital prerequisite for ECI. ECI works well if parties have been assured that IP
and confidential information is protected and will not be shared. In this way, it is possible to
receive input from more than one participant while maintaining confi-dentiality and
adequately providing com-pensation for their knowledge, know-how and time. The client
should ensure that it is clear how project information generated through collaboration will be
captured and managed. The client must also ensure that any commercial or technical
confidential knowledge transferred from one Supplier such as cost information, or unique
intellectual property, is protected in the competitive process. An effective co-operation
between the client and the supplier/contractor will only be achieved if their corporate
information is protected.

The principles of transparency and confidentiality could lead to income-patibilities, so a

Confidentiality Agreement, commonly called a Non-Disclosure Agree-ment (NDA), should be
used to secure intellectual property rights. Through careful participant selection and contract
drafting, ECI participants could achieve a level of assurance that project information
exchanged will be utilised only for project purposes.

Trust is of paramount importance in building and developing a collaborative relationship in

infrastructure projects. It is advisable to build it up based on the principles of transparency and
confidentiality.

37
 Transparency and contractual frameworks worldwide
"ECI contemplates the sharing of much more information than is customary under traditional
models. Confidentiality agreements serve to make all participants aware of the importance
of the proper uses of shared confidential information1".

"An effective coalition between the client and the supplier will only be achieved if there is
trust between the parties that their corporate information is protected1".

When talking about competitive procedure with negotiation, competitive dialogue and
innovation partnership, EU law states: “contracting autho-rities shall not reveal to the other
participants confidential information communicated by a candidate or a tenderer
participating in the negotiations without its agreement1".

The examples of industry standard form contracts contained within Appendix C all have
various provisions for how the ECI process deals with intellectual property.

3.4 Defining Objectives & Scope

Before instigating the ECI process, the client first must define the following:

The
project
definition

The main objectives

of the project

Objectives of the ECI phase

Objectives and constraints

of the desired result

Defining the objectives

Gathering these objectives and definition will prove to be very valuable to align the different
stakeholders towards a common goal. These objectives and constraints should be the
technical result (physical asset to be built), the benefits the client want to achieve (see 2.1.1)
as well as the commercial approach (which commercial approach is expected from all
parties). Preferably a distinction is made between performance and cost objectives, as they
serve different purposes, and different discussions are necessary for a clear definition each
objective.

A key part of the defining objectives and scope is to understand the function, purpose or use
(objectives) of the infrastructure over its life cycle. There is also a clear distinction to be made

38
between needs (absolute requirements or objectives, i.e. the ‘shall’) and wants (‘nice to
haves’, i.e. less important objectives, ‘the should’). This can be undertaken through some type
of analysis of requirements, which is defining the expectations of the users, or owners, of the
facility/infrastructure. It involves all the tasks that are conducted to identify the needs of
different stakeholders, and therefore is a key part of defining both the project and the ECI
phase. Typically, an analysis of requirements is undertaken, which in essence is a means to
analyse, document, validate and manage requirements, with the outcome of a hierarchy of
requirements, in order of most important to least important.

One of the first procurement decisions to be made on any project is how many works
packages there will be and which of the pricing structures (e.g. lump sum or instalment based)
is most likely to deliver value for money for the client. Transparency and clarity on the
commercial objectives and constraints is equally important, as a large majority of conflicts may
arise because of a lack of explicit discussions on commercial objectives. These commercial
objectives and constraints should find an ambitious, yet feasible, balance between cost, time
and quality.

As a minimum set of objectives for an ECI process, one can identify project requirements and
the allocation and reduction of project risks and opportunities. From the client's perspective,
the following objectives are best communicated through critical success factors set in ECI
information package: (risk identification & resolution), compliance with the client code of
conduct, delivery (cost plan) quality, programme, communication collaboration, stakeholder
management and local involvement. For all ECI participants, objectives are best
communicated through the ECI Proposal, the ECI Execution Plan.

It is to be noted that not all objectives are considered to be part of an ECI process: in particular,
active involvement in the political decision taking must be excluded from an ECI
process/project as it involves a close cooperation between clients and contractors, and not
political stakeholders. Besides the abovementioned minimum set of objectives and the
excluded scope elements, the following optional scope elements are identified:

Definition of
Decision on functional
Construction codes, standards requirements and
Budget pricing
method & regulation that need for systems
applies engineering
approach

Definition of
Definition of opt- performance
Definition and
out conditions specifications,
selection of the Permitting
(go/no go leading into
stakeholders
moments) technical
specifications

Problem Preparation of ECI Risk management Site investigation

definition engagement

39
 (agreement, rules,
administration, etc.)

Supply chain Stakeholder

Scheduling Value engineering
management engagement

Optional scope elements

Last but not least, it is important that the client translates the ECI objectives into a list of
deliverables for the ECI phase. This list can change through the process and can be updated.
The following is recommended prior to the start of the ECI works or even during the ECI tender
phase:

• When the client does not define a clear list of deliverables, the contractor should make
a proposal, seek approval from the client and update this list on a frequent basis in
close collaboration with the client.
• Once the contractor and the consultants involved in the ECI have performed a gap
analysis of the information and requirements provided, the parties should engage in a
collaborative discussion to see if additional scope items should be added to the ECI
scope. If the basis for the ECI is deemed incomplete to commence the ECI phase,
there are 2 options: a) certain activities are added to the ECI scope if deemed
appropriate by both parties, b) the ECI phasing is reviewed in such a way that the ECI
activities that rely on pending information only has to commence once the information
is provided by the client.

As a final note on objectives, it is equally important to define how to proceed when objectives
are not reached. Pre-described opt-outs provide the possibility of having a way out after the
design/preparatory phase but before awarding the construction part of the works.

3.5 Financial Aspects

The financial aspects of ECI are related to the client as well as to the contractor. The client is
seeking an optimal price-quality relationship and, therefore, to improve the value-for-money
outcomes of the project. The contractor is seeking to secure a fair compensation of its efforts.

ECI is useful in cases of complex projects with extensive engineering and the use of innovative
methods for an optimal solution. After the prequalification stage either a selected group of
contractors will be shortlisted work on the design or a single contractor will be chosen.
Complete tender teams are established, and a lot of intellectual power comes together with
a high-cost impact. It is, therefore, in this stage fair to consider a compensation to cover at
least a part of the cost of this stage to the contractor.

The compensation for the cost of the tender phase is typically based on a fixed fee negotiated
as part of the tender conditions. The fee differs but generally does not exceed 50 % of the

40
estimated costs incurred by the contractor for participating in this phase. All the preparatory
work will result in a tender offer.

An efficient ECI model gives the basis for a lump sum contract. This means that the process has
been successful in addressing and closing the issues and uncertainties in project scope and
cost. This ideal situation however presents issues with the transparency of the ECI participants
pricing and risk allowances. In that case, it is suggested that an ‘open book’ policy is adopted
to ensure transparency in pricing cost and risk allowances. This to deal with uncertainties in
project scope and cost. The client team needs to have open access to the contractor's
estimating and cost management systems and particularly for waterborne infrastructure
projects may need to consider employing specialist cost consultants to ‘reality check’ the
contractor's commercial & estimating teams project cost, production estimating & risk
assessments. The client team in return should be fair-minded in, for example, making
allowances for actual conditions encountered that could not have been reasonably known
or discovered prior to construction (e.g. more debris, stiffer materials, extreme weather events),
and including escalation clauses to deal with fluctuations in prices of major components
needed for the project which are outside any of the parties ability to influence or fix in
advance, such as steel and fuel cost.

Potential savings as well as costs should be shared between contractor and client; pain and
gain should be shared. There are no standard rules how to deal with this, it is part of the
negotiation process. The Port of Melbourne case in Chapter 6.2 of this report gives an example
how this could be agreed.

In general, one-sided financial incentives do not belong in an ECI-project. Client and contractor
have a joint interest in achieving the project result. Incentive payments to one contract party
are generally not in line with an ECI project philosophy. These payments are only provided in
exceptional cases and then for outstanding performance. In some situations, a financial
incentive is part of the project scope. In cases where a contractor is not only responsible for
designing, building, and maintaining a project, but for the project finance as well, there may be
a different payment mechanism and incentive structure. This may be based on availability or
performance of an object (see the Beatrix Locks case in Chapter 6.1 of this report).

3.6 ECI at Work/ECI in Action/How to Reap the Benefits

The factors for a successful project, as highlighted by clients3 who have chosen for an ECI
process, are shown in the table on the next page.v

3 The organisations involved in ECI in this survey (Eadie, R. (2015): “The Feasibility and Rationale for using Early
Contractor Involvement ECI in Northern Ireland”) were asked about their size. All but one had over 500 employees.
The other one had between 100 and 500 employees. This indicates that only large organizations appear to be
using ECI as a procurement route. The respondents of this survey were asked to rank a number of attitude
statements based on the AEC Critical Factors for a successful project stated earlier.

41
Rank Critical Factors for a Successful Project

1 Providing an integrated project team that work together to reduce waste, improve
quality, innovate and deliver the project.
2 Carrying out effective risk and value management which involves the whole project
team and is actively managed throughout the project.
3 Providing a design that takes account of functionality, appropriate build quality and
impact on the environment.
4 Providing an integrated process in which design, construction, operation and
maintenance are considered as a whole.
5 Involving key stakeholders throughout the project.
6 Providing commitment to excellence in health and safety performance
7 Providing an appropriate Procurement route and strategy for the scale and value of
the project.
8 Providing a design which delivers whole-life value for money.
9 Providing leadership and commitment from the projects Senior Management.
10 Providing personnel in the key roles that have the appropriate skills and capabilities
to carry out their tasks.
11 Providing and identifying clear lines of communication.
12 Defining clear objectives and success criteria at the start of the project.
13 Providing a focus on whole life costs and quality to deliver best value for money.
14 Identifying clear roles and responsibilities which are clearly understood by everyone
involved in the project.
ECI rankings on achieving critical factors for project success

Even though the geographical spread of the study on which this table is based is limited to ECI
projects in Northern Ireland, it provides a good indication which critical success factors are
achieved by operating in an ECI setting. However, it is to be noted that a minority of the
respondents also identified some factors – especially the ones lower-ranked - to be hindered
by an ECI setting.

3.6.1 Performance Specifications Versus Technical Specifications

Performance Specifications and Technical Specifications

Performance Specs vs. Technical Specs vi

42
 Specifications for construction projects come in primarily two types: technical or ‘design’
specifications and performance specifications.

Design specifications describe often in precise detail the materials the contractor must
use, the quantities for such materials, the location and requirements for installing such
materials, and certain measurements and tolerances. For example, for an industrial facility,
design specifications would require a specific type of equipment, the precise installation
location, and its particular connection to other equipment. However, they stop short of
directing a contractors’ means and methods how a contractor performs its work, such as
scheduling and manpower.

In contrast, performance specifications outline or set a standard or objective for the final
construction, leaving the contractor to select the design, methods, and materials
necessary to achieve that objective. Performance specifications can even include how a
project performs over time after construction has completed. As an example, a
performance specification for a water treatment facility or oil and gas plant may require
certain flow rates and pressure standards for distribution systems, but leave it to the
contractor to select the pumps, determine their installation, and create a system that
meets these flow rates and pressure standards.

Each type of specification has inherent advantages and disadvantages. Technical or design
specifications ensure great precision and predictability. They therefore require a significant
amount of design work to be completed which provides this precision and predictability. The
client also has a very clear expectation of the project it will receive, and the contractor can
determine with reasonable certainty the labour, materials, and equipment required for the
project. Conversely, because design specifications must be complied with, should the
contractor discover more effective means of construction or a more sustainable use of
materials as the Project progresses, it is difficult to make use of such improvements unless all
parties agree in writing, accommodating such changes under a variation procedure.

Guidance for Drafting the Performance Specification for the ECI Delivery Model

The performance specification should also be written with the specific ECI process in mind.
Recall that in the ECI process the contractor inputs are brought in an earlier stage than in other
delivery models, and there must be more room for the contractor to provide his expertise. The
benefit of ECI is that the contractor has the ability to work with other stakeholders, such as
environmental experts, health and safety, and operational teams, including within the client’s
internal organisation. The benefits of contractor involvement are then carried through, or
alternatively, poor non workable solutions are also rejected at an early stage. This is an essential
benefit of the ECI process.

In order to draft a performance specification suitable to ECI, the following aspects are
provided for guidance. Although recommendations are provided below, the details of the
performance specification should be assessed on a case-by-case basis.

43
Firstly, the function or use of the infrastructure must be well defined, in addition to the needs
and wants of the client. Moreover, the performance specification must provide design life of
the facility/terminal. The life of each of the elements of plant, equipment, pipes and
infrastructure encompassing this can then be defined by the contractor to meet the overall
requirement for the design life. Also, environmental requirements and limits should be well
defined, independently, by an authorised environmental practitioner. The key aspect of ECI is
that the contractor can have open discussions with the environmental practitioner, to seek to
achieve both an environmentally acceptable solution as well as one that is economical/cost
effective to build/deliver, rather than the more traditional delivery approach of defining
environmental requirements upfront that the contractor must then comply with later, with no
option of collaborative effort.

With regard to operational aspects, the solutions proposed by the contractor need to be
operationally acceptable to the client. The client’s operational team therefore needs to
collaborate with the contractor to arrive at the most suitable outcome while providing
appropriate cost improvements. Consistent teamwork, collaboration and review of the
proposed contractor design by the client’s team is necessary when dealing with an ECI where
the contractor bears design responsibility. A concept design should initially be completed by
the contractor for presentation to the client, so that all involved can visualize the proposal as
well as provide comments on it. This should become part of the performance specification
and it becomes a starting point for the ECI phase.

3.6.2 Risk Management

A more thorough risk management process is possible for projects with early involvement of
the parties and their continued participation through the project. While project procurement
methods define formal risk allocation, the use of collaboration or partnering arrangements
help to establish a collaborative approach to risk management. Relevant risk dimensions are
money, time and other factors such as reputation, quality, safety, etc.

Early risk identification and awareness by all parties, is essential for setting up effective risk
management by taking the benefit of the ECI phase and considering the specific aspects of
an ECI phase. It is important to determine these risks starting form a blank page, and not from
a list of client risks determined by the client objectives. Risk allocation and sharing are crucial
in order to improve value for money and to avoid challenging discussions later on. The general
principle that the party best equipped to manage a specific risk, is responsible for that risk,
should always be kept in mind. A prerequisite (and sometimes barrier) for effective risk
management in ECI phase is that the client needs to have a realistic approach (or ‘open
view’) on risk allocation. Similar for the contractor who needs to be able to accept risks, when
uncertainty has been de-risked to a certain level that is acceptable.

The positive impact of effective risk management in an ECI phase is that it will lead to a matrix
of responsibilities, with fewer basis for disputes as a result. Another positive impact is that there
will be less uncertainty and risk priced into the contractor’s bid: budgeting, pricing and starting
those discussions from the very beginning will eventually lead to a better cost and/or value for
the installed project. The payment method (target price & pain/gain share, lumpsum, etc.)
defines who takes the risk. In the risk strategy a risk can be allocated to 1 party in one phase,

44
with the aim of being allocated to the other party in a next phase (when sufficiently de-risked
to an acceptable level).

Another prominent benefit of ECI is its impact on project risk management, both in the early
phases as well as during the construction phase. As ECI provides a structure to bring several
parties together at an early stage, it can bring significant value in the crucial start-up phase of
the risk management process on an infrastructure project.vii A contractor will therefore review
the project to identify, define mitigations and price those where possible so that only residual
risks remain. This is a process that will result in more certainty about the total overall costs and
may lead to a lower price.

One of the primary principles of sound risk management is that the party best positioned to
manage the risk is the one who should bear the risk. Considering contractors are best suited to
control the construction risks, they should be managing those risks. However, limited
knowledge of construction risk from the team drafting the tender and contracting documents
means that these risks are either not well understood, or that the risks are not assigned to the
best party to control. Both factors lead to contracts which do not always result in a proper,
equitable allocation of project risk.

The risk assessment process of client/consultant can be compared with those of the
contractor, and as such, risk management actions can be undertaken during the ECI phase
without delaying the process (e.g., contract negotiations pre-award).viii

Within the ECI phase, time and processes can be created for risk management between all
parties, and thus provide a well-balanced platform for allocation of risks. Additional time in this
ECI phase provides the opportunity to discuss how the value of the project can be increased
without an increase of costs and again with a reduction of risk.

ECI, under balanced contracts containing agreed team-based processes and programs
which seek to de-risk the project, can greatly assist the management of risk, the avoidance of
disputes and the establishment of successful partnering relationships.ix

It is also relevant to use ECI for early de-risking by defining or performing early actions to
eliminate or reduce risks and/or to seize opportunities. Furthermore, unexpected opportunities
can be seized via ECI through early joint action structured in such a way that it creates benefit
and generates value for both parties.

3.6.3 ECI as Facilitator for Innovative and Sustainable Solutions

A mixture of civil, technological, environmental and social developments can also influence
the demands of the client. Developments like digitisation and sustainability have an impact
on project scope, and may require other products or services to be adequately addressed.

Sometimes, the use of new technology becomes part of a project and influences the
cooperation between client and contractor. In a regular project it can be difficult to obtain
more sustainable or innovative solutions. The structure of the tendering process, the set of
technical specifications and criteria, often narrows down possible new technical options. The
specifications and frameworks in an ECI project however are more functionally specified,

45
giving more ‘freedom’ to the contractor to have an impact on the technical aspects of the
project.

Innovation and Sustainability in the ECI Process

Marine construction is expensive and has significantly more inherent risks than building or civil
engineering, primarily due to the hazards inherent in waterborne infrastructure: waves, winds,
storms water levels and unexpected site conditions and the equipment needed to successfully
work and build in these conditions.

The key takeaway is that innovation and sustainability solutions, that are incorporated into
projects following the normal procurement route, are lacking in several grounds. The input of
the contractors serves to improve each of these elements that need to be considered.

Innovation

The term innovation is broad and encompassed “the process for introducing new ideas,
workflows, methodologies, services or products”. Therefore, innovation can be considered as
something completely new, or something that already exists in the sector but has been
reimagined or aspects from a different sector. Various levels of innovation can be distinguished
which indicate the progress of technical innovation development.

Commercialisation chasm x

46
The majority of new products or services will fit in the functional specifications in some cases,
however, more research and development are still needed.

Different types of innovation have different impacts on the client, and the overall market.
Typically, in projects, incremental type innovation is undertaken through the delivery of
projects through the use of standard, tried and tested engineering solutions. These provide low
levels of risk to the consulting engineer designing them and enable contractors to meet the
design needs with proven construction methods. However, also the other types of innovation,
as explained in the figure below, are critical to the development of any market, including
infrastructure, engineering and construction, and typically yields benefits that result in more
cost effective and or safer working practices.

Technology types, newness and impact on the marketxi

Construction costs are a huge part of any project cost, and any improvements to the
construction methodology, timeframe, cost or risk profile needs to be assessed by the entire
team. It is during their teamwork process that the innovation can be harnessed to provide
maximum benefit to the client, and to move the innovation level from incremental to
sustaining. In very specific projects, this level may even be taken to the radical or disruptive
type of innovation, where significant local project challenges require early contractor
involvement with the entire project team, to solve the challenges and provide a successful
outcome.

47
Key aspects of ECI and innovation:

• There are various levels of innovation each with different consequences on the project
value – or even feasibility – but also on the project’s risk profile;
• As a consequence, not all contract types and development approaches are suited
for fostering innovation. E.g. a DBFM approach is often rather risk averse, with all
uncertainty and risk allocation decided upfront.
• Innovation often means a higher investment upfront which earns itself back in the long
run. Innovation can lead to different payment mechanisms;
• Research & development of the innovation overlaps with the design and engineering
phase of the project development;
• When product innovation or non-incremental innovation is required for the project, the
entire team needs to be involved;
• At an early stage, contractual arrangements about intellectual property are
necessary.

Realising the benefits of ECI

through the innovation partnership

The European Union has established a tendering procedure that should facilitate the
procurement of innovation. Much developed innovation did not make the last step to
commercially tradable. The risks and costs of the last step in development are high. With the
innovation partnership procedure, the European Union has linked the research and
development phase of a product to the actual purchase of that product by the client.

With the innovation partnership, innovation facilitated, stimulated and purchased. This
concerns products, services and works that are not yet available at the moment of inquiry
or products that require further development. The prerequisite for implementing the
innovation partnership is a prior extensive market analysis by the client on the basis of which
it can be concluded that the available products cannot meet his demand at that time.
Innovation must offer a solution. Hereby it is important for the client to clearly agree the
minimum performance levels and maximum costs in advance and to determine how the
intellectual property is arranged.

Finally, the process must be transparent and the use of the innovation partnership must not
lead to a distortion of competition. The process is provided with mutual exit moments if
expectations are not met.

Sustainability

In 1987, the United Nations Brundtland Commission defined sustainability as “meeting the
needs of the present without compromising the ability of future generations to meet their own
needs.” To substantiate this definition a social, an economic and an environmental pillar has
been identified. In addition, the terms people, planet and profit are often used. The
involvement of people and planet with profit often includes a more integral approach of a

48
project. An average life cycle of a civil construction is tens of years, so client and contractor
have to take the future revenues and residual value into consideration. The development of
several models and tools have contributed to an improved and wider application of the
sustainability concept, see figure on the next page.

Improving sustainability in the project cycle xii

To realise a sustainable project, the following requirements have to be met:

• Identify the interest of all stakeholders of the project and take care of their interests in
the project;
• Identify the impacts of the project on the ecosystem you are affecting with the project
• Try the maximise the added value of the project; include externalities

These 3 elements cost additional time in project initiation and start up; however, they will result
in an improved project outcome. Sustainability can lead to a higher investment at the start
which can be earned back later in the project. There are several methods developed to
measure in what way sustainability contributes to the project goals and organisational
ambitions. The outcoming of such method gives guidance to client and contractor to make
considerations in design and project execution. The execution process has a large influence
on the level of sustainability of the project. It is therefore that the contractor should be involved
in an early stage. Specific knowledge is exclusively in his company available.

How ECI Can Facilitate Improved Level of Innovation and Sustainability

In the consulting industry with consultants preferring tried and tested solution which lowers both
their and their clients risk profiles, innovation is typically slow and sustainable solutions do not
go beyond the first two levels of compliance and engagement. Innovation and sustainability

49
can be brought to a higher level directly through the early collaboration the ECI offers (ref.
Appendix F). At the same time, the ECI approach requires specifications to be more open e.g.,
through functional requirements, it can reduce the complexity of pricing ‘off the beaten track’
solutions and finally also helps defining the monetisation of the innovative or sustainable ideas
through early involvement and dialogue on aspects such as IP ownership.

3.6.4 Environmental Regulatory Regime/Permits

The implementation of infrastructure projects in the marine environment often requires an

integrated approach, such as ECI strategies, to develop optimal solutions within existing
regulatory frameworks. The probability of an adverse impact and potential consequences to
biota, ecological processes or habitat are assessed during the permitting process. Depending
on the type, location and complexity of a project, regulatory agencies will require varying
degrees of documentation and understanding to assess risk, issue permits and allow controlled
construction to proceed.

Overview of Permits and Documents

Common marine infrastructure-related impacts of concern within the environmental

regulatory regime include water quality (i.e. turbidity and TSS), air quality (i.e. NOx, SOx), sound,
light, physical Impacts (i.e. vessel strikes, entrainment, OFW blade strikes), contamination and
bioaccumulation (such as PFAS), hydrodynamic modifications (i.e. waves, currents) and
habitat removal or damage (i.e. coral, rock, aquatic vegetation).

Environmental impact assessments, endangered species/biological evaluations, route

determinations, environmental baseline studies, environmental monitoring plans, water quality
certifications, dredge and fill permits, offshore dumping permits, and building permits are
examples of documentation that may be part of the regulatory permit process to assess
potential impacts and protect the environment.

As is often the case with construction in new marine environments, and increasingly complex
projects, engagement with the contractor is needed to understand the construction
technologies and processes to be applied, spatially and temporally, to assess environmental
impacts. To avoid or minimise impacts, ECI may be the best means to develop practical
mitigation measures, i.e. through technology and/or operational adaptations, early in the
permitting process. Likewise, early engagement with environmental regulators may influence
the ECI process.

During the permit application process, regulators need to be able to quantify, evaluate and
develop controls for project environmental impacts. With the permitting process often taking
several years, early involvement of regulators during initial project planning and design is key
to successfully acquiring project permits. Impediments in existing legislation can then be
identified early enough to undertake appropriate actions, i.e. review of the interpretation of
regulation, revision of the solution with the limitations, and/or programs to demonstrate
compliance of the solution.

50
 Example of approach/permitting phases in the Netherlandsxiii

The innovative character of complex and sustainable projects may not immediately align with
existing assessment frameworks to evaluate the effectivity of the proposed solution. Special
attention needs to be made to identify rigid institutional requirements that can obstruct the
implementation of the projects, as well as influence required financial arrangements.

A typical marine construction permit review process, for water infrastructure projects in the
Netherlands in this case, is provided in the figure on the next page.

51
Ways To Approach

The Environmental Impact Assessment (EIA) application process requires project operational
details including construction/dredging methods, construction periods, anticipated sediment
resuspension and water quality impacts, other environmental impacts and consequences,
and control measures.

On smaller or more straightforward projects, using already demonstrated design and

construction methods, with known impacts, the regulatory agencies and project consultants
may have adequate knowledge to inform the environmental reviews. Informal consultation
with contractors may or may not be advantageous in these cases. However, with larger, more
innovative greenfield and complex projects, particularly in sensitive environments, the efficient
acquisition of construction methods, periods, impacts and control measures information may
best be accomplished through ECI.

There are essentially two ways to combine the tender and EIA procedures under an ECI
approach: parallelisation and interweaving. In the parallel process, the tender procedure
starts before the consent decision and therefore runs parallel with the EIA process,
independently, with no exchange of information. In interweaving, the tender procedure starts
before the consent decision and is ‘interwoven’ with the EIA procedure. They are coordinated
and information is explicitly exchanged.

In both parallel and interweaving processes various solutions are generated, studied and
refined in successive stages based on problem definition and objective. In both processes, one
solution is eventually selected by means of an evaluation framework.

An essential element of interweaving is that tendering and planning are coordinated and the
moments of decision-making coincide. There is room for creative solutions, intensive exchange
of ideas, and values (objectives, needs) are considered in relation to the risk (time, money,
quality). In addition, the planning procedure is leading, and the tender procedure is linked in
parallel and introduced at certain moments with the EIA procedure, but both processes
remain on separate tracks.

Tender and EIA procedures under an ECI approach xiv

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ECI can also be achieved by first selecting a contractor in a procurement procedure and then
starting the EIA process. A potential drawback of this approach; however, is that it can limit
competition by the early selection of a contractor, removing a stimulus to optimise plans in the
public planning procedures.xv

Role of Contractor

Guidance for implementing ECI is provided below and further in Chapter 4. When it is most
advantageous for ECI to be initiated is highly dependent on the project complexity, location
and permitting regime. While the owner must retain primary authority over the design and
regulatory permitting, the contractor can serve as an advisor, permanently involved during
the permit process. When environmental monitoring programs are part of the process, the
contractor will necessarily need to take ownership of the permit requirements, as construction
operations and contingencies may very well be impacted by environmental monitoring, and
vice versa.

Depending on the ECI agreement then, the contractor may provide input, manage, be
informed by, and/or be responsible for the components of the permitted environment for
which it can affect. To ensure construction is accomplished within the final permit
requirements, the contractor develops typically several construction working plans to inform
the full operations team and safeguard the environment. Examples include an environmental
monitoring plan, oil spill prevention/response plan and site monitoring plan. Proceeding
forward to construction, the contractor sets ups and executes the works to be in compliance
with the final permit requirements and approved plans with the least possible environmental
impact.

Benefits and Challenges

There are several areas of potential benefit ECI brings to the environmental permitting process:

• Saves Time. Applying the traditional sequential permitting process, takes longer than
an ECI approach which progresses on parallel tracks. In addition, deviating from an
EIA process not originally informed by ECI may require it to be at least partly carried
out again. There are efficiencies in performing environmental investigations just
once, i.e. setup of hydraulic model, scoping document for EIA investigations, etc., with
a known project design and operational approach informed by ECI.
• Innovation. Inclusion of the conceptual, innovative and creative input of contractors
on construction methods, nature-based solutions and/or design into the permitting
process early (i.e. EIA scoping, investigations, baseline studies), and improved
price/quality ratios through competition, achieve a higher overall quality and
sustainable solutions.xvi
• Environmental Monitoring Program (EMP). Establishing a realistic and effective EMP as
an early stage and coupled with input into the Environmental Impact Assessment (EIA),

53
 through ECI the contractor and project team can focus on improved environmental
monitoring and protections.

A possible challenge to consider in applying ECI too early in the permit process, is losing
freedom to change approaches (i.e. in design, methods, scheduling) once the EIA permitting
processes have been completed. In such cases, therefore, it is important to allow sufficient
margin for changes and innovation.

Examples of Permitting Improvements Through ECI

The Port of Melbourne Access Channel Deepening Project is a specific project example of
how ECI has yielded and improved environmental outcomes through knowledge-based
design and adaptive operations. This project involved channel deepening dredging with
offshore placement and capping of some contaminated sediments. There was strong local
opposition to the project by environmental groups due to concerns as to the potential impacts
on the environment. As the highest environmental standards were essential, the planning and
agency review process required experienced input from an ECI dredging partner to develop
high confidence the work could be executed responsibly and receive permit approvals. A key
issue was containment of contaminated dredge material. With an early understanding of the
conditions, the dredging contractor was able to develop appropriate diffuser and capping
technologies. The owner expressed that with ECI beginning in the preliminary design phase,
they had greater visibility of project costs, were able to optimise environmental outcomes, and
improved risk management on this complex project.xvii

3.6.5 Supply Chain as ECI Partners

An ECI process might depend significantly on the contractor’s supply chain. Therefore, clients
and contractors should identify, assess and engage key supply chain members, to create
optimal value for the project. In conclusion, there is a need for contractual arrangements
covering the ECI phase not only between client and contractor, but also between designers
and specialist subcontractors and both the client and the contractor (possibly using collateral
contracts).

As a process to optimising values in project delivery, ECI provides opportunities to stimulate

fertile collaboration up and down the supply chain and across project team and/or clients.
This is important to integrate design development and construction planning and to allow
together with the client, contractor and consultants, to develop innovative solutions. Also,
inspiration can be found in the new Dutch standard type two-stages contract ‘Bouwteam’,
where the role of other partners (supply chain) that are not contractor is being specified. The
question whether a separate agreement is required between the main parties
(client/contractor) and these other supply chain partners, should be answered in the
affirmative, though this very model gives a solution for such agreements. Finally, it should be
noted that proper dealings with supply chain and established relationships is an important
element in the contractor selection process (see also §3.2 Selection of ECI contractor(s)).

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3.6.6 Stakeholders

Stakeholder management is becoming increasingly professionalised in the construction

industry. The large scale or complex nature of certain waterborne infrastructure projects
requires appropriate analysis of multiple stakeholders and their potential engagement to
address their interests and not to fail to achieve objectives because of a poor management
of stakeholder relationship.

The development of a single or a set of infrastructure projects are based on decisions resulted
from community needs. As such, input from stakeholders could be essential to fully understand
which services should be prioritised first and finally provided by the infrastructure. Stakeholder
engagement in project development should be closely assessed as far as their involvement
would increase benefits and certainty in the attainment of project objectives, such as a more
realistic and reliable design, schedule, cost estimate, improving service delivery, risk
assessment, management or any other. It is not uncommon that their non-participation
provokes adversarial attitudes being a major factor affecting project development.

Continuous monitoring, evaluating and adjusting Stakeholder Management Process

The stakeholder management process could be simply described as an iterative and adaptive
management process of assessment, evaluating and monitoring of what is the purpose,
objectives and value of considering stakeholders, of who are significantly affected and who
have considerable influence and who should be involved (stakeholder identification), and of
how and when to implement the intervention and engagement level of stakeholder
management/engagement. This multi-stepped process should be continuously monitored
and evaluated to approach and manage adaptively the stakeholder engagement process
during the life cycle of the project. This strategic approach could be an essential part of project
development and it is recommendable to be based on clear principles like purposeful,
relevant, openness, inclusive and responsiveness.xviii

Stakeholder analysis uses to involve the following steps: identify stakeholders and their interests
& relations between them and prioritise their interests, analyse the impacts of their
requirements on the project success, develop strategies by aligning their interests with the
project design and creation of value, and monitor, evaluate and adjust the whole process.
Stakeholder identification in its broadest sense is recommended: a person, group or
organisation that has interest or concern in the project development. Thus, any person, group
or organisation could be considered, in particular circumstances at a particular time, as a

55
potential stakeholder for a specific project. Stakeholder participation and engagement should
be promoted by the client. Stakeholder engagement can be defined as a consultation
process amongst stakeholders. It is furthermore essential that those requirements are drawn up
and adopted on the basis of objectively verifiable criteria, using a procedure in which
stakeholders, such as government bodies, members of the public, manufacturers, distributors
and environmental organisations, can participate, and that the label is accessible and
available to all interested parties.

ECI and Stakeholder Management

Traditional project development is associated with long lead times due to conflicting interests
and lack of mutual understanding of involved stakeholders. The definition of ECI embraces the
need to foster the direct participation and knowledge sharing of key stakeholders in the early
stages of project development to optimise values in project delivery/development/objectives
for all involved. An early and transparent engagement of a wide variety of stakeholders could
be essential to identify opportunities for added value and to facilitate their implementation.

Transparent stakeholder involvement process

ECI case Port Phillip Bay Channel Deepening Project, Port of Melbourne

This project initially suffered from a lack of stakeholder support.

Stakeholder participation

• Creation of a stakeholder advisory committee

• Appointment of an independent chair
• Multiple community information sessions, where real give-and-take dialogue was
made possible rather than public meetings where only the participant gets to speak
• Stakeholders were allowed to meet the experts, including the dredging contractor,
and ask them questions
• Regular communication (presentations, briefings, print and electronic newsletters,
news items) to keep everyone informed of the project’s developments and to
demonstrate why the project was good for the community and the economy
• Organization of learning programmes for schoolchildren about the Bay & its environs
and about the need for environmental protection
• Creation of a dedicated website and toll-free telephone information line

3.6.7 Role of Consultants

Consultants have an important role to play in ECIs. Often, they are the participant of an ECI,
proposing the idea to the client, and on certain projects even acting as the client
representative, i.e. the primary interface with the team’s ECI contractor(s). Three types of
consultants can be distinguished when preparing a construction project, depending on their
expertise: technical consultants, contract/procurement consultants and collaboration
consultants. Some major consultancy firms propose all three types of services in an integrated

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fashion. Although, clients need to be aware that they select the right ECI approach, i.e., not
only taking into consideration the ECI experience of their main consultant.

While preparing a construction project, there is a wide range of technical consultants: civil,
coastal or structural engineering, architects, permitting specialists, cost consultants, etc. A first
important role of such consultants in an ECI is to advise the client when there is a need to
involve one or more contractors earlier than usual. Several technical reasons may exist that
justify an ECI and those have been discussed in detail in chapter 2 and 3. It is often the role of
the consultants to acknowledge this and subsequently help the client translate these reasons
into clear objectives for the ECI.

Secondly, during the ECI phase, the technical consultants need to work closely with the
contractor to integrate the contractor’s input into technical solutions. Subject to the ECI
approach chosen, this can be in direct contractual relationship (as consultant of the
contractor) or indirect (as consultant appointed by the client). For an ECI to work, there needs
to be mutual trust between the technical consultants and the contractor and a sufficient level
of equality and openness between client, contractor and consultants to reach the objectives
defined for the ECI phase.

A common hurdle in applying ECI is the conflict of interest that can arise for the design
consultant in serving as the client's technical advisor during the pre-ECI or ECI phase, to being
replaced by the contractor during the ECI or post-award phase, respectively. This shift in
relationship can give rise to some fundamental tension, e.g. from the client who may feel a
loss of connection to the design team once the hard-dollar design and construction contract
is underway. To mitigate this potential problem, it is important to identify as soon as possible in
the project that the ECI approach will be adopted, and manage the process properly through
a clear set of principles and agreements.

While it is often the design consultant that is best positioned to initiate the idea to the client to
bring the contractor onboard early, they often do not have the appropriate resources to
structure such a collaboration. In many cases when there is no ECI experience within the
client’s procurement or legal organisation, it is even recommended to bring onboard an
independent contract/procurement consultant who can give advice which ECI approach is
most suitable to meet the requirements of the client and the objectives of the ECI phase. Some
of the procurement and contractual approaches are discussed in the following chapter.

Once the client has decided to perform an ECI and the framework is being defined how to
set up the ECI phase or even to select the ECI contractor(s), more efforts need to be made
upfront in the way all parties will have to work together, compared to a classic procurement
process or construction. A collaboration consultant can assist with a wide range of services
such as the preparation and performance of assessments as an element in the contractor
selection, trust-building through start-up meetings or ECI follow-ups or through advice to the
project leadership how to improve the collaboration. The collaboration consultant, however,
must also be independent and cannot take ownership of ECI team cultural or behaviour issues,
or the actual trust-building. Some of the tools and soft skills are explained in more detail in the
following chapter.

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 PRACTICAL TIPS & TRICKS/TOOLS

• A checklist for decision guidance on whether an ECI approach is suitable in the

client’s situation can be found in Appendix B.
• Use of collaborative assessments as a selection criterion based on construction
competence and organisational culture (an independent professional assessor and
facilitator can be helpful): assessments, serious gaming, role-play tailored on the
challenges and objectives of the ECI in question.
• Be transparent and maintain confidentiality to build trust. A Non-Disclosure
Agreement (NDA) should be used to secure intellectual property rights.
• ECI objectives should be translated into a frequently updated list of ECI deliverables.
• The party best equipped to manage a specific risk, should be responsible for that risk.
• When ECI begins in the preliminary design phase (early start), it is easier to visualise
project costs, optimise environmental outcomes and improved risk management.

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CHAPTER 4: FRAMEWORK FOR ECI

KEY TAKEAWAYS

• When public clients are setting up an ECI, the public procurement

regulations need to be respected. Important principles are value for
money, proportionality/fairness, level playing field, competition and non-
manipulation, non-discrimination.
• To ensure compliance with procurement rules, there are a number of
mitigations that can be implemented such as probity auditing (equality).
• Several contract forms are discussed that provide a contractual framework
for an ECI: NEC4 ECC X22, FIDIC White Book, Bouwteam DG2020, JCT PCSA,
AIA 133 & 134, AIA IPD, NEC4, Alliance, CCDC 30, PPC2000, PAA (Australian
Alliance).
• When selecting a certain contract form, important factors to consider are
negotiation phase/time, IP ownership, degree of liability by the contractor,
level of detail regarding collaborative behavior, form of reimbursement,
pricing approach during the ECI, risk management, dispute management
and level of familiarity of the parties with the contract type.
• The process and objectives of an ECI should be well-defined but the ECI
itself should not be managed too formally.

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4.1 Procurement Framework

4.1.1 Procurement Regulation – General Guiding Principles

Public sector clients are bound by procurement rules. Undertaking an ECI phase within these
rules can be challenging. A tender process that facilitates ECI can be quite demanding, and
these sections deal with some legal issues that may arise.

A number of principles applicable to all procurements can be specified.xix Firstly, achieving

value for money is critical to ensure that taxpayer’s money is well spent. Public sector clients
should consider both price and quality during the early team selection in order to comply with
the relevant public procurement regulations. Secondly, all potential suppliers to the
government must be treated equally and the government must use competitive procurement
processes, for example to recognise and consider small and medium enterprises, so as to
encourage competition. Clients should treat all tenderers equally and in a non-discriminatory
way. Furthermore, contractors are obliged to avoid collusive tendering. Moreover, officials
should ensure accountability in its procurement activities. All parties need to act in a
transparent way and in good faith with mutual trust and respect. Lastly, relevant entities must
establish processes to identify, analyse, allocate and treat procurement risk.

Value for Money and Efficiency

A first element which plays a significant role in the procurement procedure is what can be
described as value for money, economy and efficiency. This entails that the decisions made
during the procurement process should take into consideration the state of the economy, how
efficiently the project will be concluded and the value of the final result in relation to the
money that has been invested. ECI with its specific characteristics is perfectly designed to
uphold this key element.

When the contractors are involved in the process early on, they can make an important
contribution with their technical knowledge and expertise. Nevertheless, it is possible to
develop reliable cost estimates and avoid unnecessary costs. Contractors know as well which
equipment is most appropriate for a specific job and what type of impact they may have.
Value for money can also be looked at beyond a single project even if a single contract is
under stress. One can then divert their best resources and therefore promote healthy
construction industry which is able to meet the project coming to the market.

Level Playing Field

A criticism that has frequently been made about ECI is that it does not favour competitiveness.
However, this argument can be countered through the use of Key Performance indicators
(KPIs). Specifically, for ECI, KPIs can be used for weighing out qualifications during the tendering
process. KPIs will be chosen by the contractors and applied in a uniform fashion, ultimately
promoting the level playing field.

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In practice it is a challenging exercise to price risks. The level playing field can easily be disrupted
if one of the parties favours itself or its own competitive advantage by using for example their
own equipment. This is not an academic risk, it is an actual risk, specifically when ECI is used for
installations and the choices of consultants can already influence who the contractor will be.
Nevertheless, appropriate parameters will need to be put in place as a safeguard if a bidder is
involved in the tender phase.

The regulatory principles regarding the equal treatment of tenderers require that procurement
activities are planned and documented in detail at a very early stage, and that the plans and
procedures are disclosed to prospective suppliers together with records of actions taken in
accordance with the plans and procedures. This restricts the scope for subsequent client
actions or activities inconsistent with the documented plans and procedures. Therefore,
getting the definition and documentation of the project delivery system right at this early point
in the project evolution is crucial.

Competition and Non-Manipulation

The procurement process should not tamper nor manipulate with any tenderers for personal
benefits. For example, in the European Union, competition is strictly regulated to ensure that
contractors from different member states are given the same chance to be chosen in the
procurement process throughout the European Union, particularly for public procurement.

Competitive dialogue within the EU procurement is a tendering option that allows for bidders
to engage in developing alternative proposals in response to a client's outline requirements.
The aims are to increase value by encouraging innovation and use of bidder’s execution skills
and at the same time maintain competitive pressure within the bidders.

Both the negotiated procedure and competitive dialogue can be used to negotiate complex
contracts with bidders, but strict conditions must be followed. The key difference between
them lies in, when negotiations can take place.

To ensure that competition is upheld during ECI, some special protection measures may be
implemented. There are various ideas, such as a two-stage pricing process, where the
contractor is selected through a competitive process.xx The other idea is to provide proper
compensation for all contractors' contributions in the early stages of the project and to allow
them to patent their idea to secure them in case they are not chosen to continue working on
the project in later stages.xxi These are just some of the many possibilities in which goes towards
safeguarding competition during the ECI process. New solutions are constantly being
developed.

At the beginning of any procurement process, it is particularly important to ensure non-

preferential treatment as well as equal consideration. Non-discrimination, equality, and
fairness are crucial when choosing contractors, especially for public projects.

The World Bank principles are to be used, even in jurisdictions that are less used to dealing with
procurement. This can be achieved for example by providing policy provisions to ensure fair
and equal treatment by reviewing the proposed contract to see how this policy can be

61
fulfilled, or for instance by providing guidance on how a dispute resolution board can give
guidance as to how issues can be dealt with when they occur.

Avoid Collusive Tendering

One of the key concerns with any tendering process, whether during an ECI process or the
traditional contracting process, is the possibility for collusion between bidding parties. Collusive
tendering refers to the situation when 2 or more competitors cooperate to undermine a
client’s competitive tendering process in order to gain an unfair advantage. Collusive
tendering practices may include any agreement between tenderers as to who should be the
successful tenderer or any exchange of information between tenderers for the payment of
money or the guaranteeing of a reward or benefit for unsuccessful tenderers by the successful
tenderer(s). In short, collusive tendering involves any agreements between tenderers to fix
prices or conditions of contract (price fixing is any collaboration between tenderers on prices
or conditions to be included in contracts without the consent of the client).

An anti-collusion tender clause may be included in the tender documents to warn tenderers
that the client is aware of the risks of collusion and will take the necessary actions to prevent
such behaviour. It complements guidelines on detecting collusion in public tenders by
requiring a guarantee from tenderers that they have not engaged in collusion practices when
submitting a bid. The key in this regard is transparency. Cover letters from bidders refusing to
observe certain tender conditions or referring to discussions, perhaps within an industry trade
association, should be viewed with extreme caution and possible evidence of collusion. An
open and interactive tendering procedure is instrumental in building trust between both client
and tenderers.

Transparency During Procurement

The core value of transparency is particularly important in the tender phase and the liability
within the procurement phase. One of the main goals of ECI is ‘the opening of the curtains’
during the decision-making process, with the aim to reduce risks, to minimise reasons for
disputes and to increase the shared responsibilities, which can be done by means of enforcing
and maintaining the core value of transparency. ECI aims to be transparent for the owners, for
the contractors, as well as for the public. The tendering parties put a lot of time and attention
into tendering as they understand its importance and issues. Issues usually take place when
not enough care is given to the checks and balances during the evaluation process. If one
party is pushing liability towards the other party during the tendering phase, then this liability
will only take effect if all parties wish to move forward into the procurement phase. At the
tender phase one has to accept that some risks cannot be foreseen and can still be allocated
between the parties, for example, if there is something that first needs to be investigated in the
tender phase and neither party is in a position to provide for a price or risk allocation.

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Good Faith

The concept of ‘good faith’ is a feature of many countries' legal framework and therefore is
applicable within the procurement process. The main objective of the principle of good faith
is the presumption that the parties deal with each other honestly and fairly. The parties must
act towards one another with fairness and without fraud or malice.

Best effort should thus be included in contract negotiation and must be defined clearly. Parties
should understand that they need to work together to solve legal issues while finding a way to
balance with procurement law.

Accountability

If a party notices something that does not seem right, then it is crucial that it flags and reports
this. ECI is often seen as an elaborative way to describe that duty to warn. Creating an ECI
process that is transparent, competitive and that fulfils all the principles, elements and values
mentioned above would lead one to assume that it minimises the risk of potential disputes in
the future. A contractor who is involved in the project from an early stage knows the potential
risks and is on hand to provide solutions from the outset, which helps to avoid unpleasant
surprises in later stages. In traditional procurement processes, quite often projects are
commenced or put to tender without contractor input, which leads to incorrect cost
assessments and possibly require changes to project scope that may be needed to conclude
the project. Since in the ECI method, contractors are within the process since its start, they are
more prepared for all possible problems and may make a more detailed analysis of the design.
This helps to avoid future conflicts caused by non-understanding of the project, confusion or
incorrect preliminary plans.

In brief, a well-designed ECI process is an effective measure to prevent or avoid causes for
potential conflicts.xxii The advantages of ECI include the advanced business relationship, the
contractor design input, early risk identification and improved resource management.xxiii All of
these advantages have considerable influence on the strengthening of the relationship
between stakeholders and on helping to avoid potential disputes. ECI litigations are rare. A
large part of the litigation relates to the contract itself: sometimes the contractor goes
bankrupt and therefore the court is appointed to decide who they deem to have a claim
against the client for monetary funds. The lack of jurisprudence in the courts concerning ECI
disputes and any ECI case law is perhaps a reflection of the good preparation that goes into
ECI agreements and parties being able to resolve disputes amicably rather than going to
court, however it could also simply be an indication that fewer projects are prepared using
ECI and this will only be known for certain in the coming years as more projects embrace ECI.

4.1.2 Compliance with Procurement Regulations

The goal in compliance within any procurement regulation or procedure is to work within a set
of rules and regulations which may be at a company, state or government level so that certain
values in commercial relationships and procedures are adhered to. It also seeks to make sure
that the interests of every party are maintained and that a due and fair process is followed.

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Therefore, a client that considers and applies compliance provisions, either within a statutory,
public or private process, offers the market a more transparent business approach with a fair
and equitable result. All potential tenderers know they are on the same level playing field with
their competitors. The client can develop tools within its procurement process to identify
omissions, irregularities or deviations and should be in a position to solve these problems
promptly and efficiently during the tender process without favouring one tenderer over
another. There are numerous potential benefits for managing compliance within a
procurement process: they reinforce existing guidelines and policies by providing detailed and
clear expectations at all stages of the procurement process and they can help operationalise
and translate the objectives of fairness, openness & competition in the procurement process.
There is a broad agreement about the major features of a competitive procurement process
that should be covered by a compliance checklist, including but not limited to:

• Public notification of tendering opportunities,

• Clear documentation of the needs for goods and services, specifications and
technical requirements,
• Documents clearly outlining the tender and contracting process, terms and conditions
and specified criteria for awarding the contract,
• In respect of government procurement, submission of secret sealed bids that are
publicly opened at a specified date, time and place,
• Impartial evaluation and comparison of bids by competent evaluators without
interference by tenderers or other parties,
• Award of the contract to the tenderer complying with all requirements and offering
the best value for money offer, as defined by the published procurement selection
criteria,
• Documentation of the contract award decision and notification of the unsuccessful
tenderers with the ground for decisions and relevant information about the successful
tenderer,
• Effective supervision of contract implementation following the award.

The client itself has to decide how to apply procurement regulation and rules. In any case,
even if the implementation of the legislation is more restrictive, a procurement management
and leadership team is needed who can successfully understand and navigate these
challenges. Particularly in public tenders, the award may be subject to a legal challenge that
due process has not been followed. It is important that the procurement team is aware of the
need to follow the rules and procedures to the letter to avoid any legal challenge that may
arise.

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Application of Procurement Regulations
For clients within the public sector,
procurement is commonly subject
to a regime of procurement
regulations laid down at national
level. Additionally, it may be subject
to the procurement rules of a body
involved in funding the project, such
as the World Bank. Procurement
rules and regulations apply to the
client and not to the tenderer or
prospective tenderers. Such rules
and regulations are ‘external’. They
should be separated from internal
governance rules or procedures
relating to procurement laid down
by the client itself. The external
procurement rules and regulations
create a framework within which
the totality of the procurement
phases needs to be planned.
The significance of these rules and
regulations is not merely that they
state what should or should not be
done, but that they also provide
sanctions or remedies for breach.
Looking ‘upwards’ the client may
be subject to oversight and possible
sanction for breach by the
regulatory or rule-making authority.
This could include withdrawal or
withholding of funding. Looking
‘downwards’, prospective tender-
ers may be given rights and
remedies for breaches by the client,
enforceable through the courts or
other tribunals. Even if a claim by an
aggrieved prospective tenderer
does not lead to any remedy being
awarded, the mere bringing of a
claim itself can be very disruptive for
the client. Clients therefore need to
be careful both to ensure that they
A market consultation is an interaction between client and
contractor to get input certain topics and plans. For instance
on the ambitions, (project) goals, specifications and
validation, circularity, processes, procedures and even
whether or not ECI is a good approach. A market consultation
helps to clarify. Mostly the Client is the initiator, e.g. to validate
the ambition and technical specifications. This ensures the
client to have the most up-to-date knowledge at hand, as
market players evolve relatively quickly.
A market consultation can appear in different phases of a
project and therefore the content and filling in can differ. The
consultation isn’t an official part of the tender procedure and
takes place separately. The client has to be careful and has
to operate transparent as all equal information for the future
bidding parties is essential to obtain a level playing field.
However when the feedback of the market consultation
commutated properly and when transparent with the gained
input a lot is possible. Besides technical or other kind of input a
market consultation is also a sign for the market to compile
partners for consortium. Especially for the financial bigger
projects or projects where different expertise are needed.
A market consultation design in a way that ensures the
information exchange works both ways. Important is to for the
client to share own ambitions with market players. This
information is of interest to them as well. In addition, the client
should ask market players for information it needs: what are
the customary requirements in the market, what opportunities
can be identified, how would parties like to be challenged?
An open attitude allows the client to make the most of these
discussions. The insights a client gains from this process can find
their way into your definitive call for proposal. Depending on
the objectives there are various ways to perform a market
consultation. Possibilities are a digital request for information,
one-on –one discussion or an open group meeting. Within
these types there are several ways of more or less open
structured questioning. Th choice should reflect the efforts that
market players have to make, i.e. the consultation should be
in proportion to the size of the contract. When a market player
have to put in a lot of effort or go in depth a fair compensation
is to be considered.
65
comply with the regulatory requirements and that they have good processes and records to
prove compliance. For private sector clients not subject to procurement regulations, there is
greater freedom. Some principles may nevertheless be relevant. In relation to ECI, invited
bidders will still expect that any selection process and the ECI phase will be conducted in good
faith.

For any project there will be a national regulatory regime that applies to public procurement,
based on the location of the proposed works. However, national regimes consist of
implemented principles laid down at one or more supra-national level(s). For example,
national procurement regulations in EU Member States implement supra-national Directives
issued by the EU. Contracts for waterborne infrastructure projects awarded by contracting
authorities which operate maritime, coastal or river transport services, would be public
contracts within the scope of EU Directive 2014/25/EU. At an even higher level there is the
‘World Trade Organisation Agreement on Government Procurement’ (GPA). This agreement
sets minimum requirements on transparent, non-discriminatory contract awards and provides
for protection under procurement law. It provides a multilateral framework for the conduct of
international trade in government procurement.

Certain regulatory regimes such as the EU Directives make it possible to conduct ‘Preliminary
market consultations’, through which the contracting authorities "may conduct market
consultations with a view to preparing the procurement and informing economic operators of
their procurement plans and requirements”. This approach could be relevant in relation with
ECI, as the contracting authorities have the opportunity to approach contractors for a
preliminary discussion on relevant matters, e.g. concerning the works covered by the contract.

4.1.3 Incentivisation

A sound procurement process consists of flexible payment terms and contract terms and
utilises incentive strategies that reward all levels of the supply chain.xxiv Though not commonly
discussed during the main ECI phase of contracting, if this ECI phase is designed well, it can
have mutual beneficial effects relating to trust during the discussions around incentivisation
that commonly take place during the post-ECI main contract phase. A process of a
competitive tender contest between bidding parties to win a project is a fundamental driver
underpinning the use of the traditional procurement processes and is often perceived by those
soliciting offers from tendering parties as an impediment to the use of collaborative
contracting methods such as ECI. So how can you ensure that in an ECI-designed process
contractors are incentivised to submit a bid which is competitive against fellow tenderers,
includes a reasonable allocation of fees and profit margin and is not an inflated bid? This can
be addressed through the competitive ECI selection process at the initial tender stage which
gives the ability for the client to discontinue with the ECI contractor if the terms for the
delivery/execution phase are not acceptable. Transparency in the ECI contractor’s pricing is
key.

Potential short-listed ECI contractors should be able to be ultimately selected based on a

competitive procurement process assessing value for money on fees/margins and either lump
sum pricing for defined activities and agreed performance metrics or on an hourly rate basis
up to a capped amount. This as opposed to a pure cost reimbursable ‘for all hours worked’

66
arrangement. It is essential that appropriate mandatory and non-price selection criteria are
selected for the evaluation of ECI tenderers. It may be appropriate to select at least three,
and preferably not more than five, non-price selection criteria: in this way an ECI tenderer is
not just evaluated on price alone. These numbers are not absolute but give an indication of
the amount of non-price factors which should be considered at a minimum to select a
competitive and attractive bid. This is not to say that a contractor should not focus on price at
all, a well-priced bid will always be attractive to projects with limited budgets, but it is to say
that, as with any procurement process, the non-price factors play an important part in
determining the bid’s attractiveness.

ECI tenderers must comply with all mandatory criteria to be considered acceptable and, as
such, these criteria need not be evaluated and scored in the same way as non-price selection
criteria. The mandatory (confidential) criteria requirements should be stated in the conditions
of tender and may include prequalification and financial capacity, lump sums and hourly rates
for personnel, appropriate profit margins and current commitments. The client can then assess
whether these price items are within industry norms. Non-price selection to advance overall
industry improvement goals, such as treatment of subcontractors and suppliers, industry
training, etc. can be used as key performance indicator. All relevant aspects of non-price
should be considered.

The use of mandatory and non-price selection criteria enables the client to call for direct
evidence of the competence of the ECI contractor to undertake a particular project and
incentivises the ECI tenderer to submit a bid which is both competitive and meets the
qualification requirements. The review should incorporate predetermined weightings for the
non-price selection criteria for ranking by the client. This will require a robust audit trail to
demonstrate fairness, transparency and accountability.

An invitation for tender is the usual mechanism used for seeking tenders from potential ECI
tenderers. A two-envelope system may be used for an ECI tender, and there should be specific
procedures for handling each envelope. The first envelope is opened for all ECI tenderers and
the selection is based wholly on the non-price selection criteria attributes. The second
envelope would be put under lock and key safe until a preferred ECI tenderer has been
selected, and only then will the second envelope be opened. The second envelope contains
the cost plan to be used in the ECI stage.

The content of the tender documents will vary for projects, depending on size and complexity.
A key document that will generally be required as a minimum is the project brief. It is an
important document in the tendering process, which evolves and changes as the dialogue
between the client and ECI tenderer develops. It therefore needs to be accurate and clear,
so that both the client and the ECI tenderer easily understand it and the ECI tenderer can
submit a price for the completion of the ECI stage. The brief must allow, where feasible, for
innovation and development of new techniques, and it must identify where there is potential
for cost savings. Drawings and specifications may also be included.

Once the second envelope has been opened, the client may enter into a period of post-
tender negotiation with the preferred ECI tenderer to gain acceptance of any rules or
conditions and to negotiate rates/times for the ECI stage, possible risk sharing and other
aspects of the contract.

67
The negotiations should not be conducted in a way that puts ECI tenderers at a disadvantage,
distorts competition or adversely affects trust in the ECI tendering process. At the final stage
prior to the expiration of the tender validity period, the client will notify the ECI tenderer by
letter of acceptance that their bid has been accepted.

An important part of ongoing incentivisation for the procurement process is for the client to
offer a thorough debriefing session for the unsuccessful ECI tenderers to examine how their
individual tender performed against the non-price selection criteria. Though not allowed under
all procurement rules, this is in the interests of enhancing future performance on ECI tenders.
Potential benefits for the client include identifying ways of improving the process and making
sure best practice and guidance is updated to reflect relevant issues, whereas potential
benefits for unsuccessful ECI tenderers include helping them to re-think their approach so that
future bids are more successful. The debriefing session should address the unsuccessful ECI
tenderers’ performance against the selection criteria and the strengths and weaknesses of
their tender.

To ensure full incentivisation and best value for money, choosing the best delivery method
must take into account the tender method, project size and complexity. Selection requires the
consideration of marketplace capabilities, the approach adopted for managing risk, ensuring
best value for money, process probity, fair dealing and effective competition.

The ECI tender delivery method using a two envelope non-price selection process ensures that
considerable emphasis is placed on the calibre and experience of the proposed project team
and ultimately results in the best value for money for the client.

4.2 ECI Agreement

The central challenge in any form of agreement for ECI and in making it a success, is to be
able to define the clients’ requirements clearly and to have an agreement that the parties
communicate well and continuously throughout the process. The ECI agreement should
carefully outline the terms and conditions of the ECI process, the rights of both parties, a clear
contractual program, the amount to be paid as well as the key deliverables and a dispute
review process should things not go to plan. It is vital to have a well-written agreement as it
ensures that owners and contractors alike are working in the same direction and with the same
goal. Constant communication between clients and contractors allows the parties to avoid
issues that may lead to disputes. Having a clear and well-written ECI agreement is a
prerequisite of good communication between the parties during the ECI process.

Level of Freedom to Modify That Provided for in the Contract

An ECI process often has as an objective to mitigate the information risk by dealing with the
unknowns of the project, hereby confirming or refuting initial assumptions which may result in
modifications to the initial scope of work. When a contract for works is subject to public
procurement regulation – such as the EU Directives (2014 and 2014/25) – the contract will also
be subject to the directives' provisions concerning the limited ability to modify contracts during
their term. Therefore, when selecting and drafting the agreement, the client must carefully
consider and make sure that any necessary variations can be performed in accordance with

68
the contract. This may be done by adding clauses dealing with material or price revision
clauses or including scope of work options, without altering the overall nature of the contract
or the framework agreement. In practice ECI contracts will often have quite broad variation
clauses which, after careful consideration, allow parties the room to tailor the final scope of
work as long as it stays within the remit of the original functionally described scope of work. This
approach is in line with that seen within D&C contracts.

Choice Between Industry Standard or Bespoke Agreement

Fairly early in the process the client who wishes to embark on ECI will need to determine
whether it tasks its in-house legal team or an external legal advisor to choose between a
custom-made ‘bespoke’ agreement or an industry standard agreement to set out the ECI
requirements and obligations.

There is no ‘perfect’ standard industry form contract. There are no industry standard form
contracts specifically drafted solely for ECI use. The various industry standard form contracts
must be modified to incorporate special provisions or options for ECI use or have to undergo
some form of amendment to make them fit for this purpose. Applying these amendments or
optional clauses can be relatively minor in nature when compared to the drafting of a
bespoke contract.

Clients who have greater experience with ECI projects are more at home making significant
amendments to standard industry form contracts to suit their particular situation and the
specific requirements for a particular project. Clients who are employing an ECI contract for
the first time may want to consider seeking external advice from consultants as to how best
adapt an appropriately selected standard industry form contract.

When considering the choice between a bespoke or standard form contract, a number of
factors, which have been outlined below, have been identified by industry practitioners and
should be kept in mindxxv .

Cost

The time and expense of drafting a bespoke contract is considerable and it should only be
taken on by trained legal practitioners. To expedite contract drafting there is a tendency to
'cut and paste' terms and conditions from previous contract documentation rather than
compiling terms from scratch. This recycling of terms and conditions may initially save time and
expense but it inevitably creates areas of contractual weakness, ambiguities and
inconsistencies when terms and conditions are not relevant to the project, or if project specific
data or recent legislation have not been considered. An industry standard form contract is ‘off
the shelf’ so to speak whereby the client only needs to pay a fee by way of a user license.

Procurement and Negotiation Time

Standard industry contracts enable the parties to quickly and easily agree on the non-
controversial and repetitive aspects of the contract (a majority of contracts contain standard

69
terms which are known as ‘boilerplate’ clauses). Recognition of industry standard clauses
eliminates the scope for negotiation and thus speeds up the procurement process. Standard
industry contracts enable the parties to quickly and easily agree on the key clauses and to
focus their attention to drafting clauses that add value where there are significant differences
of opinion.

Familiarity

A client will use the same key terms every time a contract is formed. This makes it easy for
people within the respective organisations (client, contractor and suppliers) to become
familiar with the terms of standard contracts of their industry. As time passes and with
knowledge disseminated by way of user forums and conferences, users’ confidence also
grows in the terms of knowledge of how the contract should be applied. Industry standard
contracts are regularly updated to take account of changes in user needs.

Training

There will be challenges for organizations that still prefer to draft bespoke ECI agreements
rather than using standard industry contracts, particularly if they have not operated this way
in the past. By using industry standard contracts in a particular project all parties are able to
source the right training. It is far easier to train both client and contractor organisations and
their suppliers on how to administer and manage a standard contract instead of a bespoke
contract. It will also be easier to obtain training from contract consultants who are familiar with
industry standard form contracts who have the expertise in the drafting and contract
management of those contracts.

Balanced Contract

A standard industry contract will have been drafted with the consultation and input of all
industry players so will generally be perceived as a ‘balanced’ contract. In the case of the
FIDIC brand, FIDIC goes as far as identifying ‘golden principles’ which it requires if the FIDIC
trademark is used. In the NEC suite the parties 'act in a spirit of mutual trust and cooperation'.

An industry standard contract will generally be considered in the market as being fair,
balanced and as a well-recognised form of construction and engineering contracts and
agreements. Industry standard contracts are generally accepted as striking an appropriate
balance between the reasonable expectations of contracting parties. Accordingly, a
contract identified as an industry standard contract has real commercial value to both the
client and the contractor, both at the tendering stage and during execution of the contract.

Risk

Taking the time to focus on the more controversial aspects of the contract increases
commercial awareness and encourages an increasingly balanced approach to risk, along
with the capability to allocate the risk with the party best placed to mitigate it.

70
Jurisprudence

Standard forms reflect the latest industry contract knowledge, supported by legal precedence
and case law, which can aid interpretation, and support the development of a balanced
approach to risk allocation for both parties.

Disputes

Disputes may arise but with consistent use of the same model contract comes familiarisation
and greater understanding. This reduces the potential for disputes due to a reduction in
ambiguity, which will benefit both clients and contractors.

The infrastructure sector at a global level continues to evolve by embracing new models for
engaging the supply chain with innovative contractual arrangements and ways of working,
part of this is the willingness to pay for a user license to use a standard contract in place of
employing a lawyer to draft a bespoke ECI contract.

4.2.1 Analysis of Relevant In respect of development of specific ECI Contracts, one of

Current Standard
Forms
Construction of major waterborne
infrastructure and facilities in many
countries is increasingly international,
often funded by multilateral
development banks (MDBs) with
projects being constructed by overseas
contractors with a supply chain
involving many countries. Many MDB’s
have policies which promote the use of
industry standard form construction
contracts. This formed the basis of the
most widely used international contract
suite at present which are those
published by the International Fede-
ration of Consulting Engineers (FIDIC).
FIDIC contracts are gene-rally more
detailed than typical construction
contracts in civil law jurisdictions as the
civil law contracts rely on civil codes for
many legal rights and obligations.
the most notable developments took place in the
Netherlands with the concept of the ‘BouwTeam’ contract.
Infrastructure projects had to be built quickly and there was
a need to reduce the project preparation time, to control
interfaces and to introduce continuity in the construction
process. The BouwTeam contract was developed as a form
of contract in which the client and contractor, and in some
cases an engineering firm or architect, work closely
together during the design phase. Often a positive
collaboration between parties during the design phase is
continued during the construction phase. Working within a
Bouwteam provide benefits such as sharing knowledge,
reducing risks, guiding actions, genuine collaboration and
open communication which are hallmarks of the polder
model. Two recent BouwTeam contracts have been
published in the Netherlands DG2020 and KBN2021 which
have been developed from the 1992 VGBouw Model
Bouwteam Agreement. The KBN2021 is published by a
contractor’s association whilst DG2020 is published by an
independent platform organisation with a broad range of
participants in the construction and real estate sector.
There is increasing interest in the application of Bouwteam
contracts in the construction sector in the Netherlands and
both DG2020 and KBN2021 have an important role to play
in the wider adoption of this form of collaborative working.

71
 Success factors of a Bouwteam xxvi

In the United Kingdom, the New Engineering Contract (NEC) came from a different
background. It was the first attempt at developing a standard form contract on a different
basis to traditional forms. One key recommendation was that partnering should be used to
encourage the establishment of long-term contracting arrangements and that the NEC
contract should be adopted more widely as a less adversarial form of contract. The NEC suite
of contracts embody modern project management principles and practices and uses simple
procedures and language. The processes in NEC contracts such as use of a risk register and
early warning notices were designed to reward cooperative instead of adversarial attitudes
and behaviour. The NEC contracts have been used successfully in a number of countries
outside of the UK, where they are now the preferred form of contract for UK government
projects. The NEC contract includes an option X22 for Early Contractor Involvement and is the
first internationally used contract to specifically do so.

The FIDIC Contracts Committee also have identified the need for a standard collaborative
contract and is in the process of drafting a Collaboration Agreement which is due for
publication in 2023. There are standard contracts published by the American Institute of
Architects (AIA) and the Canadian Construction Documents Committee (CCDC) which
promote Integrated Project Delivery (IPD). IPD is a term used in the USA and Canada and is a
project delivery method that aligns the business interests of the team, consisting of the client,

72
consultant, contractor and any other project parties, through a single, multi-party contractual
arrangement.

The IPD arrangement has many similarities with that

of an Alliance. In Australia and New-Zealand, the
‘Alliance’ contracts were developed following their
initial use in the UK’s oil and gas sector and are now
widely used in the public and private sectors. An
Alliance contract is a multi-party contract where
parties sign up to the same project objective, The
parties can include ECI as part of the Alliance
process though this may not necessarily be the prime
objective.
The benefits of an Alliance/
Project Partnering Contract
In complex projects, influence and
flexibility by all parties including the
client promote more freedom in
design, innovation and dealing with
multiple stakeholders on a best for
project basis.

The most significant difference between traditional contracting and the majority of ECI
methods and alliance or partnering contracting is that in alliancing, all project risk
management and outcomes are collectively shared by the alliance participants. In more
traditional methods of risk allocation, specific risks are allocated to participants who are
individually responsible for best managing the risk and bearing the risk outcome. This concept
of collective risk sharing provides the foundation for the characteristics that underpin alliance
contracting including collaboration, making best-for-project decisions and innovation.xxvii

Selection of Standard Contracts

For those parties wishing to enter into an ECI arrangement, there is a need to identify the
various standard form contracts commercially available on the international market and
which are in the English language and could form the best choice as a basis of an ECI
contract. The advantages of standard form contracts include reduced preparation time and
cost (minimal lawyer drafting), easy familiarity with contract terms, higher confidence of
knowledge of contract terms, less room for deviation, and an established body of case law for
future reference.

A standard contract will have been drafted with the consultation and input of all industry
players so it will generally be perceived as a ‘balanced’ contract. Some of these standard
contracts are and have been used in ECI arrangements in the building sector as well as having
some sporadic use in the waterborne infrastructure sector.

Those standard contracts identified in this report include the FIDIC White Book, JCT PCSA, NEC
4 ECC X22, AIA 133 & 134, AIA IPD, NEC4 Alliance, CCDC 30, PPC2000, PAA (Australian Alliance)
& DG 2020, see below.

A contract comparison matrix has been prepared for each type of contract, listing key
contractual aspects: see Appendix C. The various contracts are sub-divided into 3 categories,
these being:

The ‘Pre-construction pure ECI only’ contract types are a simple contract whereby the client
enters into a one-on-one contract with a contractor for a straightforward one-off service which
may consist of scope preparation, budget information, early procurement of certain systems,

73
materials or equipment, assistance with licence and permitting with no commitment from the
client to award any follow-on design and/or construction project.

In the ‘Two Stage (ECI) Project’ form the client has the commitment to engage potential
contractors in a two-stage process with the ultimate aim to award a follow-on design and/or
construction project to the successful contractor. This could be achieved by using a bidding
process or by negotiating directly. The Two Stage (ECI) Project types are the more mainstream
ECI contract arrangements as the follow-on phase is usually done under a traditional lump sum
or fixed target price.

It can be the case with both Pre-construction pure ECI and Two Stage (ECI) Project that the
ECI scope of the contractor may or may not include any design scope or design phase.

In the ‘Project Partnering’ form the members collaborate with each other to achieve the
required client objectives & the partner objectives which support delivery on a best for project
basis. Project Partnering type contracts may follow a two-stage process as described in the
Two Stage (ECI) Project types. However, the key difference in Project Partnering is that the
design and construct phase is also carried out with the client being an active participant
sharing in the risk and rewards.

Pre-
construction Two Stage (ECI) Project Project Partnering
pure ECI only
Form of Contract

FIDIC White Book

AIA A134 (2019)

JCT PSCA 2016

NEC4 ECC X22

Bouwteam DG
CCDC 30 - IPD

NEC4 Alliance
AIA - IPD

PPC2000
2017

2020

PAA

The listing of Contracts shown above is not exhaustive as other forms of contract can be used.
In preparing the contract comparison matrix, there is no preference or advice on PIANC’s part
for one form of contract over another, the intention is merely to summarise how each standard
contract deals with certain key aspects which have an influence on the type and degree of
ECI which could be adopted.

A listing of key provisions as they relate to ECI has been identified and used in the contract
comparison matrix in Appendix C. These ‘key provisions’ are Project Scope Definition,
Subcontracting/Early Supply Chain Involvement, specific ECI contract provisions, Budgeting
method, Pricing Mechanism, any Gain/Pain scheme, Decision Making & Project Management
Procedures, Risk Management approach, Early Warning Register, Insurance, Partnering &
collaborative provisions, Independent Audit/Open Book, Scope of Design responsibility, IP
Provisions, No Claims commitment, Limitations on Liability, Termination provisions and Dispute
Avoidance/Resolution.

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Comments on Current Standard
What is Two Stage Open Book?
Forms
In the Open Book system the contractor
submits, as part of his bid, a detailed
Due regard must be taken on the various ECI
quotation comprising all elements for the
elements in the standard form contracts
construction works including equipment,
which practitioners will be selecting from.
hours, rates, risks etc. This open book will
Some have more detailed ECI provisions than
then be used as the basis to determine the
others and some degree of bespoke
construction costs. In some cases, the
contract amendment may be required.
contractor can submit a list of unit prices
A key part of the ECI process is the that will be used to determine the
procurement stage. Many industry construction costs. In some cases, the
practitioners have identified that the two- contractor can submit a list of unit prices
stage open book ‘competitive’ tender and that will be used to determine the
final award process is vital to the success of construction costs.1
the ECI process.

The selection criteria are not merely based on the team with the lowest submitted price. The
successful contractor and consultant team are appointed to work up detailed proposals on
the basis of an open book cost that meets the client’s stated outcomes and cost benchmark
as a second stage. It is important that the client can elect to discontinue the process after the
end of the first stage if it considers that its key criteria have not been met. Virtually all the
standard contracts have these two stages built into the arrangement in one form or another
with some providing for the client to terminate for convenience should its cost benchmark not
be met. Contractors typically offer to undertake the early procurement of long-lead items on
behalf of the client in a Stage 1 tender and be willing to pass this onto the successful stage 2
candidate should they not be successful themselves.

Another key provision is the budgeting method and pricing mechanism. A number of the
standard contracts provide for a fixed price for the tender phase and either a cost-plus fee
arrangement which may be capped by a gain/pain mechanism, or a lump sum arrangement
for the design/construct phase.

A key part of any ECI process is the openness

Open book pricing
“Re-establish good faith, give the estimation
of the work and do not refuse a reasonable
payment to a contractor who will fulfil his
obligations. That will always be the best
transaction you will be able to find”.1
of the contractor in determining the contract
price for the stages of the project with the
scope and design/construct phase. Many
but not all the industry standard contracts
have provisions for an inde-pendent audit or
an ‘open book’ approach as to costings.

A key point is the ‘go-no go’ milestone when the client decides whether to proceed to the
second stage or not with the shortlist ECI contractor. This decision point falls under the
termination provisions in the template (see contract comparison matrix).

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A drawback of the stage two process which can occur is a financial commitment by the client
during stage one by way of procurement of early lead activities which the tenderer needs to
commit to during the stage one phase. For example, the contractor may need to reserve long-
lead materials or specialty equipment and vessels. The client needs to be mindful of this and
may need a separate long-lead contract for such items which can standalone to the stage
two process such that another shortlisted contractor can easily integrate such items into its
stage two phase.

Lessons from Case Studies

A review of the case studies reveals that there is not one ‘ideal’ form of ECI contract over
another nor is there any conclusion that can be drawn that those which have used standard
form contracts have had relative success or failure over bespoke forms of ECI contract.

Project Country Type of Contract

Beatrix Locks Netherlands Design Build Finance and Maintain (DBFM) with
competitive dialogue based on the European Directive.
(2014/24/EU). Incentivised service levels.
Room for the Netherlands ECI with an integrated Plan Design Build (PDB) contract
River and competitive dialogue
A2 Passage Netherlands ECI with an integrated Plan Design Build (PDB) contract
and competitive dialogue
Gemini Wind Park Netherlands Design Build Finance and Maintain (DBFM) with
competitive dialogue
Port of Melbourne Australia Alliance Contract without competitive dialogue
Odense Terminal Denmark Competitive Dialog with prequalification
Design & Build Contract
Swansea Bay United Kingdom EPCI
Fremantle Australia ECI open-book approach while using an Australian
Deepening Standard AS4000 ‘construct only’ format
Kangaroo Island Australia Alliance Contract
Onagawa Fish Japan Technical proposal for design cooperation
Market Negotiated based construction contract

It is clear that for the pre-construction pure ECI phase a number of industry standard contract
formats can be selected from but often it is the case that bespoke contracts are drafted
especially for the purpose.

In the ‘Two Stage (ECI) Project’ forms where the client has the commitment to engage
potential contractors in a two-stage process, there is a more mainstream choice of standard
contracts such as NEC4 ECC X22, CCDC 30, AIA 134 and IPD as well as DG2020 so the need to
draft a bespoke contract would appear to be less of a requirement. The case studies of Port
of Melbourne and Kangaroo Island from Australia perhaps demonstrate that in the case of

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complex projects and those where the client wants to take an active role, an alliance or
project partnering type of contract was used.

4.3 Operational Practises & Management

The client should have a predefined process that fits its ECI objectives, but also gives sufficient
room for the contractor to achieve these objectives and to provide the value that the client is
seeking. As an ECI process is focused on interactions and is project-specific, it is highly
recommended to jointly agree on an ECI programme with deadlines, decision moments, opt-
out moments and an ECI deliverables list. Such expectations should be communicated and
formalised before starting the ECI – e.g. in a prequalification process – through i) an ECI Execution
Plan and Project Communication Plan provided by the client on which the contractor should
base ii) an ECI Services Execution Plan. Both parties should check that these plans are aligned,
realistic and effective to achieve the client’s ECI objectives. A clear plan with timetable under
which each of the team members meets deadlines for all its pre-construction phase
activities leading up to start on site and for interfaces between them during the construction
phase. Such a timetable often proves very demanding to create but is also the most useful in
practice.

It is also important that all team members learn to know each other to create good cohesion in
the team. It is therefore recommended to perform a Project Start-Up (PSU) at the start of the ECI.
In this event, all core team members should be present. The main agenda points should be the
introduction of the project to the team members and discuss all the different ambitions,
expectations and visions of collaboration. It is also recommended to perform activities such as
a teambuilding and a team analysis with jointly established practical collaboration rules.

The outcome of the Project Start-Up forms the operational basis of the collaboration. It is
recommended that this basis is frequently evaluated and updated in Project Follow-Ups, in
which there is a reflection on how the collaboration is going and where there is room to learn
from the ECI experience so far: gather and discuss feedback, check which tools, meetings and
behaviour should be kept, stopped or started.

In order to guarantee a good pace, it is advisable to program a number of mandatory

workshops with the client and the contractor throughout the whole construction process as a
continuation of the PSU. The meetings stimulate regular client-contractor interactions while
avoiding an overly rigid submittal-review approach common for typical tender and design
processes. They are meant to make a step forward in content (e.g. making a design or methods
choice based on a trade-off evaluation).

The lean construction approach – which is discussed in more detail in Chapter 5 – provides a
project team with several operational practises to improve its effectiveness, especially in an ECI
setting: a Big Room is a working environment that is tailored to support cross-functional team
collaboration and continuous information exchange. Such a space can be established ‘on
premise’ as well as online if the ECI team is operating in a remote or hybrid setting. It allows the
project team to bring the project design to life through Target Value Delivery and create a plan
to deliver the project with the Last Planner System. The purpose of the Big Room goes well
beyond that of being a meeting place. It is a place where teams are formed, expected

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behaviours are defined, and conditions of satisfaction are what drives collaborative decision
making. It is a place where commitments are made and trust is built through the delivery of
promises. The Big Room environment fosters behaviours that lead to high levels of collaboration,
where the goals of the project become paramount to the team involved. It is where the culture
of a successful project is nurtured and all involved grow into a cohesive, high performing team.

Important aspects to consider when establishing such workshops are proper preparation: ECI
activities should be presented during these sessions, attendance of key participants from all
parties involved, early defining in the ECI process of the topics to be discussed during these
workshops and the stimulation of immediate feedback.

Besides these workshops, it is also recommended for the contractor to maximise the presence of
the client in the meetings required to prepare the client-contractor workshops. Doing such
sessions in an online environment instead of ‘on premise’ is beneficial to remove barriers for
obtaining maximum involvement. As workshops and meetings, on premise and/or virtual,
between parties are essential and require the right presence, it is recommended to establish a
well-defined meeting matrix from the start and keep it updated throughout the ECI. Although
there will be often a need to involve the client in defining the agenda and the objectives of
workshops, it is highly advisable that the contractor’s team should keep the direction of these
workshops in own hands.

A timeline that doesn’t meet the client’s expectations should be discussed at the outset to
ensure that achievable goals can be met by the ECI process. If there is already awareness in the
ECI pre-qualification phase, the contractor should proactively tackle this issue in its ECI proposal
to demonstrate its capability to reach a successful ECI outcome.

It is advisable that the contractor’s team involves the client in the development of the ECI scope.
Availability of resources at both contractor and client’s side is essential to obtain the objectives,
but it is not advisable to have a multitude of consultancy firms at client’s side.

An ECI is invariably performed pre-award – often in preparation of a final formal procurement

and contract definition – but intended to involve contractors’ subject-matter experts that are
usually involved during post-award phases. It is, therefore, recommended to ensure that the
client’s ECI team have been sufficiently trained on the usage of typical tender tools such as RFIs
and tender bulletins. However, the client team should avoid that the ECI is managed too
formally, hampering a smooth knowledge exchange. Administrative and control activities are
recommended to be kept at a minimum: as it is the intention to have frequent and in-depth
involvement of both contractor and client teams, progress reporting is recommended to be kept
to a minimum, e.g. via registered progress meetings to discuss, monitor and record progress and
upcoming activities.

4.3.1 Conduct

When looking at conduct, one can distinguish several relationships in which the conduct and
viewpoint is important to define: i) the relationship between the client and contractor(s) teams,
ii) the relationship towards the supply chain of the contractor, iii) the relationship towards other
stakeholders. And in non-competitive, integrated ECI teams (e.g. alliances, Bouwteam) there is

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another relationship that can also be particularly challenging to manage: the relationship
between the integrated project ECI team and the parent companies’ organisations.

One can also distinguish two types of formal agreements when defining conduct: a code of
conduct, which is a rather standardised text, and a partnering charter, a more bespoke
document which is more appropriate for non-competitive ECIs with integrated teams. In both
cases, it is important that it is jointly developed or as a minimum jointly discussed and underwritten
and that it is broadly distributed within the team via proper onboarding.

Such a code of conduct or charter usually includes shared ethical principles and expected
workplace behaviours regarding trust, transparency and fairness. It is also recommended to
make it more tangible by including guiding principles on how to seek advice, report concerns
of suspected misconduct and consequences when acting outside the listed expectations. In the
case of a project charter, it also includes a shared vision between partners on subjects such as
equality and that is highly recommended to be based on mutual support and benefits.

To create a proper context for such collaborative behaviour, it is also important to prescribe a
leadership style that is not adversarial nor transactional and is solution-oriented.

One might argue that such prescriptions on principles and behaviour is not necessary when there
is a well-written ECI agreement, following the advice provided earlier in this chapter. It is true that
it is preferable that these principles and behaviours are supported by a contractual basis.
However, this is best practise and not always done in practise. And even if such clauses exist, by
jointly deriving and distributing a conduct code or charter that has an operational rather than
contractual viewpoint is highly beneficial for the understanding and adherence within the ECI
team. It is also to be noted that a charter or code should not be seen as the means but merely
as the basis on which to develop an appropriate project culture and behavioural style through
the selection of resources, leadership styles, development of onboardings, training sessions, etc.

4.3.2 Approvals, Consents & Decision Making

Leadership

Depending on the size of the project and the type of ECI, a different leadership structure and
composition should be selected and authority given, in such a way that it forms a solid basis
for the conduct that is expected from the ECI participants while guaranteeing effective and
efficient decision making. The level of involvement of the contractor in such a leadership body
depends on the ECI type – competitive or not – and the level of integration that is expected
from the ECI team.

A first duty that should be expected from the ECI leadership is decision making on technical
proposals that are presented. In that capacity, it is important that the leadership ensures that
sufficient capacity is made available to evaluate those proposals. It is also the responsibility of
the ECI leadership that awareness, buy-in and potentially participation is created for those
decisions from the appropriate management levels within the client’s and contractor’s
organisations through reporting.

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A second duty of the ECI leadership is related to the trust building and maintaining what is
essential for the ECI collaboration: having a proper checks and balances system in place
through joint issue resolution and governance that takes into account possible cultural
differences between contractor and client.

A third duty of the ECI leadership is the establishment and frequent evaluation of the overall
project objectives and the approach how these objectives are delivered.

There are several approaches to install an ECI leadership structure such as a project core group
(PCG) or a senior (alliance) board – comprising key project personnel from client and contractor
– and to improve it through the involvement of an independent process advisor or collaboration
manager.

An approach often taken in the Netherlands to facilitate collaboration and trust-building is the
involvement of a process advisor or a collaboration manager: a neutral party that understands
dynamics of alliances and parties in construction projects. A collaboration manager focuses to
bring sufficient attention to the relational aspects (i.e. purpose, roles, responsibilities, behaviour,
skills) and supports the ECI leadership to shape, monitor and support the cooperation. Tasks of a
collaboration manager can include: assisting in the development of onboarding tools,
performing on-the-job training and coaching, leading sessions that focuses on cooperation and
learning from experience, providing mediation if desired, observing and providing feedback.

It is advisable that the client checks the specifications of the project to see if such an
advisor/manager is required, by evaluating their experiences with the selected contractor(s)
and possibly prior ECI engagements and the outcome of the self-assessment checklist described
in §3.1. Whether such a process advisor or collaboration manager needs to be sourced inhouse

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or external depends on the skillsets and culture that exists within the leading organisations of the
client and contractor.

An example of ECI leadership structure xxviii

Approach

The process on approval, consent and decision making needs to be made upfront. At the ECI
start, it is important that the contractor proposes and keeps up to date a clear schedule of
deliverables that needs to be approved by the leadership. Also, decision moments and stage
gates should be decided upfront and preferably jointly.

As it is often necessary to make choices between alternatives in an ECI project and these
decisions are taken on assumptions and parameters often defined by the contractor, it is
advisable to work with trade-off matrices. This triggers the client to contemplate what are the
key selection criteria for such choices and their weights, while it will trigger the contractor to
assess these aspects in more detail. It is often detrimental for the ECI outcome if such selection
criteria are not defined by the client or are defined too vaguely.

A recommended tool to record and incorporate feedback from the client or ECI leadership
into the ECI deliverables is a decision/action tracker and could replace recurring progress
reports or meeting minutes if the contractual context doesn’t require those. As assumptions
need to be decided when information gaps and uncertainty occurs, it can also serve as a
source for gap analysis and the risk management process.

4.3.3 Knowledge & Information Sharing

Knowledge sharing is recognized as one of the key principles of ECI as the contractor
contributes its construction knowledge and experience to design in order to deliver best value
to a project. There is however a wide range of conditions that influence knowledge sharing
between organisations. These conditions are related to characteristics of each organisation,
the exchange relationship between the parties involved, and the type of knowledge shared.

When entering into an ECI arrangement it needs to be recognised that no contractor wants
its knowledge, experience or ways of solving challenges of a project to be shared with its
competitors. The fear of company secrets being exposed is an important factor to overcome
in a competitive ECI process. The client should have robust management and document
systems in place to enable it to safeguard the dispersion of the contractors’ confidential
information before inviting potential contractors into the ECI process. Especially in the context
of a competitive ECI, wherein the competing contractors work each separately with the client
to develop their own design, a detailed project plan, a programme and/or a commercial
proposal for the construction phase. A proper management system that has separation
between competing contractor teams and for the client not to cherry-pick ideas with the
potential to share proposals between competing contractors increases the contractors trust
level. Contractors need to have intellectual property protection and they want to feel safe
before they start to share their knowledge with the client.

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A strong communication and meeting protocol needs to be established and distributed to
create full awareness and adherence by all parties. As a base principle, direct communication
between the contractors’ consultants and client without contractor presence or consent
should be avoided. In case of a competitive ECI, it is important to make sure there is a level
playing field by ensuring the same level of awareness of all contractors through common
communication to all contractors, similar to what is common practise in public tenders (e.g.
tender bulletins).

In order to make effective use of the contractor’s experience, the client needs to share the
information that it has at its disposal or could obtain. Due to the early nature of the
involvement, there are often more knowledge gaps than in a tender process and therefore
more focus will be required on the follow-up of gaps and objectives. There is often a higher
level of responsibility expected from the contractor to identify such essential gaps, prioritise
them, keep track and resolve them. If essential information gaps are identified, the client
should be sufficiently reactive and transparent in its efforts to obtain such information. When
such information input – e.g. on-site conditions, requirements or interfacing issues with
stakeholders or other contractors – arrives late, the ECI team can decide to continue the ECI
activities by making working assumptions and highlighting the uncertainty related to such
assumptions in a risk register.

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 PRACTICAL TIPS & TRICKS/TOOLS

• A comparison between different ECI contract types is included in Appendix C.

• It is highly recommended to jointly agree on an ECI programme with deadlines,
decision moments, opt-out moments and an ECI deliverables list.
• The Client needs to draft an ECI Execution Plan and a Project Communication
Plan while the Contractor submits during the ECI tender or at the start of the ECI
an ECI Services Execution Plan.
• A tailor-made Code of Conduct or a project-specific Charter should be
considered as guideline for collaborative behaviour and rules.
• An ECI leadership structure can be implemented by means of a project core
group or a senior board or guided by the involvement of an independent process
advisor or collaboration manager.
• A decision/action tracker is a recommended tool to record and incorporate
feedback from Client or ECI leadership into the ECI deliverables.
• Project Start-Ups and Project Follow-Ups need to be done. The outcome of the
Project Start-Up forms the operational basis of the collaboration.

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CHAPTER 5: RECENT DEVELOPMENTS & ECI

KEY TAKEAWAYS

• Using BIM processes from the start of the process creates the opportunity to
assess the project virtually before it is built physically and will result in using the full
potential of the merging digital tools.
• System Engineering (SE) incentivises working in a more systematic way and to
actively manage, verify and validate information and proposed solutions.
• Lean management (LEAN) helps organising a project through the reduction of
waste of materials, time, and effort in order to generate the maximum possible
amount of value.
• BIM, SE and LEAN are trends that support the ECI process by enhancing
collaboration, automation and efficiency

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This chapter assesses the potential of three ways of working in the process of ECI: BIM,
lean construction and system engineering. BIM, lean construction (LEAN) and systems
engineering (SE) have gained traction in the construction industry since a few years now and
are relevant methods in early development phases of a project. This chapter develops how
BIM, lean and system engineering can help the ECI process.

5.1 BIM

BIM is a process of generating and managing building data during its life cycle and focuses
on information management. The use of BIM in an ECI stage has the following advantages:

• Parametric design: will help in the decision making and cost optimisation
• Better alignment of demand and offer
• Integrated planning activities: BIM 4D gives a visual animation of the planning and
sequencing
• Possibility to integrate the model in virtual reality, to give a digital customer experience
• Methods of construction can be integrated in the construction model
• Subcontractor models can be integrated, e.g. pipe racks, piping, etc.
• The use of clash detection gives both contractor and client confidence that the
buildability is realistic and that the issues are not discovered during the design/ECI
stage but are already handled at this very stage
• Quantity take-off is extracted from the BIM model to give a transparent estimate to the
customer,
• Safety in design: risk assessments can be associated to BIM objects, and can be
tackled and analysed to evacuate/reduce the risks at early stage.

Cost Effort Impact-Time: BIM vs. Traditional Procurement

Setting up a BIM execution plan is a crucial step for successful BIM implementation. It
incorporates all the involved contributors and decision makers, the software tools used, the
digital environment, etc. Using BIM processes from the start creates the opportunity to
assess the project virtually before it is built physically and will result in using the full potential of
the merging digital tools.

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BIM models should contain some critical elements to enable the contractor to start the
construction coordination, mainly in structure, architecture and MEP, for example blocks
elements, piles, crossheads, beams, pipe racks, pipes, cable trays and equipment.

5.2 Systems Engineering

The objective of system engineering is to improve the professionalism of all stakeholders in the
organization of (mainly) the design and engineering of large infrastructure projects. System
engineering has been consequently used in this kind of projects and has already proved the
added value of the approach in which all involved parties are incentivised to work in a more
systematic way and to actively manage, verify and validate information and proposed
solutions.

The first advantage of system engineering at ECI stage is that it obliges to define the
requirements and to study carefully how the scope of work is broken down in requirements.
Should this exercise not been done by the client, then it can be done in a joint effort. In all
cases it will be the technical basis of the ECI stage, and of the whole future contract and it is
therefore a very important prerequisite.

The second advantage applies when the requirements are defined and linked to the objects
and activities that form the project in general and, more specifically, the ones relevant for the
ECI scope. System engineering allows a systematic way of working, with clear processes, easy
follow up of the requirements, and smoother process communication. Especially, it provides a
structured approach to check and document that technical choices in the ECI are aligned
with the requirements made up front. And vice versa, to have clarity which requirements
require adjustment to facilitate technical solutions that are deemed necessary, coming out of
the ECI collaboration.

5.3 Lean Management

Lean management is a way to organise the construction project to minimise waste of

materials, time, and effort in order to generate the maximum possible amount of value.
It can lead to a considerable reduction of the costs and efforts if it is applied by all involved
stakeholders and within a spirit of co-creation.

 with the alignment and holistic pursuit of concurrent and continuous improvements in all
dimensions of the built and natural environment: design, construction, activation,
maintenance, salvaging, and recyclingxxix The best way to reach this goal is to integrate
LEAN process during the ECI stage through lean project delivery. As an example, the last
planner system (LPS) begins with collaborative programming engaging the main project
suppliers from the start. LPS is used to achieve better performance in design and construction
through increased schedule/programme predictability.

5.4 Conclusion

The consequence of adopting these approaches is that change management needs to be

put in place to maximise the added value, namely by:

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 • Defining the main project strategy and objectives, making sure that the strategy and
objectives address the real needs of the project and its team members
• Empowering the actors to operate within this strategy and objectives, i.e. top
management support
• Collaborating at all stages between all the stakeholders (within the organization and
between companies); first stage for the contractor is the ECI
• Measuring and demonstrating the benefits of the actions

Cultural adaptation and change management are linked to the ECI process. The table below
summarises the typical support given by each trend in the ECI process.

ECI can enable the contractor to: BIM SE LEAN

Contribute to the design process x

Build a better team-working ethic x x
Introduce innovations x x
Advise on buildability, sequencing and construction risk x
Advise on the packaging of the works x x x
Advise on the selection of specialist contractors x
Spend more time developing a construction strategy, x
recruiting staff and identifying partners
Help develop the cost plan and construction planning x x
Help develop the method of construction x x
Obtain prices for work-packages from subcontractors or x x
suppliers on an open book basis
Prepare a site layout for the construction stage x x
Draft the preliminaries for specialist and trade contractor x x x
bid documents
Assist with planning applications on matters concerning x
the build phase such as waste disposal, construction
traffic movements and tree protection

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CHAPTER 6: CASE STUDIES/EXPERIENCE TO DATE

• Beatrix Locks Netherlands Design Build Finance and Maintain (DBFM) with
competitive dialogue based on the European
Directive. (2014/24/EU). Incentivised service
levels.

• Room for the River Netherlands ECI with an integrated Plan Design Build (PDB)
contract and competitive dialogue

• A2 Passage Netherlands ECI with an integrated Plan Design Build (PDB)

contract and competitive dialogue

• Gemini Wind Park Netherlands Design Build Finance and Maintain (DBFM) with
competitive dialogue

• Port of Melbourne Australia Alliance Contract without competitive dialogue

• Odense Terminal Denmark Competitive Dialog with prequalification

Design & Build Contract

• Swansea Bay United EPCI

Kingdom
• Fremantle Australia ECI open-book approach while using an
Deepening Australian Standard AS4000 ‘construct only’ format

• Kangaroo Island Australia Alliance Contract

• Onagawa Fish Japan Technical proposal for design cooperation

Market Negotiated based construction contract

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6.1 Beatrix Locks

xxx @ Rijkswaterstaat

Case Evaluation

Background

The Princess Beatrix lock is located in the Lekkanaal in Nieuwegein (the Netherlands). The
Lekkanaal connects the Amsterdam-Rhine canal to the Lek and is a primary inland waterway
with high density traffic and an important connection in the North-South route between
Amsterdam/Ijmuiden and Antwerp/Rotterdam. The lock is the shortest route between
Amsterdam and Rotterdam and moreover the only lock on this route.

The main challenge of the project was to solve the existing capacity issue of the locks and to
develop efficient, reliable and safe waterborne traffic management on the Lekkanaal. In
parallel, sufficient mooring facilities had to be created to comply with the needs of the
network.

The client, Rijkswaterstaat, determined that the solution to the problems would be to build a
third Beatrix lock, next to the two existing ones (constructed in 1937), to widen the Lekkanaal,
and also to create sufficient and safer mooring facilities by reducing problematic ship
movements in the vicinity of the locks. As a part of this widening of the Lekkanaal, the primary
flood weir also needed to be replaced.

Both the existing locks and certain military artefacts on site dated from the 18 th century, and
therefore were part of national and world heritage. This resulted in the team being required to
develop several unique solutions to highly specific challenges resulting from this.

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Project Information

The project name is the construction of third Beatrix lock and widening of Lekkanaal. The
project is located in Utrecht, the Netherlands, with the client being Rijkswaterstaat, which is the
ministry of infrastructure and the environment of the Dutch government. The tender for this
project with a contract value of around 300 million euros took place in 2016. The entire project
was delivered over a three-year period between 2016 and 2019. It was officially opened by
HH Princess Beatrix (as can be seen in the picture below). The maintenance portion of this
project runs over the period from 2019 to 2039.

Procurement Strategy

The client opted for a Public Private Partnership (PPP) in combination with (the standardised)
Design Build Finance and Maintain (DBFM) as a procurement model using a competitive
dialogue. The selection of the contractor was based on the principle of Economic Most
Advantageous Offer (EMAO). The client defined a scoring criterion for both qualitative and
quantitative components of the bid. Part of the success of this tender procedure can be
attributed to the fact that the client made clear from the start that they would not select the
cheapest CAPEX at the expense of the best value based on the established risk.

Some other important features of the procurement strategy were clear selection criteria and
a good balance between added value and minimising cost; approximately 50 % of the
selection criteria were linked to maximising value. Two other important features of the
procurement strategy were the protection of intellectual property through mutual trust, and
fair compensation for those who made a compliant bid, yet did not win. For the latter, about
35 % to 50 % of the tender costs was paid by the client which totalled an amount of some €
1,400,000. This amount is high but ensured that the right amount of effort was put into the bid
by the contractor.

Clear communication was also critical. The client did not want to select partners who would
speculate on cost or on schedule. They further requested that this collaborative attitude would
be maintained during the execution of the project. A few weeks before bid submission a
technical session was organised to ensure that the offers contained realistic solutions from both
the client and stakeholder perspectives.

ECI Governance and Management

The tender process followed is divided into several key stages, each with its own important
acceptance criteria.

The pre-qualification stage was based on project relevant references and financial strength
of the bidders. All bidders achieving the minimal requirements were accepted for the next
phase.

In the selection stage, all selected bidders were invited to propose a risk management plan
for a limited number of risks identified by the client. Each bidder had the opportunity to discuss
their problem analysis and proposed mitigation measures over the course of three meetings

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with the client. At the end of this stage, three bidders were selected for the final negotiation
stage. The selection in this stage was done purely based on the quality of the risk management
plan.

In the negotiation stage the remaining bidders were asked to make a full bid, including a
quantitative part (cost, schedule) and qualitative part (risk management plan, sustainability
score). During this phase an additional three meetings as well as several detailed technical
meetings were organised so that bidders and client could have an open dialogue on ideas.

This tender approach was first used by Rijkswaterstaat in 2007 and has been improved upon
since.

The ECI governance and management process was conducted in a rigid framework
managed by the legal advisor of the ministry. It proved to be both rigorous and practical.

xxxi @ Rijkswaterstaat

Conclusions, Success Factors and/or Failure Factors

The result of this ECI approach is that all bidders were incentivised not only to think about
reducing cost by proposing ‘traditional’ value engineering but also to propose benefits which
might cost more in capital and/or operational expenditures, but at the same time create
much more stakeholder and societal value.

The winning bidder proposed a 297-m long lock and double sliding doors in each lock head,
whereas the minimum performance requirements could also be met with a 270-m long lock
and single sliding doors. Double versus single door offers redundancy and allows the contactor
to perform preventive and corrective maintenance on the doors while being fully operational.

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The return on this investment is superior capacity, availability and reliability of all three of these
primary functions, which offered added value for the project owner, users and other key
stakeholders.

The Beatrix lock project proved that it is possible to combine the advantages of a strict public
procurement process, based on the European Directive, with intensive early contractor
involvement.

The critical success factors of this procurement strategy were selection criteria based on ‘value
for money’ instead of lowest cost, impeccable protection of the intellectual property, fair
compensation for compliant yet unsuccessful bids, large reduction of speculation by the
bidders on cost and schedule, and finally, establishment of the rules for further collaboration
after contract award.

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6.2 Port of Melbourne

xxxii @ Terra et Aqua

Case Evaluation

Background

The Port of Melbourne Corporation (PoMC) is Australia’s largest container and general cargo
port handling with 37 % of Australia’s container trade. By 2035, the Port aims to expand its
capacity from 2 million to 8 million containers. For this expansion, parts of the access channels
to Melbourne in Port Phillip Bay had to be deepened in an environmentally sustainable way.
The project was realised for $ 717.3 million, which was approximately $ 250 million under the
approved business case budget. About half of the total savings was due to an unused
contingency provision, showing the effectiveness of the corporation’s risk mitigation and
project management processes.

Project Information

The project name is the Port of Melbourne channel deepening project, located in Port Phillip
Bay. The Alliance Contract for this project was signed in May 2004 and the project was
executed from 2008 to 2009.

Scope & Programme

The project consisted of dredging works to deepen the shipping channels to Port Phillip Bay,
the placement of dredged material in one of the two underwater storage sites, the upgrading
of berth pockets to accommodate docking by larger vessels, the instalment of new

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navigational aids and upgrading existing ones, the protection of underwater utility services
affected by the dredging activity and the movement of larger cargo ships and environmental
and bay-wide monitoring and management.

Initially the project suffered from a lack of stakeholder support. It was the Port of Melbourne’s
largest ever marine infrastructure development, and was highly complex and challenging in
technical, procurement and environmental aspects. It needed to be delivered within a strict
set of environmental rules and conditions, and failure to do so would directly impact on both
its schedule and budget. These elements resulted in the decision for an ECI-project and
alliance contract. An alliance form of contract was chosen because commitment to such an
arrangement gives the best possible prospect of delivering outstanding outcomes regarding
time, budget, safety and environmental performance.

A win-win outcome was expected, and all decisions by the partners took stakeholder interests
into account and were based on full disclosure. For that reason, the Alliance Contract was
instrumental in overcoming one of the major non-technical obstacles to the execution of the
dredging works – the negative reactions of some stakeholders in the vicinity of Port Phillip Bay.
On-going discussions and the emergence of a local group of bay-side residents who were
clearly opposed to the project, eventually led to court action, which temporarily stopped the
dredging operations. Working together, with a concerted communications effort to involve
the public, the contractor and PoMC were able to demonstrate the environmentally sound
dredging methodology. This educational campaign included public hearings, an information
programme and school presentations. It also included extensive monitoring before, during and
after the works as well as a multi-level corporate communications campaign. These open and
transparent communications efforts played a significant role in reassuring many stakeholders
that the channel deepening project could be conducted in a safe and environmentally
sustainable manner.

In cooperation with the contractor (Early Contractor Involvement) an integrated, transparent

stakeholder involvement process was adopted, leading to a proactive- and nature cognizant
approach resulting in increased stakeholder support and project transparency, in the end
leading to a great collaborative client-contractor relationship.

The comprehensive project objectives as specified by the PoMC were to provide channel
modifications to sections of the Great Shipping Channel at the entrance to the Bay, the South
Channel, the approach channels to the Port and the Yarra River Channel as well as to protect
the existing service pipelines across the Yarra River and Port Melbourne Channel taking into
account the deeper channels.

Procurement Strategy

Procurement Model & Procurement Process

Based on a quality assessment of especially environmental plans the PoMC signed an alliance
contract with Boskalis Australia Pty Ltd.

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Factors to Adopt ECI

For deepening of the entrance at Port Phillip Bay approximately 400,000 cubic metres of rock
had to be removed. Dredging in the entrance, however, was a difficult proposition as the
entrance is known for its rocky seafloor and turbulent seas. In addition, the location of the port
required the dredging work to be carried out within strict environmental parameters.
Techniques and equipment traditionally used for dredging hard seabed materials were
therefore likely to encounter difficulties. Strong currents and a long swell meant it would be
impossible to use a stationary cutter suction dredger at the busy entrance to the port. The work
method applied was aimed at efficiently removing the hard seabed materials while minimizing
the likelihood that any residual rock would be relocated into the 100-m deep canyon and
damage the precious sessile fauna like sponges and soft corals. Considering the difficulties of
the sea, the soil and environmental conditions, the project demanded a large investment in
Research & Development to find innovative solutions. Equipment had to be developed to do
the job. Knowledge of the impact of dredging equipment and activities on the environment
is a necessity to inform the stakeholders.

ECI Governance & Management

Contractual/Agreement Aspects

An Alliance Contract was signed in May 2004 between PoMC and Boskalis Australia Pty Ltd.
The Alliance Team reported to the Alliance Executive Team which reported to the Board of
PoMC. In a workshop, concepts for a gain-share regime were developed. This regime, which
can be described as a cost risk-reward model, was finalised by the Alliance Executive Team.

Cost risk-reward model/Gain-share regime

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The gain-share amount comprised of 2 components: the actual cost performance by
participants in comparison to the direct cost estimate in the first place, and secondly,
performance by the participants in the Pool Key Result Areas assessed by a balance Scorecard
approach. The regime is presented by the graph below (DCE = direct cost estimate).

A special reward pool was available. The amount granted depended on KPI’s like
Environment, stakeholder community consultation and specific milestones.

Innovation

Several stages of the dredging process were researched. Literature and former tests were
analysed to derive the forces required for cutting the rock.

From a technical perspective, the problem was twofold. A hard seabed normally indicates
dredging with a traditional cutter. In this case, however, the heavy seas that exist at the
entrance to Port Phillip Bay, along with the large volume of shipping traffic, meant that the
cutter’s stationary operating procedure would not work. A trailing suction hopper dredger
(TSHD), on the other hand, is more flexible and can work in severe weather conditions, but
does not deal well with dredging rock. Given the hardness of the rock found near the Bay’s
entrance, both a jumbo TSHD and an exceptional and powerful drag head were needed.
Boskalis developed an innovative solution: a new type of drag head called a ripper drag head,
which could be mounted on a TSHD, a feat that had never been attempted before. A model
was made to predict the cutting capabilities of the ripper drag head. Several types of pick
points and cutting geometries were investigated during cutting tests in a quarry using a test-
cart equipped with measuring and logging instruments. The ripper drag head was then
engineered and constructed after having determined the optimal teeth configuration with
respect to forces and dimensions of the cut rock.

As part of the Supplementary Environmental Effects Statement, a full-scale trial was launched
with the Queen of the Netherlands TSHD using the improved ripper head to dredge at the
entrance to the Bay. While the trial results showed that the ripper head was cutting through
the rock adequately, it was leaving too much material on the seabed. To prevent these loose
rocks being picked up by currents and deposited on flora and fauna living on a nearby deep
reef, this material was dredged afterwards.

In addition, vessel motion and vessel manoeuvring studies were undertaken to investigate the
operational limits of the TSHD. The vessel crew were also trained on a dredging vessel simulator
whereby the actual currents and predicted cutting forces were used as inputs.

Stakeholders

Public interest in safeguarding the bay environment emerged as a major issue for CDP’s
approval. The project was subject to extensive and rigorous assessment under the Environment
Effects Act 1978 between early 2002 and late 2007 to assure the state and Commonwealth
governments and the community that the corporation could effectively manage the project’s
environmental impact on Port Phillip Bay. In fact, there was only one major stakeholder to
inform and take care of their interest: the public in general.

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Relational Aspects & Trust

An alliance contract is based on mutual trust in which the roles, responsibilities and
accountabilities of the partners are clearly defined. The PoMC decided to have the whole
process facilitated by an external ECI-expert. This was considered as a vital element in the
process. From the very beginning, Boskalis was committed to bring sufficient equipment to the
site to have the works executed in time. It is important to have robust scientific research to
meet a rigorous project-approval regime and environmental compliance.

Feedback

The feedback below comes from a Terra et Aqua article, written by a representative of PoMC
and Boskalis. The alliance contract between PoMC and Boskalis Australia facilitated the
completion of the Supplementary Environmental Effects Statement as decisions about the
proposed work scope, cost estimates and total budget were developed and approved
together by the appointed alliance team. This helped expedite acquiring the necessary
environmental permits as well as addressing the environmental concerns of stakeholders.

Transparency is essential for successful implementation of ECI. Therefore, a Stakeholder

Advisory Committee was established with an independent Chair. The community was
informed in sessions with a real give-and-take dialogue. Stakeholders had a chance to
question the experts, including the dredging contractor. Regular presentations and briefings
were given and in addition, print and electronic newsletters were published to keep various
groups informed of the project’s developments. Programmes were organised for
schoolchildren so they could learn more about the Bay and its environs and about the need
for environmental protection. Television/radio/print advertising campaigns were organised to
demonstrate why the project is good for the community and the economy. The media was
regularly informed by press releases. A dedicated website was developed and a toll-free
telephone information line was available.

From Client-Side/From Contractor-Side

As there was a joint lessons learned database, feedback from client and contractor side are
combined.

ECI should only be used for complex/high value projects. Furthermore, a commercial workshop
in the selection stage is an essential part of the ‘bonding process’. The selection panel has to
represent all important stakeholders including the owner. Ensure openness and
communication skills are part of selecting right participant. Before the selection stage, a
probity advisor has to be appointed and a probity plan should be prepared.

Moreover, QHSE should have a high weight in the selection. A formal contract strategy
assessment process should be undertaken to select best form for the project. All-important
stakeholders should assess the contract strategy. The cost of the bid process (and value to
owner) has to be considered and if appropriate, a compensation to the unsuccessful

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participant should be provided. Senior management of participant organisations should be
formally engaged to ensure commitment to the project and resolution of issues.

Ensure the risk reward model that genuinely drives the search for innovation and rewards it and
ensure adequate time to identify innovation and design out risk before DCE finalisation. Use
an alliance arrangement if innovation is a key result area in your project as a client. Finally, all
levels of the organisation should be aligned to the project objectives. Utilise KPI’s to drive
behaviour.

Conclusions, Success Factors and/or Failure Factors

This case has been a successful project, a show case with regard to ECI and a successful case
example of stakeholder participation.

Success Factors

Success factors in this case were the selection of panel advisors, including an ECI-expert, the
early involvement of the contractor, the commitment of the parties involved, proper risk
identification, the engagement by the Boskalis senior management, having the focus on
solving the problem at stake rather than on all disputes involved and the focus of the KPI’s.

Potential Failure Factors

Failure factors in this case were the success of convincing external agencies, insufficient
availability of funding of bid costs and poor understanding of dredging by some stakeholders.

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6.3 Onagawa Fish Market

xxxiii @ Kajima Corporation

Case Evaluation

Background

Tohoku region, located in the northeast of Japan, was damaged by the huge earthquake off
the Pacific coast of Tohoku in March 2011. Especially the coastal area of the Pacific Ocean
was seriously destroyed by the tsunami that occurred after this earthquake.

Onagawa town of Miyagi prefecture was also damaged by this tsunami. Port facilities
including the fish market were destroyed. Fishing is one of the main industries
of Onagawa town, which is why early reconstruction of the fishing port infrastructure including
the fish market was necessary for its economic recovery.

Project Information

The project name is Onagawa Fish Market Development, with the location being
Onagawa town, Miyagi prefecture in Japan. The owner of this project is Onagawa town (the
local government) and the contractor is Kajima Corporation.

Scope & Programme

The scope of this project is the reconstruction of the whole sale fish market (Steel structure 4-
story building, total floor area 14,245 m2). The construction period dates from September 2015

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to April 2017. The project value is US$ 50 million (6 billion Japanese yen). The basic and detailed
designer of this project is the Japanese Institute of Fisheries Infrastructure and Communications.

Procurement Strategy

Procurement Model & Procurement Process

This project involved complicated recovery works. It faced the difficulties of the determination
of the work specifications and cost estimation. Moreover, urgent recovery was also
required. Therefore, Onagawa town decided to adopt the technology proposal & negotiated
based bidding scheme based on the Act on Promoting Quality Assurance in Public Works (Act
No. 18 of 2005). They evaluated and compared several bidding schemes such as the bidding
type that combines design with the execution of works (Design-Build) and the bidding type
that combines technical cooperation with the execution of works (ECI). They finally
selected ECI.

The procurement process is as follows. In February 2015, public notice for the proposal of the
construction works for the fish market took place under the budget limitation for the ECI
scheme by Onagawa town. March 2015 was the deadline of the application for the
participation (only Kajima Corporation participated however). This same month marked the
reception of the technical proposal, the selection of the entity to be granted the priority
negotiation right by the Evaluation Committee and the announcement of the above
selection result. April 2015 marked the engagement of the basic agreement
between Onagawa town as an owner and Kajima Corporation as an expected contractor for
the work. In September 2015, official engagement of the construction contract
between Onagawa town and Kajima Corporation took place. Finally, the execution of the
construction works took place from September 2015 to April 2017.

Regulatory Aspects

The national government has promoted to introduce various bidding and constructing system
for the purpose of adopting proper system for each project in public works in line with the Act
on Promoting Quality Assurance in Public Works (Act No. 18 in 2005 and amended in 2014). ECI
is one of the above systems. This project was proceeded under this law. However, the above
Act showed the only basic idea and the concrete process guidelines had not been
established yet by the Ministry. Consequently, they made their own bidding procedures,
referring to other cases.

Factors to Adopt ECI

Factors to adopt ECI in this case were early recovery work and shortening of the execution
period, the difficulty of cost estimation due to escalation of construction cost and lack of
construction materials and labour force, and cost control for the budget limitation. Other
important factors to adopt ECI include the difficulty to determine work specifications of the
foundation works due to the complicated soil conditions & lack of the detailed data of

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previous underground foundation such as piles and the necessity of optimum construction
schedule in consideration of temporary market activities and other neighbouring recovery
works.

Evaluation of Parties Involved & Appointment

Onagawa town formed the Evaluation Committee to select the entity to be granted the
priority negotiation right by the evaluation of the technical proposals and the dialogues. The
Committee was organised of two university professors, one expert for the fisheries and two vice
mayors of Onagawa town.

ECI Governance & Management

Relational Aspects & Trust

Good relationship and smooth communication among related bodies is the key to the success
of the project. Due to the establishment of the good relationship and communication through
the various opportunities of the dialogues among related bodies, this project was proceeded
smoothly.

Risk Management

Major points in the procurement system to avoid or reduce the risks are careful examination
on the participator evaluation process, management based on the detailed schedule in order
to keep the construction period, making the detailed documents to inform the various required
conditions, making evaluation documents for the selection of the contractor and members &
management of the Evaluation Committee.

Feedback

From Client-Side

The client/owner of this project is Onagawa town. The client was of the opinion that in this
case, ECI was very effective and useful to this project for shortening the construction period
and cost (budget) control. The most difficult and important step is negotiation between
designer and the technical co-operator (the expected contractor) on the proposals such as
cost reduction ideas. The owner believes that a good relationship and smooth communication
among related bodies is the key to the success of the project. The owner should play many
important rolls such as coordinator between designer and contractor and the decision maker
based on the advanced technical ability and experience.

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From Contractor-Side

The contractor of this project is Kajima Corporation. The contractor is of the opinion that the
main advantage of the ECI scheme is speedy execution and practical use of contractor’s
advanced technology and abundant work experience. ECI allows the contractor to join the
design stage and propose its idea for the construction methods, construction process and cost
reduction.

Factors that play a role in this according to the contractor, is uneven support of the ground
and risk of liquefaction, detailed ground condition survey by the contractor owned survey
vehicle and design of the individual optimal pile length based on that data, interference by
the underground obstacles, reducing the interference risks by obtaining the exact positions of
the obstacles through the test boring and the magnetic, vibration, and electric survey,
coordination between construction works and business activities and the proposal for the
rational stage construction.

At the early stage of the design, the cost reduction possibility was confirmed through the value
engineering and cost down proposals. Due to this allowance, the user’s request and grade up
could be accepted without the hard negotiation on the budget. It is difficult to prove the
validity of the cost at the negotiation on design changes and additional works without the
competition principles.

From Construction Manager (CM)

In order to make up for the lack of experience of negotiation basis bidding and advanced
engineering technology, Onagawa adopted a construction manager (CM). The CM played
an important role as an assistant to the owner for its accurate decision making through the fair
coordination between the designer and the contractor. The CM believes that ECI is effective
to shorten the construction period and the settlement of the technical issues, because
contractor’s technical ability and experience can be used from the early stage of the
project. Regarding to this project, designer with the specific knowledge was needed to
achieve the high level of the hygiene in the fish market.

Conclusions, Success Factors and/or Failure Factors

All related parties including the owner, the contractor and the construction manager
concluded that the project was executed successfully and efficiently by means of ECI
scheme.

At this moment, in public works, ECI scheme precedents were very few and the guidelines for
ECI scheme had not established yet. However, all related parties are positive to make this
project style ECI scheme. ECI scheme enabled the effective use of the advanced technology
of the contractor and maintaining of the construction period and cost.

The most important factor of successful ECI scheme is the good relationship and mutual
understanding among project members.

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It is important though that all ECI project participants also understand the possible risks of ECI
scheme. As a possible risk of ECI, lack of the competitive condition might lead to the difficulty
of the cost reduction.

xxxiv @ Kajima Corporation

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6.4 Odense Terminal

xxxv @ Odense Port

Case Evaluation

Background

The Port of Odense (Lindo Port of Odense) undertook to expand their terminal at Lindo. MHI
Vestas have their production facilities for wind turbines at Lindo, which is also the location of
one of the largest test facilities for offshore wind in Denmark. Bladt Industries has produced
jackets for three different projects here, with more than 100 foundations. To facilitate this
offshore marked together with other activities in the region, Port of Odense is expanding the
harbour with 1,000 m of new quay. This quay wall can accommodate quay loads for the
largest crawler cranes in the world. The quays and access road and areas are designed for
very heavy loads as well as to transfer equipment and other construction materials onto
floating transport barges or vessels.

Scope & Programme

The project name is harbour extension Lindo, Odense in Denmark: Offshore Supply Terminal
Nord (OST Nord). The project is a conventional harbour extension with 1,000 m new quay wall
including aprons and 40-hectare land reclamation with approximately 2 million cubic metres
of fill. Extension of harbour basin with approximately 1 million cubic metres of capital dredging.
The dredging depth is 11 metres. The aprons are designed and built with a surface load of 100

104
kN/m2 and a special design heavy load area for 335 kN/m2 to accommodate some of the
largest crawler cranes available.

The port expansion OST Nord has a budget of approximately € 54 million for new harbour basin,
1,000m quay wall with furniture, and aprons and pavement for 20 % of the reclaimed area.
Development of the hinterland areas will be funded at a later date once tenants confirm their
exact requirements. The first part of the expansion was handed over late summer 2019 and the
final project handover was in August 2020. The project was funded by the Port of Odense
which is a limited company owned 100 % by the Municipality of Odense and is obliged to
operate under the Legislation for Danish Ports.

Procurement Strategy

Procurement Model & Procurement Process

After approval of the Danish Environmental Protection Agency (EPA), the process with pre-
investigations, basis of design and preparation of the tender process began in 2015. The tender
process began in 2017 with a prequalification round to a tender for Design & Build. The Port
evaluated and chose 4 contractors/joint ventures in accordance with the tender evaluation
procedures. The Port of Odense chose to tender under the European Competitive Dialogue
because the client wished to establish minimum requirements for the project, but at the same
time, let the contractors compete both with price and quality. By the first tender, the four
contractors/joint ventures chosen, handed in a tender, but two bids were far above the client
budget, one arrived too late and the last had a technical reservation which the client could
not price. So, the tender process had to be undertaken again both with pre-qualification and
tender dialogue. This postponed the project start by nine months.

Regulatory Aspects

Because the construction sum exceeded the limit for EU tendering, and Port of Odense
operate on procurement by entities operating in the water, energy, transport and postal
services sectors, the tender process had to follow the directive 2014/25/EU.

Factors to Adopt ECI

Originally, the client decided to go out to tender on two construction contracts – one for
dredging and reclamation and one for civil construction. However, during the phase of pre-
investigations and basis of design, the client acknowledged the difficulties in the interface
between the two contracts. The client therefore realised then that it needed for the
contractors to participate with their knowledge, entrepreneurship and availability of
specialised equipment for the full project and therefore decided to tender the project in one
single contract under the ECI banner.

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Business Case (Economical Aspects for Parties Involved)

During the tender phase the competing contractors did not receive any financial payments
for the tendering work undertaken. This was a clear decision made by the board of Port of
Odense. This did not lead to a lower number of received tenders, but the Port did
acknowledge the substantial costs incurred by contractors during the tendering phase.

The client appointed a project manager and an assistant project manager, who conducted
project and contractual management but also executed technical site supervision with some
help from external experts. The contractor was requested to appoint four key persons – the
project manager, two construction managers (one for dredging and reclamation and one for
civil works) and one design manager. The aim was that the project manager should link the
two companies together and have one single point of access. The construction managers
had to gather all technical and contractual information including management of
subcontractors within their field of execution and they had to report to the project manager.
The Design manager had to gather all design information and make quality assurance in the
interfaces of civil works, dredging works and reclamation works.

ECI Governance & Management

Contractual/Agreement Aspects

The client advisor chose to develop the tender material from the Danish Design and Construct
(ABT). The FIDIC suite of contracts was considered by the client but declined due to lack of
experience and skills with the client organisation. The structure of the tender material is as
follows; general terms (regulation for the tender phase), particular terms (legal document for
the contract), specification of requirements (expectation of the client and minimum
requirements), project descriptions (client technical guideline to the different parts of the
project), bill of quantities, prices & payment and attachments (technical and permits
obtained).

Relational Aspects & Trust

During the tender phase, the client communicated with the bidders through question-answer
sheets, whereas only one information meeting and one negotiation meeting was held. This
was not enough to build up trust and exchange of knowledge between the contractors and
the client.

Risk Management

The contract had not been undertaken following a formal risk management process, but both
client and contractor made their own risk assessments. Both client and contractor evaluated
execution risk separately, as each had their own internal risk management body; the steering
committee at the client's organisation, and the board at the contractor's organisation.

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Feedback

From Client-Side

The client believes that ECI together with the competitive design & build project has
strengthened the project, but that the process that was undertaken could be improved
through several ways. Firstly, a more frequent exchange of information was needed. In
addition, the second round of tenders resulted in changes to both the in tender material and
the consortiums. This resulted in better exchange of information. Thirdly, the client believes that
ECI needs a strict legal and technical evaluation, so that all competitors have equal
information and to avoid potential disputes after the contractor has been chosen. The client
received two complaints after evaluation but was able to resolve these in a short time.

From Contractor-Side

The contractors were pleased with the selected tender procedure as their freedom to choose
technical and execution solutions were very large. However, one of the shortfalls was that both
the tender process and the ECI phase needed a lot of design and tender effort which was not
reimbursed.

Conclusions, Success Factors and/or Failure Factors

The client had delivered a large and complex design and build project with fairly low cost and
execution risk. Because the dredging and reclamation portion was 2/3 of the project cost
compared with the civil portion, more weight in the evaluation criteria was applied to this
contract, which proved beneficial.

With respect to the foreign contractors, the relatively unknown Danish legislation resulted in
unexpected costs, e.g. pilot fees. However, the impact of this legislation could have been
better studied and understood by these foreign entities prior to tendering.

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6.5 Space for the River

xxxvi @ Beeldbank Rijkswaterstaat, picture by Joop van Houdt

Case Evaluation

Background

The Netherlands is situated in a delta of several large European rivers and their tributaries. Since
the 1990’s there have problems with flooding events which has created challenges in
management of these increasingly higher volumes of water when these floods occurred.

Rijkswaterstaat, the client, is the executive organisation of the Dutch government which
manages national infrastructure and waterworks. Together with regional water boards,
municipalities and provinces, Rijkswaterstaat works in the programme ‘Room for the River’, that
consist of mitigation measures that give the rivers more space to flood in 34 localities along the
river system. In this way the government wanted to ensure the safety of the public and
infrastructure as well as providing an environment with opportunities for recreation, economic
benefit and ecological enhancement. The program entails a new vision on water
management: to give the river more space to flood.

Scope & Programme

The programme, divided into 34 projects, has a total budget of some € 2 billion. In addition to
the intensive cooperation between all the authorities involved, cooperation with contracting

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parties was independently sought, not only with a view to spatial integration and potential
exploitation possibilities, but also to look for functional, high-quality solutions and possibilities for
innovation within the budget. The tender process was specifically designed with the intention
to facilitate this.

xxxvii @ Rijkswaterstaat: "The 39 measures Space for the River".

The Lower Rhine project is one of the 34 projects in the Room for the River program. More
space for flooding as provided at four locations. Rijkswaterstaat brought together spatial
planning, design and realisation in the water sector in one contract. In addition to the safety
and spatial objectives, the project also includes ambitions regarding innovation. The work
consists of, among other things, excavating floodplains and improving nature and recreational
opportunities. The contractor is Boskalis, advised by Grontmij Engineers. The total scope for the
Lower Rhine portion of the works involved some € 12 million. The project started in 2009 and
was delivered in 2014.

Innovation

The best project solution – within the budget – has to be obtained in an iteratively process among
others based on risks, ambitions, technical possibilities, matching public-private interests and
mutual trust. Therefore, a certain flexibility in the scope is needed as well as awareness and trust
in the capabilities of the contracting parties. In these projects this translates into the early
involvement of contracting parties (ECI) in order to be able to use their creativity and innovative
capacity as much as possible. Because this makes workable solutions easier to realise, it better
estimates the environmental impact of the construction process including the construction itself
and it is possible to allow citizens and other stakeholders to participate in the process: as part of
the process or through participation. Another key aspect is the involvement of later contract

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management in design and realisation. Already from the start of the design, the contractor takes
the effects on maintenance in regard. Despite maintenance isn’t part of the tender, the
effectiveness of the project will remain at a certain level long after the building stage is
completed.

Procurement Strategy

Rijkswaterstaat started the tender process earlier than usual. Usually, the spatial procedures
are made public and completed before the final scope is determined as the tender is put on
the market. In addition to the design and construction, the Lower Rhine project also required
an upfront spatial planning to be completed, a so-called integrated Plan Design Construct
contract (PDC). Multiple contracting companies were invited to submit bids. Because the
spatial planning was included –some adjustment to the tender process was permitted. In
particular, the existence of public participation resulted in a different selection approach
compared with a regular DC contract, where it was more focused on capabilities, attitude
and trustworthiness instead of merely following a cost, schedule and technical aspects.
However, there was a publicly supported design basis which formed a starting point for the
tender.

The reason for tackling the project in this way were the possibilities that were opened up with
regard to spatial integration. By keeping the safety objective at a functional level, additional
(technical) scenarios were possible. Together with the spatial integration and the participation
of stakeholders, the early contract involvement process created time for the mitigation of risks.
Ideas and participation were directly tested for feasibility within the financial framework. In
addition, the project risk profile was discussed, formulated and finalised in cooperation with
the contractors and stakeholders in the early project phase. Another motive was the desire for
innovation. By putting contractors to work much earlier in the integrated process innovation
was more integrated into the project. This became possible directly due to the additional time
gained through the use of ECI.

ECI Governance & Management

Relational Aspects & Trust

A key aspect has been the acknowledgement that early contract involvement requires
mutual trust between client and contractor. Trust in the relationship, the process and in
professionalism. This is also reflected in the risk distribution that is based on that each party does
what it is good at. The client takes the risks for delays due to approvals, procedures or
participation and the contractor takes the technical risks. The Lower Rhine project was
delivered well within the required timeframe and from that perspective was considered a
success.

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Feedback

The feedback from both the client and contractor side consisted of the several key aspects.

Cooperation isn’t similar to risk sharing, in that cooperation is being aware of each other’s aims,
motives, risks and to structure risk management, organisation and the actions of the team in
that way.

Coaching is also required to coach the client and contractor in their roles within ECI. The client
should act more as a manager whose primary role is not to subscribe solutions but to set the
direction for the contractor. The contractor, whilst executing the project, advises and supports
the client in order to achieve the best solution, be it technically, financially and/or in time
planning.

Early contract involvement maximises the opportunities in design and realisation. By combining
several project stages in a tender to one contractor the interface risks between these different
stages are reduced. The ambitions and the specific characteristics of a project determine if
early contract involvement (here PDC contract) is the best tender approach.

Setting up the functional requirements appears to be the most efficient manner to determine
project goals because client and contractor are then clear on the intent of the project. There
should be a public supported framework available which guides all parties. The inherent
challenge is to get a fixed price early in the process and therefore, it is essential to act from
the point of attainment of mutual needs. The next step is to focus on the dominant drivers in
the project and on cost consciousness. For example, one can assign incentives for innovation,
which then need to be tested during the project. In the selection stage, collaboration
assessments are important to audit to be certain that project teams can effectively
collaborate.

Conclusions, Success Factors and/or Failure Factors

The overall conclusion is that early contract involvement has been successfully achieved on
the Lower Rhine project. The great advantages were that the public authorities involved
accepted a design basis. For the contractor this framework reduced risks and which resulted
in easier and more reliable pricing.

Success Factors

The main success factor is that because the risks were mapped out, the contractor was able
offer a fixed price early on. This made the design and construction progress more smoothly
and assisted din achieving the overarching objectives of providing the project areas with
environment with opportunities for recreation, economic benefit and ecological
enhancement.

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6.6 Gemini Wind Park

xxxviii @ Terra et Aqua : Construction Gemini Wind Park

Case Evaluation

Background

During the climate summit in Paris in December 2015, the Netherlands agreed to a reduction
in greenhouse gas emissions of 80 to 95 percent by 2050. The Gemini Wind Park will contribute
to the realisation of this target.

Project Information

The location of the project is 85 kilometres north off the coast of Groningen, in the Netherlands.
The project consists of 150 wind turbines. The Gemini Wind Park generates renewable electricity
for 785,000 households (data from 2017). The financial close was in 2014. The construction started
in May 2014 and was finalised in October 2016. The total construction costs were € 2.8 billion.
Gemini Wind Park is owned by four companies: Northland Power (listed Canadian power
producer, 60 %), Siemens (listed German technology firm, 20 %), HVC (sustainable waste- and
energy company, 10 %), and ALTE LEIPZIGER/HALLESCHE (two German insurance companies, 10
%). The combination ALTE LEIPZIGER/HALLESCHE acquired the shares in 2018 from ‘founding
father’ Van Oord – the Dutch international dredging and offshore contractor. Van Oord was

112
involved in the Gemini project in two ways: as a project shareholder and also as an EPC
contractor (engineering, procurement and construction) during the construction of the offshore
wind park. The EPC contract, with a total value of approximately € 1.3 billion, involves supplying
and installing the foundations, the entire electrical infrastructure, including the off- and on-shore
high-voltage stations, the cables and installing the Siemens wind turbines. The jackets and the
two Offshore High Voltage Stations form the heart of the Gemini operation in the North Sea. The
Land High Voltage Station (LHVS) was built in the Eemshaven seaport in the northern part of the
Netherlands.

Procurement Strategy

Procurement Model & Procurement Process

A standard procurement model of first the design and then the tender for a construct phase was
not considered appropriate by the client. Bard, the client and winner of a concession for a wind
park, invited various parties, including Van Oord, which it had worked with on earlier projects, to
team up for the project.

Factors to Adopt ECI

The choice to adopt ECI was based on the lack of input required in order to facilitate funding
and the costs to construct the complete project. The knowledge and experience of the
contractor was necessary in an early stage to consider all construction options and to get a
clear picture of all the risks and how they could be mitigated. This knowledge was essential as
several options had to be assessed to realise a feasible business case. The project had to face
a number of environmental challenges (Natura2000 and sound) in design and construction.
Wind energy deployment in the North Sea was in its early stages and innovations in the offshore
wind sector were progressing rapidly.

Business Case (Economical Aspects for Parties Involved)

The business case of the client was initially not known by Van Oord but the client being able
to achieve the project planning was a key requirement for its business case. The contractor
would receive a bonus in event of an earlier delivery. The client was motivated to apply
innovations in order to reduce the project costs. The offshore wind industry was at an early
stage of development at the time of project inception and therefore offered plenty of
possibilities for new suppliers to enter the market.

Van Oord and the client agreed on a lump sum of € 1.3 billion. A calculation of the overall project
value based on the true value method (KPMG) Showed that during the construction and
installation of the Gemini Wind Park an overall true value of € 907.7 million would be created.
Positive economic value-add is created through the significant amount spent by Van Oord on
suppliers. The estimated economic value-added would-be € 929.1 million, of which EUR 366.8m
is created inside the Netherlands, and € 562.3 million outside the Netherlands. Major positive

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impacts from the operation of the wind park come from the avoidance of carbon emissions (€
454.4 million) and avoiding fossil fuel depletion (€ 227.8 million). The most significant cost to
society is derived from the subsidies from the Dutch government. A value of € 712.7 million was
attributed to Van Oord based on anticipated electricity market prices for the coming 20 years.

The overall value of Geminixxxix

The graph above gives an overview of short- and long-term costs and benefits of the project.
It is often difficult to identify and value all long-term societal and environmental effects of a
project. The contractor is aware of the impact of different working methods on the project. To
have a complete valuation of the project with regard to the three pillars of sustainability the
involvement of a contractor in an early stage of such a complex project was considered a
necessity. With this in mind, the application of ECI is the best way forward.

ECI Governance & Management

Contractual/Agreement Aspects

Bard, Van Oord and Typhoon entered into a framework agreement which governed how all
parties were to cooperate with each other. They agreed on a complete ‘open book’
arrangement with complete transparency on costs during the development and design
phase. In these stages there was a full focus on cost and risk reduction. From the moment of
financial close, a more traditional client-contractor relationship was then established. The final
design focused on optimisation of construction and maintenance. The client had the
obligation to work with Van Oord as contractor. Most importantly, the turbine and EPC
contracts for the Project were negotiated and signed off ahead of taking the project to the
banking market – this in contrast to previous offshore wind financing in markets such as the UK
and Germany. The business deals with turbine supplier Siemens and EPC contractor Van Oord

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were ones with which banks were comfortable. In terms of risk, this was very de-risking of multi-
contracts. Risks (e.g., in regard to planning and supply chain) were jointly defined before the
financial closure. With a risk reserve being established.

Relational Aspects & Trust

The key parties already knew and had worked with each other on earlier projects. The starting
point was then to instigate trust among the other new parties. This was supported by the 100 %
open book situation in the development and design stage. It resulted in an approach in which
the interest of every stakeholder was always considered in order to optimise the final result.
Parties were mindful that each party should be able to achieve a reasonable margin of profit.
After financial close, the parties had to shift to the more traditional client-contractor
relationship situation. Consideration should be given to changes in formal positions and
relationships. Due to the project culture of trust and transparency and these early interventions
hardly any conflict or dispute resolution escalations were necessary. Employees of both the
client and contractor were enthusiastic in going about their work and wanted to realize a high-
quality sustainable project. The project had a clear consultation and meeting structure, and
responsibilities were clearly defined which contributed to a pleasant work environment.

Risk Management

From the very beginning there was a focus on de-risking and risk reduction. It not only
contributed to a reduced cost price but also to a safer working environment. Risk
management was deeply embedded in the genes of all the project’s employees.

Conclusions, Success Factors and/or Failure Factors

ECI and the application of the open book approach resulted in constructive cooperation
between all parties who were involved. This resulted in optimisation of design, installation and
operation which resulted in significant risk and cost reductions. Parties worked together
towards a common goal which was based on mutual trust and resulted in a successful project
delivery. Having a consistent core team during the development and execution stages
contributed to the mindset of trust and inter-reliance. Creating a culture of trust, openness and
transparency was key for the project and resulted in substantial reduction of risk.

It is important that sufficient thought is given to the management of project culture as new
employees will enter the project continuously. This will result in optimisation of the knowledge
transfer between design-, construction- and operation stages. This was easier on this Project
due to the involvement of a single EPC contractor. Issues arising in the project should be
discussed and resolved at the appropriate level and if not then escalated to a senior
management level. Canadian IPP Northland Power's role as the main equity provider to the
transaction was also important to its success with lenders emphasising the management and
balance sheet capacity that the group was able to bring to the table. Offshore wind projects
which have been largely driven by financial investors have been some of the more
challenging prospects to finance.

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6.7 Swansea Bay Tidal Lagoon

xl @ Dixon and Watt (August 2017): “Swansea Tidal Lagoon Power Plant – A World First – Civil Engineering”.

Case Evaluation

Background

Tidal Lagoon Power (TLP) had engaged Atkins as client’s engineer to develop a conceptual
design for a tidal lagoon power station to be constructed in Swansea Bay, Wales. Under
condition of guaranteeing a limited and manageable environmental impact, the design
needed also to be creative to be cost-effective and to allow TLP to participate in the CfD
(Contract for Differences) renewable energy auction.4

The idea behind the Swansea Bay Tidal Lagoon project was to capture the abundantly
available potential energy of the hyper-tidal range in the Severn Estuary, with tidal ranges up
to 10.50 m.

A tidal lagoon is a closed off basin constructed with sea walls, equipped with turbines, which
capture the potential energy of the tides. Water fills up and empties the man-made lagoon as
the tides rise and fall. As the envisaged turbines were bi-directional, they would generate
electricity 4 times a day, i.e. on both the incoming and outgoing tides. Major advantage of

4 For renewable energy projects, the UK government has a strike price system in place which guarantees a minimum
return on investment for the investors. This was especially important for the viability of this project, it being a ‘first
off’ pilot project. For the sake of completeness, we need to mention that in the end, the UK government refused
to give financial backing for the relatively high CfD cost that was required, claiming the project was uncertain to
deliver on its promises and FID (Final Investment Decision) was never reached.

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the tidal energy versus wind or solar is the predictability of the tide, and as such also the
availability of the renewable energy. xli

Project Information

The project is comprised of a 9.5 km long sea wall impounding 11.5 km² of lagoon basis. 16
bidirectional, low-head, 20 MW bulb turbines would be housed in a concrete turbine structure
which forms part of the sea wall. To increase local support for the project, some recreational
facilities were envisaged to be constructed, as well as a number of environmental
enhancements that include sand dune grasslands and salt marsh habitats. With an installed
capacity of 320 MW, and a gross annual energy output of 530 GWh, the structure would
generate electricity, over its 120 years lifetime, to cover more than 10 % of the present-day
total Welsh domestic consumption.

The Swansea tidal lagoon tender was initiated in late 2013 and the project was awarded a
Development Consent Order by the UK Government in 2015. Intended start of construction
was envisaged in 2018. Overall construction was planned to take four years, with an expected
project cost of £ 1.5 billion.

Procurement Strategy

During preparation and development of the project, even before starting up the tendering
process, the client already realised they would be facing a project comprising three main work
packages of very different scopes; requiring a completely different expertise and, on top of
that with unavoidable and extremely high and critical interfacing intensity both on technical
and time schedule levels.

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Firstly, the marine works comprising the sea wall construction (conventional breakwater) and
a temporary dewatered cofferdam to facilitate the construction of the turbine and sluice
structures. Including also the creation and maintenance of an access bund, for both the civil
and the turbine contractor to the 2 km offshore construction pit.

Secondly, the civil works that consisted of the offshore turbine and sluice structure construction
(300,000 m3 of concrete). Main interface with marine scope on accessibility of offshore
construction pit and schedule responsibility. Main interface with turbine supplier in embedded
elements in the concrete structure, time schedule interfaces and technical guarantees (e.g.,
roughness concrete – abrasion resistance for concrete structure – accessibility guarantee pit
during construction – temporary supports for turbines, etc.).

Thirdly, the turbines: production and installation of the generators and sluice gates.

xlii @ Roberts, van der Plas, Fijen, Dixon, Hughes and Macdonald:
“Planning and Design of Swansea Bay Tidal Lagoon”.

In view of the fact this was a pilot project, it is worth mentioning TLP and its engineer already
consulted the market and discussed the project with some expert contractors upfront and
during development of their own reference concept, hence for example the introduction of
the geotube system to construct the sea wall and the choice for the low-head bulb turbine.

The tender procedure started with, considering the required expertise and size of the project,
a classical and standard prequalification round with technical, financial and commercial (e.g.
local content strategy) criteria. After selection of a limited list of tenderers, the tender
procedure was launched as a normal EPC-tender. After tender submission, followed by some
intense clarification rounds, preferred bidders for all three packages were selected.

Further development of the project would continue henceforth in two further stages. The first
stage comprised the award of the interface clarification contract. This consisted of a six-month
period in which all three preferred bidders were to be sitting physically together in one location
to fully identify and detail all interfaces and their consequences on methodology, time
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schedule, selection of resources and, not in the least, cost. This exercise was guided by the risk
matrix which was developed by each bidder separately during the EPC tender phase. A more
detailed soil investigation program was also to be set up and consequences of a possibly
changed soil profile were to be processed and agreed with client during this interface stage.
Costs incurred by the bidders for these six months of intense interface identification and
clarification would be reimbursed by a LS offered during the EPC tender submission. The
second stage entailed the detailed design and execution of the project.

ECI Governance & Management

It is clear this is a very tedious process, hence very expensive and with a high requirement on
resources. On the other hand, it is the ‘ideal’ system for a client to avoid any major issues
afterwards and it gives confidence at FID.

Through this ECI procedure, the risks would be better defined and assigned, resulting in more
cost certainty as his tender ECI allows for all design and construction interface issues to be
treated before financial close, thus reducing the risks immensely.

Relational Aspects & Trust

It is a real challenge to keep all parties involved fully interested and motivated during the
whole process especially as costs rise and time passes by.

Keeping the same team is the key to success. In working out complex processes and discussing
detailed interface issues and specialist problems, with consequences sometimes being
covered by one of the other partners, the personal aspects of cooperation and trust are very
important to come to a balanced agreement.

Feedback

This tidal lagoon was a pilot project, so no experience was yet available although most
envisaged techniques had been utilised before, but the scale of the works, the combination of
the different specialties and the possible impact of the consequences was enormous. This tender
process allowed however to bring all partners together before start of the works and provided a
platform where some fundamental choices could still be made or reversed. Something which is
not possible once the main contract is signed, FID fixates the price and everybody is mainly
focused on getting their own scope on the tracks.

The temptation for a client to qualify a large number of tenderers is sometimes high, in order to
get ‘the best offer’ (which still means in most cases: a low price, no matter what lip service some
client’s give to HSE, QA, methodology, etc.). But once contractors realize that’s the case, their
appetite to make a real investment of time and dedicate their best resources to project might
diminish, and client’s might be shooting themselves in the foot here without realising it.

In a tender process as the one presented in Swansea Bay; it is important for tenderers to give an
honest budget for the interface period. Temptation is high to underestimate this – willingly or
unwillingly – but that will only complicate the discussions afterwards. Client’s engineers tend to

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work often ‘by the hour’ whereas contractors are usually assumed capable to provide a simple
LS even for scopes that are almost impossible to fully grasp at tender submission stage.

Conclusions, Success Factors and/or Failure Factors

After receipt and evaluation of the EPC proposals and having had all the clarification meetings,
client received – from a contractor not having participated in the whole process – an offer giving
a substantial discount on the lowest bid. Tempted by this proposal, even more so because
apparently none of the received bids made the business model work, client selected that
contractor and started up discussions with him.

The process was stopped because the UK government refused to give financial backing for the
relatively high CfD cost that was required, but had this not been the case, client could potentially
have been facing serious issues if it would have deviated from the rules that were initially set out.

The contract of ECI (first six months) was presented to tenderers as a lump sum. With the
experience from this project, it would be advisable if all proposals would be made based on a
pre-defined small BoQ with envisaged resources and anticipated time-budget to prevent
speculative or commercial submissions.

The interfacing between the construction of the seawalls and concrete structures was critical.
One contractor having qualified for both the marine offshore construction and the civil works
scope for the turbine houses was offering client a major advantage through absorbing the
interfaces between those 2 scopes by itself. There was on the other hand a concern that one
partner would dominate the project in this way.

This system is only applicable for complicated projects with multiple partners facing important
interfaces with possible major consequences on cost, methodology and time schedule. In that
case, the above is a very nice system that will undoubtedly lead to the finest designs and
interface management plans. It is important to note that, in order to pursue this tender
technique, tenderer’s costs, at least partially, shall be recoverable and a tender fee is required
to guarantee some interest and motivation from contractors.

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6.8 A2 Highway Passage Maastricht

xliii @ Zuiderlicht, https://a2maastricht.nl/Tijdlijn/2003-2006

Case Evaluation

Background

The European highway the E25, is a north–south European route from from Amsterdam in the
Netherlands to Palermo in Italy. The Dutch number of this highway is the A2. The highway runs
directly through the city of Maastricht in the south of the Netherlands and cuts the city into two
halves. The highway impedes traffic flow, reduces local accessibility (as can be seen in the
picture above), and detracts from the liveability in the city. It was for these reasons the local
authorities and Rijkswaterstaat came together to find a solution to overcome these issues. The
objective of the A2 Maastricht project was to improve the traffic flow on the A2 highway and
also to increase the accessibility and liveability of Maastricht and the surrounding areas.
Protected nature areas surround the city which made a detour of the highway around the city
impossible so a tunnel was chosen along the existing highway trajectory (see picture above).

Project Information

The client responsible for the highway is Rijkswaterstaat, the executive organisation of the
Dutch government which manages national infrastructure and waterworks. However, the
project is broader than just the infrastructure. The local authorities are responsible for spatial
and urban development. Rijkswaterstaat had to work closely together with the provincial

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authorities and the local municipalities. Both the infrastructure, special and urban parts of the
project are interrelated which brings with it administrative complexity between several
responsible public authorities. The estimated cost of project is some € 1.2 billion of which € 850
million is funded by the public partners and € 350 million derives from revenues of private
investment in area development including real estate.

xliv @ Avenue2 (consortium), source: https://www.cob.nl/over-ondergronds-

bouwen/voorbeeldprojecten/ maastricht-a2-maastricht/

Procurement Strategy

The infrastructure requirements, together with spatial, urban development tasks as well as the
public responsibilities were so interrelated that an integrated project approach seemed to be
the most obvious approach for the client to manage the project. From this perspective a
parallel tender with both the infrastructure and spatial-urban development was chosen. The
integrated approach aimed on utilising input from urban development to the infrastructure
and vice versa. The tender process had to ensure that the total project costs remained
manageable whilst also allowing the contractor to optimise the project. An agreement
between all the various public authorities stating these aims was signed in order to express their
joint ambitions.

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Procurement Model & Procurement Process

In December 2006, the tender of the spatial planning was issued and both design and the
construction started. The integrated PDB contract used a competitive dialogue tender
procedure. The competitive dialogue comprised multiple rounds with tenderers regarding
themes such as infrastructure, traffic, urban development, environment which resulted a final
concept. The contract was awarded to the contractor combined in a consortium called
‘Avenue2’6 on 25 June 2009. The infrastructure, the highway and tunnel, was finally delivered
in 2016.

Factors to Adopt ECI

The A2 Maastricht Project was technically quite complex. The construction area was very
narrow and restricted given that the highway runs straight to the city. To mitigate risks and to
manage the budget from an early start ECI was used to get feasible technical solutions: with
the contractor being given sufficient time to develop technical solutions. The rationality
between the highway and the urban development was evident from the start: technical
requirements affect each other because the tunnel would impact housing and real estate at
either side of the route. The construction of both the infrastructure and urban development
were also reflected in the planning and budget. ECI offered the opportunity to align both aims
so the construction phase could be implemented easily. Another reason to adopt ECI for the
A2 Project was that it was possible to gain time by combining the environmental, spatial and
tender procedures. Usually, these mandatory procedures are followed consecutively. Because
the A2 project would have an enormous effect on the livability and accessibility of the city of
Maastricht, time was an issue. By combining the procedures, a significant amount of time was
saved. The project being also administratively complex, affecting the whole city of Maastricht
and surrounding areas it was determined that ECI offered the opportunity to facilitate
moments where stakeholders could deliver input.

Feedback

Both client and contractor acknowledged that the key success factor of the A2 Project was
the willingness shown from all parties to really empathize with each other’s role and
responsibilities. They maintained a close interaction and supportive role all throughout the
Project. A signed public agreement and ambition document was used as key project
agreement which was very beneficial as only a few modifications to the Project were needed.
The document also stimulated the public’s understanding of the Project. The client and
contractor worked closely together. The project staff were located in the same Project office,
there was a joint communication7, which helped collaboration and saved time. All these
factors resulted in the design and construction phases being more inclusive and more
innovative. In a true integrated approach, there is one central control point for both client and
contractor. The project was comprehensive and integrated different domains: infrastructure,
urban development and environment.

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Conclusion

The A2 Maastricht project involved two different tasks –urban development and infrastructure
– which whilst being strongly interconnected have different risk profiles. The most efficient
approach to dealing with them both is to integrate them early in order to facilitate the ability
to complete the project on time whilst also optimising the involvement of the various
stakeholders. ECI with an integrated PDB contract and competitive dialogue was used with
success. A sound and close collaboration between client and contractor was facilitated
which ultimately delivered the A2 Project on time and within budget.

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6.9 Fremantle Deepeningxlv

xlvi @ Boskalis: Port of Freemantle

Case Evaluation

Background

Fremantle Ports is the Western Australian Government trading enterprise responsible for
strategic management of the Port of Fremantle. The Port of Fremantle provides modern deep-
water facilities for handling container trade, break-bulk vessels, livestock exports and motor
vehicle imports as well as accommodating cruise ships. Of Australia’s five major ports,
Fremantle is the closest to Europe and is very often the first or last port of call for global shipping
lines operating between Australia and overseas destinations. The trend towards bigger
container ships has impacted ports worldwide, including Fremantle. Deepening the Inner
Harbour was essential to enable the port to continue to accommodate these ships at full
cargo-carrying capacity.

Fremantle Ports deepened the Deep Water Channel, Entrance Channel and Inner Harbour at
the Fremantle Port to allow 14 m draft ships to utilise the Inner Harbour. The project included
reclaiming an area of seabed at Rous Head and disposal of some dredged material in a
proposed spoil ground near the Entrance Channel.

The works area borders on beaches and the Swan River, a heritage icon site, and an area
considered the playground of Western Australians as well as a distinctive marine life habitat for
whales, dolphins and sea lions. Thus, the works had to be carried out within strict environmental
parameters.

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Under Australian regulations, section 18 of the Aboriginal Heritage Act 1972, the project
execution had to obtain consent by Aboriginal Elders community, so transparent stakeholder
communication protocols had to be implemented.

The project involved a number of technically complex aspects and construction interactions
and as a result presented many unknown risks and costs to the Port. The procurement strategy
evolved as a result of these many unknowns. The available traditional contracting formats did
not, in the opinion of the Port’s Project Team, provide the necessary controls over the scope,
quality and cost outcomes. This led to the decision to embark on an Early Contractor
Involvement approach which resulted in an excellent project outcome from several
perspectives.

The $264M dredging project proceeded in a cost-effective, environmentally responsible and

sustainable fashion and was completed in November 2010 after 11 months.

Project Information

The project name is Fremantle port inner harbour & channel deepening, reclamation at Rous
head and offshore placement of dredged material. The client/owner in this case is Port of
Fremantle (Western Australia), with the contractor being Boskalis.

The Project comprised the following project works. Firstly, the dredging of Fremantle Inner
Harbour to a depth of RL-14.7 m LWMF including berthing pocket along Berths 4-9. The soft
overburden dredged during this phase was placed into reclamation in the designated bunded
area at Rous Head. Secondly, the dredging of the entrance channel into the Inner Harbour to a
depth of RL-15.6 m LWMF with disposal partly into the Rous Head reclamation area or the spoil
dump area in Gage Roads. Lastly, the dredging of sections of the outer Deepwater channel to
a depth of RL-16.5 m LWMF on straight sections and RL-18.0 m on the bend.

The project also involved strengthening of the north Quay container berths to cater for the
heavier loads the bigger ships impose on wharf infrastructure. This was executed by a civil
contractor. Dredged material from the deepening was reused to create additional land at Rous
Head for port-related purposes. This material was pumped behind a new seawall which was
lined with geotextile material. Dredging started early January 2010 and ended in November
2010. In total over 2,000,000 m3 of material was dredged from the Inner Harbour. Approximately
1,332,000 m3 (net) of sand was used in the reclamation site at Rous Head and approximately
715,000 m3 (net) required pre-treatment (crushing) with a Cutter Suction Dredger (CSD) prior to
removal using a Trailing Suction Hopper Dredger (TSHD). This material was placed into the
offshore spoil ground.

Procurement Strategy

The upgrading of a port close to a metropolitan area has a number of unique elements for which
costs and risks need to be considered. An ECI (open book) approach was chosen by the Port to
be the preferred way forward to have proper insight into these costs and risks however using an
Australian Standard AS4000 ‘construct only’ format.

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The two selected contracting parties (Dredging Boskalis and Civil Works Thiess Georgiou JV) who
were engaged initially under an ECI Contract were paid at daily rates for the full period for the
people involved in the process. ECI teams were co-located to a dedicated project office. The
teams had a core that remained for the duration but the team expanded and shrank
depending on the work phase. The bidders who responded to the initial expressions of interest
and request for proposals did so under standard arrangements and funded this effort
themselves. The ECI methodology however made the bidding considerably less expensive than
the normal tendering process.

An ECI contract was signed during the final design and permit stage. During the contract
negotiations, interfaces and risks were discussed and where required divided between port and
contractor based on who could best manage the risk therefore reducing overall costs of risk
contingencies. Intellectual property was covered through contractual clauses, design authority
remained with the port authority.

The client specifically chose for an ECI process as it best fits its requirements to reduce the
required effort in the project preparation and execution phase by ensuring efficient overall
cooperation, design and execution planning and communication to the stakeholders. An open
and transparent communication lines allowed for a basis for creation of trust and clear internal
and external communication.

A challenge for Project teams progressing the procurement concept of ECI in major works is to
ensure that company Boards are fully conversant with the concepts from an early stage in the
planning and that the team engage credible, high quality independent cost benchmarking
support. Most large projects will be managed within a business environment which demand very
high standards of probity and process governance. The requirement for demonstration of ‘value
for money’ will lead businesses and their Boards potentially to assume that the real value for
money test is to engage in open competitive fixed price tendering. The business case for ECI
needs to consider the challenges of this aspect and to ensure that it clarifies to the business the
benefits in managing project scope, quality, risks and costs in projects of uncertainty and
complexity in a different way. The business case must clarify that there is a clear plan for
demonstrating value for money within the ECI process.

The Fremantle Ports Project engaged a very experienced dredging consultant and also several
quantity surveying companies to check and validate the assumptions, methodologies and costs
that evolved during the ECI phase. The outcome from this validation work became an important
contribution to the process of final approvals from the Board and Government.

At the conclusion of the ECI phase the agreements were converted to an Australian Standard
form of lump sum fixed Price contract. The project operated a joint leadership team whose
membership included senior port and contractor’s personnel. This team reviewed project issues,
morale, etc.

ECI Governance & Management

During the ECI stage, the final design was optimized and the work method determined. Starting
in early 2009, six months were spent preparing for the operation with three teams – from the port,

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the dredging contractor and the port's civil contractor. The teams worked together in one office,
reviewing the interfaces, jointly examining the risks, developing solutions and building
relationships. Each team was able to add value by bringing its knowledge and expertise to the
design process in an early stage.

During the ECI period the parties jointly developed a project charter, outlining shared corporate
values/behaviour of trust, respect and honesty. The document was broadly distributed within the
teams, and its content included in the preamble to the contract between the contractor and
the port. In this way the contractor was able to contribute towards achievable and measurable
values and put them into practice during the project.

Stakeholders

The client consulted with the community during its planning for the Inner Harbour deepening
project so community and other stakeholder views could be taken into account. This
consultation included workshops, briefings and meetings with various groups, organisations
and individuals. The consultation process included meeting with Aboriginal Elders to obtain
consent for the project under section 18 of the Aboriginal Heritage Act 1972 and consultation
with the Environmental Protection Authority and Department of Environment and
Conservation as project regulators. submissions were also sought on the Public Environmental
Review document.

The Early Contractor Involvement process helped the project partners to reach out and
communicate with the community, as the dredging took place on the doorstep of Perth,
which has more than 1.5 million residents. In addition, it allowed for an effective approach to
protect the nature present as the area also borders on beaches and the Swan River, an iconic
heritage site used as a playground by humans, as well as whales, dolphins and sea lions.

This was done during the preparation stage, when the parties examined the issues and
perceptions about dredging and the contractor offered simulations and presentations to
community groups to build up the picture and manage expectations of the effects of the
dredging before work started. To do this successfully, it was important to keep communication
lines clear, use experience from previous projects and give information rapidly to the local
community, allaying public concerns.

The main lesson was that it is important to be pro-active rather than reactive during the early
stages and be transparent on what the potential effects are e.g. turbidity from dredging
ensures cloudy water for a while, but this will not cause any harm to people swimming in the
water or to the marine ecology.

Furthermore, details of environmental impact assessments, weekly monitoring and fact sheets
were provided via the Freemantle port website in close co-operation with the contractor. This
included information on the measures taken such as dredgers fitted with green valves in the
overflow to reduce turbidity and provision of an independent training course to port staff and
vessels crew members to work together as trained whale observers, allowing the team to
determine best course of action if any whales came too close to dredging vessels.

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An added benefit of the ECI allowed Fremantle Ports to organise exercises early on with pilots
and dredge masters using the port's simulator, to align the navigation in the port during
dredging and allow the people involved to become confident in each other's skills. This
ensured that they were aware of each other's working practices and ship handling behaviour
– allowing port and shipping operations to continue as normal.

Feedback

Adoption of the ECI model contributed significantly to successful outcomes in planning

implementation and cost. Involving and embedding Port operating and technical teams in
the project contributed significantly to its success. It is important to consider that the teaming
attitude might drift following the execution of a lump sum contract and it is important to
continue to monitor the attitudes and concerns of the various parties involved. This included a
review of progressive ‘how are we going’ reviews against the team charter established early
in the ECI phase. A watch point is the issue of an ECI team being the “front team” and then
new members coming on board who were not a part of the initial ECI phase and who may
not carry the understandings from this phase. This required an occasional intervention by the
joint Leadership Team

On behalf of the client in this case, Fremantle Port Authority, Lyle Banks stated: "We had a great
co-operation with Boskalis that most likely wouldn't have happened if we hadn't gone through
the ECI process and built up those relationships. It's been a positive learning experience and
hopefully we have transferred some knowledge to Boskalis, just as they have to us.”

Conclusions, Success Factors and/or Failure Factors

An audit of the project showed there were no environmental or other issues, partly due to
public consultation and good communication between the client and dredging company.
Importantly, the new dredging equipment, with its advanced monitoring and navigation
equipment and well-trained crew, helped achieve the high compliance level.

The chosen ECI approach was an important contribution to allow the client to meet all its
project objectives, i.e. an expanded, sustainable port, created with community acceptance,
and within a specified budget. The cooperation between the project partners helped
significantly in achieving this.

This has been a showcase of an ultimately successful project which clearly demonstrated the
advantages of ECI.

Success Factors

Success factors in this case include the early involvement of contractor which accelerated
project delivery, the commitment of parties involved to address stakeholder concerns,
adequate cost and risk identification that achieved client’s specified budget, and dealing
with stakeholder concerns which gave joint focus.

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Potential Failure Factors

Potential failure factors include insufficient funding of bidders’ costs and the fact that the
choice of a traditional form of contract and open book pricing did not support innovation.

xlvii @ Boskalis: Port of Freemantle

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6.10 Kangaroo Island

xlviii @ Kangaroo Island Plantation Timber (KIPT)

Case Evaluation

The client, Kangaroo Island Plantation Timbers Limited (KIPT) is committed to establishing a
sustainable timber industry on Kangaroo Island, South Australia, and as part of this is
developing a deep-water port at Smith Bay, a greenfield site on the north coast of the island,
for the export of logs and woodchip to Asia. The facility will also be available to other approved
users and cargoes. The development involves construction of a wharf including, a piled jetty
from the shore which connects to a floating pontoon, tub mooring facilities, berthing pocket
to a depth of up to 13.5 m, retaining structures, mooring dolphins, timber stockpile and storage
facilities, ship loading and materials handlings systems, laydown areas, ancillary facilities. It is
expected that export vessels (Panamax and Handymax) will be berthed at the wharf between
30 and 75 days per year with 10 to 20 ship movements per year. The location of this project is
Smith Bay, on the north coast of Kangaroo Island in South Australia.

Project Information

The project’s name is KI Seaport, Kangaroo Island (South Australia). Kangaroo Island Plantation
Timbers Ltd (KIPT) is seeking approval from the South Australian and Commonwealth
governments to construct and operate a deep-water port at Smith Bay on Kangaroo Island.
The proposed development, referred to as the Kangaroo Island Seaport (or KI Seaport), would
export logs and woodchips to Asia. The facility would also be available to other approved
users and for other cargoes. KIPT is Australia’s only ASX-listed (KPT) timberland company. It was
established in January 2000 and adopted its current name in June 2013, by which time its

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operations were consolidated on Kangaroo Island. KIPT is committed to building a sustainable
timber industry on Kangaroo Island.

The project value is approximately US$ 40-50 million. It is expected that export vessels
(Panamax and Handymax) will be berthed at the wharf between 30 and 75 days per year with
10 to 20 ship movements per year. The Project was declared as a major development in 2017.
The Environmental Impact Statement (EIS) for the Smith Bay wharf proposal was released for
public comment on 28 March 2019 and is at the last stage of the approval process by the
South Australian Government, Minister for Planning.

Procurement Strategy

Procurement Model & Procurement Process

The procurement of a construction contractor was done at feasibility stage on a one-on-one

basis using an ECI approach. The client needed to know the cost to build such a marine facility
on a greenfield site and in 2015 directly approached a local South Australian marine
contractor – Maritime Constructions Pty Ltd to assist with budgets, feasibility studies, assessment
of site location and choices of wharf construction, optimisation, etc. There was no formal
process for the selection of an ECI contractor.

The NEC 3 contract was initially chosen as the stated aims of mutual trust and cooperation
using a Target Cost Option C Contract (open book) shares risk in a fair manner, fair degree of
price certainty (gain/gain). The Target Cost (Total of the Prices) is only adjusted based on
Compensation Events and if actual cost exceeds the target.

Factors to Adopt ECI

The client is not an experienced port operator which is why it sought a contractor willing to be
involved in the project from an early stage looking at the most optimal design. The ECI
contractor sought to optimize and reduce the CAPEX cost of wharf construction by procuring
a floating pontoon in South-east Asia rather than to follow the traditional approach of a fixed
wharf arrangement using sheet or driven piles. The client was also looking to minimize the
footprint of the project by minimising the amount of dredging required. The client wanted that
the ECI contractor’s procurement decisions were transparent, made on best-value rather than
lowest cost. In 2017, the client together with the ECI contractor and a procurement consultant
had a workshop to look at the best contractual arrangement to achieve the aims of the
project.

Business Case

The economic aspects for a fit for purpose wharf facility within budget were for the client
paramount. It is a company listed on the Australian Stock Exchange so the business case and
the costs for a new wharf facility have to stack up in order to gain funding for the construction.
For the ECI contractor the project was always a long-term business proposition. The ECI

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contractor had to work together with the client to optimise the design and construction in
order to keep within the expected project budget.

ECI Governance & Management

Contractual/Agreement Aspects

The procurement consultant brought in by both parties evaluated the types of contracts which
were available in the Australian construction market. The procurement consultant determined
that no standard ‘off the shelf’ contract with design-construct or construct only best fitted the
purpose which both client and ECI contractor were looking for. The client and contractor
initially considered NEC3 Option C Target contract with Activity Schedule. However, in 2020
the parties elected to enter into an Alliance Contract based on the Model Project Alliance
Agreement (PAA).xlix

Relational Aspects, Trust

The relationship between client and ECI contractor has been ongoing since 2015 when the
project was at rudimentary feasibility stage. Trust was built from the outset when it was clear to
the client that the ECI contractor was not involved merely to maximise its turnover by proposing
a design without regard to whether the client could fund it or not. Furthermore, the ECI
contractor also made use of a design consultant to check the feasibility of its proposals at an
early stage in the design process thus convincing the client that the ECI contractor was fully
exploring all design options.

Risk Management

The management of risks and adapting to change is an ongoing process. The ECI contractor
has been actively involved in the forecasting and evaluation of financial risks together with the
identification of suitable design changes to avoid or minimise their impact. Low-priority risks are
monitored and reviewed by the ECI contractor for notification to the client of higher
consequence risks. The parties are aware that they need to develop and implement a specific
management plan or procedure that includes consideration of all aspects required to mitigate
the risk to an acceptable level. Communication and consultation have been important
considerations at each step of the risk management process. The client and ECI contractor
are mindful that they need to develop a communication plan for both internal and external
stakeholders at the earliest stage of the process which addresses the issues relating to both the
risk itself and the process to manage it. The dredging was considered as a key risk in this regard
as the ECI contractor was directly involved in the selection and preparation of the site data
and also provided a reality check on the basis of design, buildability and value engineering.

Effective internal and external communication is important to ensure that those responsible for
implementing risk management, and those with a vested interest, understand the basis on
which decisions are made and why particular actions are required.

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Feedback

The South Australian construction market is quite limited in terms of marine construction
companies, so the client wanted to involve a local company with experience in port
construction at an early stage and gain valuable insight and knowledge of how to best
navigate through the feasibility, design, development approval and ultimately the construct
phase. The client was satisfied that its approach to appoint a local contractor, Maritime
Constructions, as the ECI contractor was the right one based on the contractor’s track record
on projects within South Australia.

From Client-Side

The client is not a port operator but an end-user. Having a trusted partner who can work
through both design and approval stage is paramount. There have been unforeseen
expenditures along the way, but the project remains on track and development approval will
be granted in the future, which will allow the project to progress to the construct stage.

Managing Director of KIPT, Keith Lamb, said he was pleased to formalise the long-standing
strategic partnership with Maritime Constructions: “There are many advantages for our
shareholders in this ECI arrangement. In particular, we welcome the fact that this Alliance
Agreement model allows KIPT and Maritime Constructions to share the financial risks and
rewards of building the KI Seaport. We respect the skills and experience of Maritime
Constructions, and we are pleased that this ECI has the practical effect of establishing them
as our development partner for the KI Seaport project.”l

From Contractor-Side

The ECI contractor has been involved in the project from inception and will be involved to
completion. The ECI contractor has been required to be realistic as to what is best for project and
optimise design and has sought to reduce construction costs rather than looking for the design
which may bring in the most turnover.

Conclusions, Success Factors and/or Failure Factors

The ultimate success factor of a project is not merely judged by its completion but by the
journey that the parties have made in realising their goals (win/win). At this stage of KI Seaport,
the parties are only halfway to achieving their ultimate goals so to claim ultimate success now
would be premature. That being said both client and ECI contractor have had to make
compromises along the way and adjust the project deliverables accordingly, this is reflected
in the ultimate choice for the Model Project Alliance Contract (PAA) over that of the NEC3
Option C Target Cost Contract. This form of adaptability to shared risks is perhaps the true
measure of ECI success.

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CHAPTER 7:
EPILOGUE: RECOMMENDATIONS FOR FUTURE REVISIONS

There are a number of topics that have not been fully developed in the current
report and would benefit from further research. The following topics could serve as a
basis for the Terms of Reference of an upcoming revision of the report or could also be
seen as a strong recommendation for other taskforces seeking to further develop and
advance best practise when selecting, setting up and performing an Early Contractor
Involvement:

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7.1 General Topics

• Phasing & Sequencing

- An overview of different ECI approaches on phasing/sequencing
- Procurement/Tendering Process towards Execution Award
- Classic project (preparation) phasing versus ECI approach
• Review the relevance and practical application of international standards on
collaboration and relationship management, such as ISO 44001 and BS 11000, e.g.
potential basis for a code of conduct or certification for parties intended to engage in
an ECI project.
• Situate ECI as a specific case of Early Supplier Involvement (ESI) and describe the generic
principles and practises of ESI.
• ECI and project financing: challenges when external financing is obtained:
- when the final construction amount is not yet fixed at the moment that commitment of
lenders is required
- Subsidies and the resulting requirements on aspects such as procurement and remuneration
• The possibility of working on several projects with the same ECI team, rather than one
single project, and the decision criteria to come to such an approach. li lii liii

• When reviewing other ECI cases: discuss in further detail the procurement stage and the
contractor selection methods that were applied.
• Some suggestions for recent case studies are the High-Speed Line 2 project (UK), the
Sambangalou Dam project (Senegal) or the Nye Veier projects (Norway) that were used
as cases for the STEPS procurement strategy tool trialled and described by OECD. liv

7.2 Procurement Topics

• More detailed comparison/evaluation of ECI-based procurement frameworks:

competitive dialogue, 2-phase procurement, etc.
• Contrasting the different types of ECI with classic procurement procedures
• Country-specific review of the regulatory framework based on the principles, approach
and take-aways developed in this report to have a more comprehensive understanding
of local regulatory specificities.
• When reviewing other ECI cases: discuss in further detail the procurement stage and the
contractor selection methods that were applied.
• Some suggestions for recent case studies are the High-Speed Line 2 project (UK), the
Sambangalou Dam project (Senegal) or the Nye Veier projects (Norway) that were used
as cases for the STEPS procurement strategy tool trialled and described by OECD. lv

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7.3 Contractual Topics

• More detailed evaluation of informal ECI approaches

• Contrasting the different types of ECI with classic contract types (e.g. D&B and DBFM)
• Design contributions and resulting liability
• Novation
• More detailed guidance on the available remuneration models
• Fallback procedures
• Reduction of disputes and claims through ECI
- Minimising post-contract changes through variations
- Proper alignment and preparation of bodies such as a dispute resolution board
• (Un)orthodox clauses: no blame clause, back-to-back principle, shoulder-to-shoulder
principle
• Intellectual Property Rights and Protection in an ECI setting
• Blockchains and Smart Contracts

7.4 Managerial Topics

• Code of conduct
• The checklist for ECI feasibility (Appendix A): it would be an improvement to introduce
levels (of trust, etc.) in the checklist and provide a clarification for each level, to make it
easier for a practitioner to fill in the checklist and grade each item.
• Incentivisation/compensation
• Involvement in site investigations
• Stakeholder management: more detailed guidance how success and failure factors can
be impacted through ECI.
• Insurance: integrated project insurance (ipi) as ECI model, insurance as per liability
approach (design, etc.)
• Management of Change
- Solutions to tackle resistance to change
- Practical guidance how to make an organisation ECI-ready, considering aspects
such as training and leading by example

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7.5 Other Specific Topics

Success and Failure Factors During Stakeholder Management Processes

Some success and failure factors underlined in the stakeholder management literature can be
listed for guidance.

Adequate use of Coherent approach,

technology: Build and maintain Clear rules and planning of consistent
BIM & web- relationships engagement communication
based participation and messages

Establishing rapport with

stakeholders Get the right
Effective
and maintaining stakeholders to the
Commit to action communication
transparency and honesty table and know their
in communicating the expectations
project objectives
Listen, respect Management Perception of win-win Reputation,
and learn expectations outcome credibility and trust
Stakeholder
management as Time
Transparency
part of the risk and resources
and accountability
management in management
the project

Success factors lvi

Inexperience
Differing capacity of Failure to review Insufficient skills
and unbalanced
stakeholders and evaluate in the team
engagement

Most delays due to Project leaders should be

Unfocused
lack of proper experienced to Unclear purpose
dialogue
stakeholder analysis trade-offs

Failure factors

Blockchain & Smart Contracts

The design and construction industries are poised to transform tremendously with the adoption
of blockchain technology. Flow of information is the foundation of the industry and many of
the issues and inefficiencies in construction transactions can be remedied by having an

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accurate, absolute, and shared archive of information. Blockchain and Smart Contracts are
some of the tools that are changing the way the construction industry operates.

Blockchain is a software protocol that creates an electronically stored ledger that tracks the
history and present status of an item. The item can be physical, such as land, a building,
equipment, or currency; or intangible, such as plans, schedules, or contracts. Data is stored in
a series of ‘blocks’ and each new block is linked to the immediately preceding block to form
a successive ‘chain’. Blocks and chains are replicated identically over multiple computer
systems across a network, and the system records the time and sequence of each change to
the chain, giving instant notice of changes to all participants. A network of participants all
agrees to the rules of a specific blockchain system. The most familiar use is by digital currencies,
or ‘cryptocurrencies’ such as Bitcoin that utilise blockchain technology as their supporting
platform.

The ledger is reliable because nothing is ever erased from it; information can only be added
to it. The shared record is the one, true agreed-upon record of the transaction. The shared
ledger is also verified by replicating it identically across a network of multiple computers,
decentralising the location of the data. This process makes the information less vulnerable to
tampering or hacks. Complete accessibility and transparency make any changes or
tampering immediately visible to all participants.

A blockchain-based ledger can be integrated with the BIM process to provide an accurate
list of required materials and quantities, which could permit more accurate apples-to-apples
bidding, and which could ensure that all bids match exactly what is shown in the building
design.

In a smart contract the provisions are capable of being self-executing. For example, parties to
a smart contract can follow a checklist of conditions that are required to be satisfied (e.g.
completion of a certain task) in order to cause other provisions to be self-executed by the
contract programme (such as payment for that task) without any further action needed by
the parties.

Smart construction contracts would normally be built of form provisions that are recognised as
industry standards but a smart contract would be an active participant in the construction
administration process, with the contract itself verifying that certain tasks have been
completed and then executing the next required steps.

A smart contract permits real time information to be universally available to the project’
stakeholders who would be able to track its flow with full details. Funds will be transparent and
the project participants will be able to know if their funds are available. Payments would be
automatically released when suppliers complete the end of the contract. This saves all of the
parties’ time and money, and increases trust between them. For example, if all parties verify
on the blockchain ledger that steel joists were delivered and correctly installed today, the
program can send payment out for that task immediately.

Without further development, smart contracts are not designed to accommodate the series
of interconnected decisions and the exercise of discretionary judgement that relate to:

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 • Innovation through the review and development of designs
• Collaborative decisions such as the approval of new ideas
• Joint risk management decisions and actions
• Change procedures and decisions in relation to other optional matters
• Problem-solving and dispute resolution

Smart contracts are in the early stage of development and have had limited application on
ECI projects to date. Due to the fact that one of the biggest causes of acrimonious
relationships is disruptive human involvement in processing payments; it is expected to see
rapid changes affect how construction transactions are documented and smart contracts
administered in the coming years.

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APPENDIX A: TERMS OF REFERENCE

Background

It is increasingly acknowledged that the consequences of budgetary constraints and the

increasingly complex nature of infrastructure works affect both preparatory and procurement
processes for large or complex infrastructure projects in general and for waterborne transport
infrastructure projects in particular. Early Contractor Involvement in these processes is therefore
very valuable in certain cases. Previous efforts such as the Forum on Early Contractor
Involvement organised by IADC have started up knowledge exchange and discussions
addressing various aspects of Early Contractor Involvement related to maritime infrastructure
construction. These efforts did not address frameworks relating to how the relevant parties in
an ECI process should act. This lack of guidelines often results in inefficiencies, misaligned focus
or distortions in the relationship between the parties involved. Therefore, there is a need to
establish a set of structured and well accepted guidelines to the ECI process. A new effort is
proposed to fill this need by developing i) a framework derived from existing methods and ii)
approaches for informing decision makers managing procurement and early development of
waterborne transport infrastructure construction projects.

Objective

The mission of the proposed WG is to provide a framework to decision makers for managing
ECI processes for waterborne transport infrastructure projects. It will show decision makers how
to transition from a price-oriented, diverging and onerous approach to a risk-oriented, focused
and lean collaboration.

The objectives of the working group can be split in two parts:

i) First part:

• Collate and review other existing information on ECI and similar processes
• Give an overview of the trends driving ECI
• Analyse relevant factors in ECI (drivers and barriers)
• Explore the range of existing ECI approaches
• Identify and research recent ECI cases, summarising them in an understandable
manner as to how it was approached and gathering feedback from the
stakeholders involved.
• Understand and address challenges and benefits of ECI including impact on
innovation, environment, project management and time for completion.
• Evaluate the effectiveness of the different ECI approaches and of the different
alternative moments in the life of the project for contractor involvement.
• ECI analysed from the point of view of different regulations on procurement of
infrastructure projects (EU Directive 2014/24, regulations from USA, Japan, etc.)

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 ii ) Second part:

• Develop guidance for decision makers to define feasibility/appropriateness,

objectives and scope when starting up an ECI
• Develop a reference framework that deals with responsibilities and conduct
between the stakeholders (e.g. a code of conduct, a template cooperation
agreement)

Earlier Reports to Be Reviewed

The ECI Framework report will integrate current knowledge from existing frameworks, such as
those recently developed by the IADC report on ‘Public Procurement Rules in the European
Union and Early Contractor Involvement’. It can build on the IPPC report ‘ECI: A new Strategy
for Buying the Best in Infrastructure Development in the Netherlands’ and show decision makers
how to select a framework that aligns all parties towards a more efficient and focused ECI
process.

The WG will review the following PIANC WG-reports:

• InCom WG 21 (2005): “Economic Aspects of Inland Waterways”.

• InCom WG 25 (2013): “Maintenance and Renovation of Navigation Infrastructure”.
• MarCom WG 31 (1998): “Life Cycle Management of Port Structures – General
principles”.
• MarCom WG 103 (2008): “Life Cycle Management of Port Structures – Recommended
Practice for Implementation”.
• InCom WG 110 (2010): “Governance Organisation and Management of River Ports”.
• InCom WG 129 (2013): “Waterway Infrastructure Asset Maintenance Management”.
• EnviCom WG 143 (2013): “Initial Assessment of Environmental Effects and Navigation
and Infrastructure Projects”.
• EnviCom WG 150 (2014): “Sustainable Ports – A Guide for Port Authorities”.
• MarCom WG 158 (2014): “Masterplans for the Development of Existing Ports”.
• EnviCom TG 3 (2008): “Climate Change and Navigation: A review of Climate Change
Drivers, Impacts, Response and Mitigation”.

The Working Group will agree the range of other national and international reports and
publications to be reviewed.

Scope

The scope of the group will extend to maritime and civil infrastructure. The report should include
case studies, identify good practices in the management of Early Contractor Involvement and
provide frameworks to manage ECI.

It is suggested that the Working Group addresses the following topics:

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 • Relevance of the regulatory framework regarding contracting civil and waterborne
infrastructure projects. Compliance issues.
• Impact on Risk Management, Life Cycle Assessment, and relations with stakeholders
• Advantages for innovative solutions and environmental improvement: possibilities
for a ‘Working with Nature’-approach.
• Advantages at a planning stage, prior to EIA.
• Impact of Performance Specifications from the earliest stage versus Technical
Solution driven approaches with detailed Technical Specifications.
• Transparency and confidentiality: How to address this topic.
• Objective criteria for awarding the contract.
• Impact on Tender Costs.
• The impact of BIM, Lean Management and similar tools on ECI.
• Relevance of the regulatory framework regarding contracting civil and waterborne
infrastructure projects. Compliance issues.

Intended Product

The outcomes will be presented in a well-structured and practical guidance document

targeted at the waterborne transport infrastructure development sector. The document will
be suitable for use by senior managers and decision makers. It will also provide reference
frameworks such as a code of conduct for practitioners but it will not be a detailed technical
handbook.

The resulting report should comprise:

• An introduction to ECI, providing an appropriate level of background information,
including definitions of different approaches falling under the ECI definition, benefits
and challenges.
• An analysis of the existing approaches and their effectiveness to deal with the
challenges and seize the benefits, exemplified by relevant cases and feedback from
stakeholders.
• A guideline on selection of ECI + defining goals and scope.
• A set of reference frameworks addressing all relevant aspects in the relationship
between client and contractor such as conduct, liabilities and responsibilities: a Code
of Conduct, a form for ‘ECI cooperation agreement’, etc.
• A list of relevant existing national and international publications.

Partners and Associated Activities

Partnership shall be set up with relevant Sister Associations as IADC, IAPH, etc. Other
international associations that may have a similar interest and are viable to contribute should
be sought for participation as Consultants and Contractors Associations.

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The Group will draw on the practical experience and expertise of its members, and on
international experience accessed through a proposed series of 2-3 facilitated regional
workshops.

Working Group Membership

The Working Group should be led jointly by MarCom and InCom, and should include members
from other Commissions. Designation of WG-members should follow the standard procedure
defined by PIANC Rules and Regulations plus some more members designated according with
the particular scope of the WG.

Members of the WG should include representatives from the target readership, i.e. project
owners, contractor and consultant associations, contractors, consultants, regulators,
governments, policy makers, public bodies, relevant international organisations, infrastructure
investors and practitioners who are tasked with managing client-contractor relationships. The
range of expertise should cover at least all parties involved in large waterborne infrastructure
partners such as owners, investors, engineers and contractors. A regulator should be included
to provide a regulatory perspective in order to match ECI with public contract regulations.

The development of guidance should be done by a multi-stakeholder approach. Therefore,

members from organisations representing several stakeholders will be invited to participate,
next to experts from the PIANC community.

Relevance to Countries in Transition

The primary audience in both developed countries and countries in transition would be
decision makers in planning and procurement that have responsibility for preparatory and
procurement processes for infrastructure projects.

Climate Change

Climate Change needs to be considered in relevant waterborne infrastructure and civil

engineering projects regardless of the contractual framework.

However, potential benefits of ECI on prevention and mitigation of Climate Change will be
addressed by the WG. ECI at a planning stage, prior to the EIA allows for consideration of best
possible solutions from the beginning, avoiding the case where environmental permits granted
without knowledge of all possible solutions could preclude improvements regarding
prevention of Climate Change.

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APPENDIX B: CHECKLIST ECI APPROPRIATENESS
The checklist below gives a listing of characteristics of which the level of fulfilment makes an
ECI approach more or less suitable for a project. The higher the overall score, the more suitable
an ECI approach might be. A score of one implicates low or the characteristic is hardly present
and a score of five means high or abundantly available.

If the organisation has an open communications structure in which colleagues are used to
share mistakes and to learn from them, it tends to score a five instead of a one. However, if
there is a name and shame culture in which faults are not openly discussed, it is more the other
way around.

When innovation is needed to get the job done and when every party involved has unique
knowledge which is evident for an acceptable solution, it will definitely score a five. Also, when
the magnitude of one or more risks are unknown and the budget is critical, a five will be
appropriate.

If the client or the consultant is not transparent because they are convinced that they are the
expert, a low score is suitable. Regarding the expectations for transparency, reference is made
to Section 3.3 where further detail is provided.

The overall score is an indication for the degree of suitability of the ECI approach. When a line
scores low, it is also an indication that additional effort might be put into that particular
characteristic to have a successful implementation of ECI.

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 Description
Company culture, at which level are the characteristics below present? 1 2 3 4 5
Client
Probity
Transparency
Equal Treatment of all engaged contractors
Fairness
Open communication
Clarity through clear rules of engagement
Protection of intellectual property
Consultant
Probity
Transparency
Equal Treatment of all engaged contractors
Fairness
Open communication
Clarity through clear rules of engagement
Protection of intellectual property
Contractors
Are ECI suitable contractors available to execute the project?
Design
The functional requirements are difficult to realise within the given budget
Sustainability requirements are strongly involved
The design should be innovative
Budget
There is pressure on the budget
Not all costs have been identified
There is uncertainty with regard to specific costs
Construction
The construction methodology has been poorly defined
The construction conditions are challenging
Construction risk is unclear and badly allocated
The transport situation is challenging
General
All parties involved are open for the ECI way of working
There is a lot of uncertainty and risk in the project
There is a financial solid business case for the project
There is time pressure on the project
There are a lot of different stakeholders involved
The legal situation facilitates ECI
A situation of ‘client capture’5 will not arise
Contractor selection
The assessment method for selection of the contractor is well defined
The assessment method for selection of the contractor is clear to all parties
Compensation for the losing contractor(s) has been included in the budget

Table 1: Checklist: When is Early Contractor Involvement appropriate?

5 Definition Client Capture: see List of Definitions Appendix D.

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APPENDIX C: CONTRACT STRUCTURE COMPARISON CHART

FIDIC White Book 2017 5th Edition

Project type Pre-construction pure ECI only

Origin/History Published by the Federation of International Consulting Engineers (FIDIC)

based in Lausanne. First Edition was published in 1991.
Area of usage Globally
Scope of Usage Building & Civil
Parties Client, Consultant
Contract Documents Letter of Acceptance, Consultant Model Services Agreement, Appendix 1 –
Scope of Services, Appendix 2 – Services to be provided, Appendix 3 –
Remuneration & Payment, Appendix 4 – Time Schedule for Services.
Subcontracting/Early Not mentioned
Supply Chain
Involvement
ECI Provisions The White Book is formulated on the traditional role of Client and Engineer and
is not written with early contractor involvement in mind it needs amendment
for it to work in this role.
Project Scope This will be included under Appendix 1 – Scope of Services. It is prepared by
the Client in conjunction with the Consultant as part of the contract
documents and determines the services of others to be provided by the Client
which are included in Appendix 2.
Budgeting method Lump Sum or Rates & Prices as are agreed prior to contract award.
Pricing Mechanism Lump Sum or Rates & Prices
Gain/Pain scheme Not mentioned.
Decision Making/ Agreement only contains Appendix 4 which shows the overall commencement
Project Management and completion dates as well as the start and duration / completion dates for the
Procedures individual project tasks and any key milestone dates agreed between the parties.
Risk Management Traditional Client and Consulting Engineer relationship. The performance of
approach Exceptional Services shall entitle the Consultant to extra time for their
performance and to payment for performing them.
Early Warning Register Not mentioned
Insurance Consultant to insure against the risks it carries, also to insure against public/third
party liability (Clause 9)
Partnering/ Obligation on the parties to act in good faith and in the spirit of mutual trust
Collaborative Provisions (Clause 1.16)
Independent Audit/ Yes (Clause 7.6). The Consultant shall maintain up-to-date records and make
Open Book these available to Client. Except where Agreement provides for Lump Sum
payment Client can require an audit by accountants of any amount claimed
by the Consultant
Scope of Design Consultant to perform the Services with a view to satisfying any function or
responsibility purpose that may be described in the Scope of Services however the
Consultant shall have no other responsibility than to exercise reasonable skill,
care and diligence in the performance of its obligations under the Agreement
(Clause 3.3.1). The 5th edition specifies the level of duty is that "to be expected
from a consultant experienced in the provision of such services for projects of
similar size, nature and complexity". This addition may be of particular relevance

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 where the Consultant has taken on a task it is not entirely equipped to handle,
but in most cases it will not add much to the obligation already contained in the
previous version of the White Book. There is also a fitness for purpose obligation
(Clause 3.3.2) on the Consultant to perform the Services with a view to "satisfying
any function or purpose that may be described" in the Scope of Services.
However, that obligation only applies insofar achievable using reasonable skill
and care. The Client is responsible for the accuracy, sufficiency and consistency
of all information provided by the Client or by others on behalf of the Client.
There is an obligation on the Consultant to exercise the standard of skill and care
with a view to ensuring that there is no manifest error, omission or ambiguity in
such information and to promptly give notice to the Client of any adverse
findings There is an obligation on the Consultant to review such information,
using reasonable skill, care and diligence, to ensure there is no manifest error,
omission or ambiguity and to promptly give notice to the Client of any adverse
findings (Clause 2.1.2).
IP Provisions Consultant retains the design rights and other intellectual property rights and
copyright of all documents it prepares. The Client shall be entitled to use them
and copy them only for the Project and the purpose for which they are
intended. Consultant has been given the right to revoke any intellectual
property license granted in case of any default in payment of any amounts due
under the Agreement (Clause 1.7).
No claims Not mentioned.
Limitations on Liability The maximum amount of compensation payable by either Party to the other in
respect of liability is limited to the amount stated in the Particular Conditions
except for deliberate default, fraud, fraudulent misrepresentation or reckless
misconduct (Clause 8.3). The Particular Conditions do not provide separate
entries for each Party's respective limit so the default position would be the same
amount for both. No default amount is suggested so it could (or should) be the
full amount payable for the Services or more. The ‘deliberate default’ also needs
to be ‘manifest and reckless’ in order for the exclusion from the liability cap to
apply. A mutual carve-out of liability for any loss of revenue, loss of profit, loss of
production, loss of contracts, loss of use, loss of business, third party punitive
damages or loss of business opportunity as well as any indirect, special or
consequential loss or damage has been included (Clause 8.3.3). It expressly
excludes certain types of losses, such as third-party punitive damages, loss of
business or profits, even though they may be a ‘direct loss’ in the context of the
contract. This needs to be read in conjunction with Clause 8.1.3. (a) which states
only "reasonably foreseeable loss and damage suffered as a direct result of such
breach" is recoverable.
Termination Termination for Consultant default. Consultant can terminate for Client’s failure
to pay or in event of suspension lasting more than 168 days (Clause 6.4.1.e). The
Client can terminate for convenience. The new edition of the White Book
provides that the Client is not entitled to terminate for convenience in order to
carry out the services itself or through a third party (Clause 6.4.1 d). In the
previous edition of the White Book, this was not expressly stated.
Dispute Avoidance/ Clause 10 provides that Parties meet in good faith to resolve dispute, if the
Resolution dispute is not resolved the Parties will attempt to settle it by adjudication. A
detailed adjudication procedure set out in Appendix 5. Any disputes not
resolved amicably will first need to be referred to adjudication, prior to any
referral to ICC arbitration.
Resource https://fidic.org/books/clientconsultant-model-services-agreement-5th-ed-
2017-white-book
Summary The White Book is an important part of the FIDIC suite issued on behalf of its
membership of consulting engineers and it is recognised as one of the most widely
used forms of professional services contract internationally. It is formulated on the
traditional role of Client and Consultant and is not written with early contractor
involvement in mind as such it needs some amendment for it to work in this role.

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JCT Pre-Construction Services Agreement (PCSA) – 2016 either General Contractor or Specialist version

Project type
Pre-construction pure ECI only

Origin/History In 1931 the Joint Contracts Tribunal (JCT) was formed by the Royal Institute of
British Architects (RIBA) and the first JCT standard form of building contract was
issued. Since 1931 JCT has produced standard forms of construction contract,
guidance notes and other standard forms of documentation for use by the UK
construction industry.
Area of usage United Kingdom only. The JCT forms of contract are not widely known outside
of the UK.
Scope of Usage Building & Civil
Parties Client/Contractor or Client/Specialist
Contract Documents Agreement, Annex A – Fee, Rates, Additional Payments and Reimbursable
Expenses, Annex B – Pre-Construction Services.
Intended for use as a Two-Stage process with the JCT Standard Building
Contract, DB Contract for the build or design-build phase but can be used on
its own for pre-construction ECI use.
Subcontracting/Early Section 2-3 details that the Contractor shall duly consult with members of his
Supply Chain supply chain and at the Client’s request endeavour so far as practicable to
Involvement ensure the attendance at relevant project meetings of those suppliers whose
attendance is necessary or desirable.
ECI Provisions The Pre-Construction Services Agreement enables the Client to deal with the
chosen Contractor or Specialist or their team of consultants to develop
designs, to develop the proposed contract works, or to compile specialist
tender documents. There are no specific early contractor involvement
provisions included.
Project Scope This will be included under Appendix B – Pre-Construction Services. It is
prepared by the Client in conjunction with the Contractor or Specialist as part
of the contract documents and determines the specific deliverables to be
provided.
Budgeting method Fee (Lump Sum) as may be agreed prior to contract award.
Pricing Mechanism Fee and Reimbursable Expenses
Gain/Pain scheme Not mentioned. This means that unless stated otherwise, the Contractor has
no design liability unless or until it enters into a main contract with the Client
(Clause 2.8). If a main contract is subsequently entered into, the Contractor
will have the same liability in respect of design carried out under the PCSA as
if it had been carried out under the ultimate main contract.
Decision Making/ Section 3-2 details that decisions, approvals and instructions reasonably
Project Management required by the Contractor shall be made or given by the Client of the Client’s
Procedures Agent within a reasonable time of the Contractor’s request.
Risk Management Traditional. Pricing can be either lump sum or reimbursable expenses.
approach
Early Warning Register Not mentioned.
Insurance Section 7 details that the Contractor is to maintain Professional Indemnity
Insurance (PI) & Public Liability Insurance provided the PI insurance remains
available at commercially reasonable rates.
Partnering/ Section 2-2.3 details that the Contractor shall liaise and cooperate fully with
Collaborative other members of the Project Team. No specific partnering or collaborative
Provisions provisions are mentioned

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Independent Audit/ Not mentioned.
Open Book
Scope of Design Section 2-1.1 details that the Contractor shall exercise the level of skill, care
responsibility and diligence reasonably to be expected of a contractor experienced in
projects of similar size, scope and complexity.
IP Provisions The copyright of Contractor’s Information remains vested in the Contractor.
Subject to monies payable the Contractor grants to the client an irrevocable
royalty-free licence to copy and use the Contractor’s Information for the
execution and completion of the Project.
No claims commitment Not mentioned.
Limitations on Liability Not mentioned.
Termination Section 10 details that the Client may at any time terminate the Contractors
employment by giving no less than 14 days’ notice. Contractor can only
terminate for a material breach by the Client.
Dispute Avoidance/ Section 10-7 provides for a dispute or difference to be referred to adjudication
Resolution but either Party can refer a dispute to statutory adjudication under UK
legislation.
Resource https://www.jctltd.co.uk/product/pre-construction-services-agreement-
general-contractor
Summary JCT’s Pre-Construction Services Agreement (General Contractor) is designed
for appointing a contractor to carry out pre-construction services under a two-
stage tender process. The Pre-Construction Services Agreement enables the
contractor to collaborate with the client or their team of consultants to
develop detailed designs, to develop the main contract works, or to compile
specialist tender documents. It is ECI in its most basic form. The contractor’s
involvement at the pre-construction stage can involve making preparations
for the construction phase, such as the programme, cost plans, buildability
and any specialist procurement. The agreement covers the period from the
submission of first stage tenders up to the submission of a definitive second
stage tender and entry into a main contract for the construction phase. As a
basic agreement it lacks some of the usual provisions seen in other contracts
which are used for ECI arrangements.

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 A134–2019 General Conditions of the Contract for Construction, Construction Manager as Adviser

Project type Two Stage (ECI) Project type

Origin/History USA. Published by The American Institute of Architects (AIA). The AIA offers a
wide range of standard form contract documents
Area of usage USA and reported use in Canada. The AIA forms of contract are not widely
known outside of the USA.
Scope of Usage Building
Parties Owner and Construction Manager (Client & Contractor). Owner has an
Architect to represent it. Owner can retain Geotechnical Engineer, Civil
Engineer or other parties such as a Project Manager or Program Manager.
Contract Documents Agreement, Conditions of the Contract (General, Supplementary and other
Conditions), Drawings, Specifications, Addenda issued prior to execution of
the Agreement, other documents listed in the Agreement.
Subcontracting/Early Construction Manager shall prepare, for the Architect's review and the
Supply Chain Owner's acceptance, a procurement schedule for items that must be
Involvement ordered in advance of construction. Upon the Owner's approval of the
Control Estimate, the Owner shall assign all contracts for these items to the
Construction Manager and the Construction Manager shall thereafter
accept responsibility for them. (§ 3.1.12)
ECI Provisions § 3.1.1 describes the extent of responsibility for the Contractor in the
Preconstruction Phase which is subject to reimbursement. The Pre-
Construction phase enables the contractor to collaborate with the Owner &
its consultants to develop the project works and to prepare the Control
Estimate for the construction phase.
Budgeting method Preconstruction phase is based on lump sum, hourly billing rates or actual
cost for the Construction Manager and the Construction Manager's
Consultants and Subcontractors. Construction Manager prepares a Control
Estimate which is the sum of the Construction Manager's estimate of the Cost
of the Work and the Construction Manager's Fee. The Control Estimate shall
be used to monitor actual costs and the timely performance of the Work (§
3.2.1).
Pricing Mechanism No Guaranteed Maximum Price for the Construction Phase.
Gain/Pain scheme None in either Preconstruction or Construction phase. The Owner shall pay
the Construction Manager the Contract Sum. The Contract Sum is the Cost
of the Work plus the Construction Manager's Fee.
Decision Making/ Owner retains an Architect. The Construction Manager shall schedule and
Project Management conduct meetings with the Architect and Owner to discuss such matters as
Procedures procedures, progress, coordination, and scheduling of the Work. The
Construction Manager shall also provide recommendations to the Owner
and Architect, consistent with the Project requirements, on constructability;
availability of materials and labour; time requirements for procurement,
installation and construction; prefabrication; and factors related to
construction cost including, but not limited to, costs of alternative designs or
materials, preliminary budgets, life-cycle data, and possible cost reductions
(§ 3.1.3.2).
Risk Management Largely a traditional Cost Price plus Fee approach.
approach
Early Warning Register Not mentioned.
Insurance A list of insurance and bonds is to be detailed in Exhibit B. Insurance
requirements under the exhibit are separated into those coverages that
would typically be provided by the Owner and Construction Manager on all

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 projects (required coverages) and other (optional) coverages that may be
selected by the parties based on their specific needs and the needs of the
Project. Construction Manager to provide client’s liability, professional
liability, pollution liability, maritime liability risks (§ 14.3.1).
Partnering/ The Construction Manager accepts the relationship of trust and confidence
Collaborative established by this Agreement and covenants with the Owner to cooperate
Provisions with the Architect and exercise the Construction Manager's skill and
judgment in furthering the interests of the Owner to furnish efficient
construction administration, management services, and supervision; to
furnish at all times an adequate supply of workers and materials; and to
perform the Work in an expeditious and economical manner consistent with
the Owner's interests (§ 2.2).
Independent Audit/ The Owner and the Owner's auditors shall, during regular business hours and
Open Book upon reasonable notice, be afforded access to, and shall be permitted to
audit and copy, the Construction Manager's records and accounts (§ 10).
Scope of Design The Construction Manager shall exercise reasonable care in performing its
responsibility Preconstruction Services. The Owner and Architect shall be entitled to rely
on, and shall not be responsible for, the accuracy, completeness, and
timeliness of services and information furnished by the Construction Manager
(§ 3.1.1).
IP Provisions Not mentioned.
No claims commitment Not mentioned.
Limitations on Liability Not mentioned.
Termination the Owner may terminate the contract for convenience in either the pre-
construction or construction phase in which case a termination fee applies
(§ 13.1.1).
Dispute Avoidance/ the Owner and Construction Manager may identify an Initial Decision Maker
Resolution to render initial decisions on claims arising from or relating to the Construction
Manager’s Construction Phase services. If the parties do not identify an Initial
Decision Maker, then the Architect will provide initial decisions. For claims
arising from or relating to the Construction Manager’s Preconstruction Phase
services, no decision by the Initial Decision Maker shall be required as a
condition precedent to mediation and binding dispute resolution. It is
possible to select from three choices of binding dispute resolution:
arbitration, litigation or another method that the parties must identify. Other
types of dispute resolution include a dispute resolution board or a mini-trial
(§ 12.1).
Resource https://www.aiacontracts.org/contract-documents/6232471-owner-
construction-manager-as-constructor-agreement
Summary AIA A134–2019 is designed for appointing a contractor to carry out pre-
construction & construction services under a two-stage process. It differs
from AIA A133-2019 in that the second construction phase is not subject to a
maximum guaranteed price. The Pre-Construction phase may include other
Preconstruction Services to be provided by the Construction Manager, such
as providing cash flow projections, development of a project information
management system, early selection or procurement of subcontractors. The
Pre-Construction phase enables the contractor to collaborate with the
Owner & its consultants to develop the project works and to prepare the
Control Estimate for the construction phase.

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 NEC4 – Engineering & Construction Contract (ECC) – June 2017 with amendments October 2020
incorporating Secondary Option X22 Early Contractor Involvement
Project type
Two Stage (ECI) Project type
Origin/History United Kingdom. The first NEC contract – then known as the 'New Engineering
Contract' – was published in 1993. Published by the Institution of Civil Engineers &
Thomas Telford Ltd.
Area of usage Widely used in UK with reported use in South Africa, Hong Kong, Australia & New
Zealand. Now gaining recognition in Continental Europe (International Criminal
Court in the Hague, Oosterweel link in Belgium).
Scope of Usage Building & Civil
Parties Client, Contractor in base version, multiparty partner collaboration is possible if
Option X12 is used.
Contract Documents NEC4 Conditions of Contract June 2017 Core Clauses, Contract Data – Part One /
Part Two, Prices, Schedule of Options (W, X1 to X22 & Y Clauses), Schedule of Cost
Components, Client Scope, Works Information, Site Information, Trust Deed
Subcontracting/ Early Multiparty collaboration is possible if Option X12 is used. Option X12 provides for a
Supply Chain Core Group of members who collaborate in a manner as described in the Partnering
Involvement Information.
ECI Provisions Option X22 ECI can be used (which is NEC4 Option C or E). Stage One & Stage Two
to be defined & included in the Scope. Contractor provides detailed forecast of total
Defined Cost of work to be done in Stage One. Notice to proceed to Stage Two is to
be given by Client when Client and Contractor agree the total of the Prices for Stage
Two and Client confirms the works are to proceed.
Project Scope The Scope is prepared by the Client and referenced in the Contract Data. This is
defined prior to contract award. The Scope describes the criteria which are required
to be achieved and a proposal for it to be changed during the course of the
contract can be proposed by the Contractor. This is subject to the Client’s
acceptance.
Budgeting method The main incentive in the contract is for the Contractor to beat the 'total of the Prices'
after it has agreed the 'total of the Prices for Stage Two. The share is defined as for
any ECC Option C target cost contract by share ranges and share percentage in
the Contract Data. The Client can also choose to define other elements of cost to
be included in the 'Project Cost' and to set a Budget for the Project Costs. Logically,
the other costs to be included will be those that can be influenced by the Contractor.
Then, if the final Project Costs are less than the Budget, the Contractor is also paid a
'budget incentive' over and above the 'normal' Contractor's share under the target
contract.
Pricing Mechanism The ECI secondary option X22 is design to be used only with main options C or E.
Gain/Pain scheme Yes. If NEC4 ECC Option C or D is used then it is detailed in the Contract Data Part
One – a table of Contractor’s share percentages and share ranges A target cost
contract with Contractor’s share percentages and share ranges introduces a
mechanism enabling the contractor, and/or the consultant team, to share in the
benefits of cost savings, but also to bear some of the additional cost when there are
cost overruns.
Decision Making/ There is a key role for the Project Manager (appointed by the Client) in the entire
Project Management administration of the contract. The decisions of the PM if contested are reviewable
Procedures first by a Senior Representative of the Parties, then by an Adjudicator, who is
independent. Either party may call for an Adjudicator to ‘open-up, review and revise’
the PMs decision within 28 days. The Programme is a key document in the NEC3 ECC,
its application is set out in Clause 30. Under Clause 60 there is a set of 21
Compensation Events.

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Risk Management Options A to F cover the various contract types from Lump Sum through Target Cost
approach to Cost Reimbursable & Management Contract.
Early Warning Register Mentioned in Clause 15.2. Early Warning items can be specified by the Client in the
Contract Data – Part One or the Contractor in the Contract Data – Part Two. 'These
are included in the 'Early Warning Register' which is added to throughout the contract
by 'early warnings' required to be notified by Contractor or Project Manager for any
event which might increase the Prices, delay Completion or impair the performance
of the works in use. The Early Warning Register forms the agenda for the required
routine early warning meetings. There are sanctions on the Contractor for not
notifying early warnings. The early warning process is key to the collaborative nature
of the NEC contracts.
Insurance The Client provides the insurances listed in the Contract Data Part One. Contractor
provides the insurance listed in the Insurance Table.
Partnering/ Clause 10.2 details that the parties to act in a spirit of mutual trust and cooperation.
Collaborative Provisions

Independent Audit/ Clause 52 details that the Contractor keep records of Defined Cost and other
Open Book amounts determined at open market or competitively tendered prices. The Project
Manager can inspect the accounts and records.
Scope of Design Extent of Contractor design is to be detailed in the Scope. Unless Option X15 is used
responsibility then a general fit for purpose design obligation is implied. Under Option X15 the
Contractor is not liable for a Defect unless it failed to carry out design using the skill
and care normally used by professionals designing similar works.
IP Provisions Clause 22.1 details that the Client may use and copy the Contractor’s design for any
purpose connected with the construction or use of the Works unless otherwise state
in the Scope. Option X9 states the Client owns the Contractor’s rights over material
prepared for the design of the works except as stated otherwise in the Scope.
No Blame No Claim Not mentioned
Limitations on Liability Option X18 can be used to limit the Contractor’s liability for:
• consequential loss
• for loss of or damage to the Client’s property
• Defects due to its design which are not listed on the Defects Certificate
and for any liability under the contract.
It can also include an end of liability date.
Termination The parties can terminate for 22 different reasons (Clause 90). There is no termination
for Client convenience, but Client can terminate on completion of Stage One phase
if it elects not to proceed with Stage Two if the total of the Prices for Stage Two are
not agreed with the Contractor or if the Contractor has failed to achieve the
performance requirements stated in the Scope. The Client may then proceed to
appoint another contractor to complete the Stage Two works.
Dispute Avoidance/ Resolution first to Senior Reps otherwise escalation using Option W1 & W2 for
Resolution adjudication under UK legislation or outside UK. Option W3 allows for a Dispute
Avoidance Board.
Resource https://www.neccontract.com/NEC4-Products/NEC4-Contracts
Summary The NEC4 ECC contract is one of the most popularly used within the UK Construction
market. It uses a straightforward structure of Core Clauses with an extensive set of
additional Secondary Option Clauses (X1 to X23) for the parties to choose from. The
NEC4 ECC Contract X22 provides for early contractor involvement with Stage One
and Stage Two phases as defined in the Scope. NEC offers support to users in the
form of a detailed User Guide and training courses, webinars which are held across
the UK, Asia Pacific, Australasia and Africa as well as the support of User Groups. See
NEC4 X22 Practice note. https://bit.ly/3LYxN8S.

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 CCDC 30 – 2018 Integrated Project Delivery Contract

Project type Two Stage (ECI) Project type

Origin/History Canada. Published by the Canadian construction Documents Committee.

Area of usage Canada no reported use internationally.

Scope of Usage Building & Civil

Parties Single, multi-party contract between Owner, Consultant, Contractor, and any
other IPD parties.

Contract Documents Articles of Agreement, including Annex – Other Parties – Definitions - General
Conditions - Schedule A – risk pool distribution - Schedule b – allowed costs -
Schedule c – time-based costs - Schedule d – contract tasks matrix - Schedule e –
added party - Schedule F – Use of BIM - Validation Report as accepted by the
Owner - Construction Documents and any other Contract Documents.

Subcontracting/ Early Subcontractors and subconsultants work either for Consultant or Contractor and
Supply Chain form part of the Project Implementation Team providing working-level guidance
Involvement for the implementation of elements of the Project.

ECI Provisions The activities of the PMT during the Design/Procurement Phase include authorizing
early procurement of certain systems, materials or equipment & preparation of the
Validation Report otherwise there are no clearly identifiable early contractor
provision other than production of the Base & Final Cost Target.

Project Scope Project Management Team prepares the Business case together with Design
narratives and systems validation as part of the Validation Report. The
Design/Construction Team performs Design Services to achieve the requirements
specified in the Validation Report. The Design Services are performed using Target
Value Design, which shall endeavour to create additional value by identifying
alternative systems, means and methods to reduce capital expenditures reducing
life-cycle costs, analysing and improving workflow, improving constructability and
functionality, providing more operational flexibility, and endeavouring to reduce
the actual Reimbursable Costs while maintaining or increasing the quality and
overall function of the Project.

Budgeting method Base Target Cost is prepared which is the target cost of the Design Services and the
Work which consists of all Reimbursable.

Costs to complete the Project (Article 4.1.2.2). Final Target Cost is the final target
cost developed by the PMT during the Design/Procurement Phase (Article 4.2.3.11).

Pricing Mechanism The pricing structure is cost plus with a Final Target Cost.

Gain/Pain scheme Yes. A Risk Pool is created it is an amount that is established by the PMT during the
Validation Phase, revised upon the addition of Added Parties, if any, and
distributed amongst the Design/Construction Team once the Final Actual Cost is
calculated. Risk Pool is the sum of the profits of each member of the
Design/Construction Team, as set out in Article A-4 of the Agreement.

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Decision Making/ Project Management Team (PMT) to provide management-level guidance for
Project Management collaborative planning, design and construction of the Project to achieve the
Procedures Project Objectives. The PMT shall organise Project Implementation Teams into
interdisciplinary, cross-functional teams that will vary depending upon the stage of
the Project (Article 3.3.1).

Risk Management The profits of the design/construction team are identified and allocated to a risk
approach pool that remains at risk subject to the achievement of mutually agreed project
objectives (Article 4).

Early Warning Register The Validation Report also includes a Project risk analysis, Validation Report is a
written report as described in paragraphs 4.1.3 and 4.1.4 of Article 4.1 – Validation
Phase.

Insurance The Consultant, the Contractor and the Other IPD Parties shall provide Automobile
Liability Commercial General Liability Insurance. The PMT provides Wrap-Up general
liability insurance, Builders’ Risk Broad Form property insurance Boiler and
Machinery/Equipment Breakdown insurance & Project professional liability
insurance in joint names (Article 10.1).

Partnering/ the Contract establishes a relationship of mutual trust and good faith among the
Collaborative members of the IPD Team (Article 2.2.) Each member of the IPD Team shall make
Provisions reasonable commercial efforts to establish and maintain an atmosphere of mutual
trust, respect and tolerance to work together and individually to achieve
transparent, cooperative and timely exchange of relevant information relating to
the Project, and to share ideas for improving Project delivery to actively promote
harmony, collaboration, and cooperation among all entities performing on the
Project (Article 2.1.1.2).

Independent Audit/ Members of the Design/Construction Team shall keep full and detailed accounts
Open Book and records necessary for the documentation of the Reimbursable Costs (Article
1.6.1.). Members of the IPD Team shall be afforded reasonable access to all of the
Design/Construction Team’s records relating to the Reimbursable Costs (Article
1.6.2).

Scope of Design The Design Services shall be performed using that skill and care used by other
responsibility competent licensed architects, engineers and consultants skilled in designing
projects at the Place of the Work that are similar in size, scope, quality, and
complexity (Article 2.3.4).

IP Provisions Copyright for the design and drawings and electronic media, prepared on behalf
of the Design/Construction Team belongs to the author who prepared them. Plans,
sketches, drawings, graphic representations, and specifications, including, but not
limited to computer generated designs, are instruments of the authors’ services and
shall remain their property, whether or not the Work for which they are made is
executed and whether or not the Owner has paid for the Design Services. (Article
1.1.6).

No Claims Owner, Consultant, Contractor, and Other IPD Parties waive all claims against each
other arising from or related to the Contract, except solely for direct loss and
damages arising from claims arising from a party’s wilful default; claims arising from
any express warranty obligations of the parties or an obligation to provide third-
party warranties under the Contract Documents; claims for payment of amounts
due under the Contract by any party to the Contract against any other party;
claims by third parties; claims for failure to provide insurance coverage; claims for
damages resulting from substantial defects or deficiencies in the Design or the Work
which were not known, or reasonably could not have been discovered, prior to the

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 end of the Warranty Phase. (Article 11.1.1) Owner, Consultant, Contractor, and
Other IPD Parties waive claims against each other for indirect, special, punitive or
exemplary damages arising from or related to the Contract, and also for any
consequential damages including without limitation loss of anticipated profit, loss
of revenue, loss of business opportunities, or loss of use, howsoever caused (Article
11.1.2).

Limitations on Liability The Validation Report contains any agreed limitations of uninsured liability (Article
4.1.4.1 (9)).

Termination The Owner may terminate the Contract at any time prior to the Owner’s
acceptance of the Validation Report thereafter Owner may only terminate the
Contract If the Design/Construction Team fails to correct a specified default (Article
9.3.1).

Dispute Avoidance/ PMT shall make all reasonable efforts to resolve their dispute by amicable
Resolution negotiations If the PMT is unable to reach unanimous agreement to resolve their
dispute, the dispute shall be referred to the SMT for resolution. If the SMT cannot
resolve the dispute the dispute shall be submitted to mediation If a dispute is not
resolved by mediation any one of the parties may refer the dispute to be finally
resolved by arbitration (Article 8.1).

Resource https://www.ccdc.org

Summary The CCDC 30 has a pricing structure of cost plus with a Final Target Cost which can
only be exceeded for limited reasons. The profits of the design/construction team
are identified and allocated to a risk pool that remains at risk subject to the
achievement of mutually agreed project objectives. CCDC 30 also outlines the
project management structure of an IPD project including the senior management
team, project management team and project implementation teams. The CCDC
30 is a hybrid of a Two Stage (ECI) Project and Partnering type and is worthy of use
outside its home turf of Canada.

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Model ‘BOUWTEAM’ (also known as ‘Construction Project Team’) agreement DG 2020, issued in May 2020

Project type Two Stage (ECI) Project type

Origin/History This new model is the initiative of 5 people, all consultants in the Dutch
construction industry. They took this initiative because they realized that there
was a need for a revised approach towards ECI.

Area of usage Netherlands only (in Dutch language, but for specific projects an English version
has been used)

Scope of Usage Building & Civil

Parties Client, Contractor. Other participants work for either Client or Contractor, they
are third parties.

Contract Documents Model Bouwteamovereenkomst DG 2020 including Annexes. The latter are to
be filled in by the client/contractor, or jointly.

Subcontracting/ Early The model is a two-party agreement. Subcontracts are in place for other
Supply Chain participants: e.g. architect, engineers, cost management, subcontractors with
Involvement a specific field of expertise.

ECI Provisions The early contractor involvement is applied on the first phase. The second phase
is then using a standard contract or an integrated contract. For these two
phases different standard contracts are used.

Project Scope The Scope is prepared by the Client and is used as the basis for the tender. After
tender award, the detailed design/specifications are worked out in the
Bouwteam phase. Depending on the specific project goals (optimization,
sustainable goals, innovation, risk mitigation) the result of the Bouwteam phase
might be altered and is always more detailed than at the start of the Bouwteam
phase.

Budgeting method Prior to entering the contract, the client is obliged to have informed the
contractor about his budget, see Article 3.4. There is no strict method for setting
the budget at the beginning of the Bouwteam phase. During the BT-phase, an
open book pricing method is applied. At the end of phase 1, the contractor
offers his firm fixed price for phase 2 (in general). There is an extensive procedure
in Article 12 in the event the client and contractor are unable to reach an
agreement on the final price for phase 2. There are several ways of setting a
price for the contractor costs in the first phase. The basis for this in all methods is
that the contractor gets paid for his work in the first phase.

Pricing Mechanism See above, reimbursement for first phase and, in general for phase 2 a fixed
price.

Gain/Pain scheme No. In practice, there is a variation in the way contractors are paid in phase 1
and (in general) a fixed price for phase 2. A pain/gain incentive is (very) rare.

Decision Making/ In article 9 the decision-making principles are described: decisions are to be
Project Management taken mutually, by a majority of votes in the Bouw Team, in which the client has
Procedures a veto, and at the beginning of phase 1, parties are obliged to work out the
process in further detail.

Risk Management Article 6.1 states the client is to appoint a member of the Bouw team as
approach responsible for the management and updating of the risk file.

Early Warning Register There is no register, but the obligation is explicitly in the contract, for client and
contractor to notify issues as they arise.

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Insurance Article 11.5 states that the contractor needs have insurance (to be specified for
each specific project)

Partnering/ There is a separate article (5) about partnering. Summarized:

Collaborative
Provisions • about involvement of third parties during the ECI process (phase 1);
• about obligations on role behaviour and attitude for every member of the
ECI team, including third parties, who have not signed the ECI contract. It
contains the following elements:
- that they act flexibly, proactively and transparently;
- that notwithstanding the nature of the bilateral agreement as
mentioned in Clause 5.1, they are focused and contribute to proper
cooperation in the Construction Project Team;
- that they promote the Construction Objective and the legitimate
interests of the other Participants;
- that they do not avoid points of discussion with other Participants, but
devote effort to putting these to discussion in good time, in discussions
oriented towards a resolution;
- that they give notice of their own mistakes and put these to discussion;
- that they proactively search in good time and in a positive manner for
solutions to their own mistakes
- and to mistakes made by other Participants like acting flexible, pro-
active and transparent.

Independent Audit/ Yes, open book as a leading principle described in Article 8.2.
Open Book

Scope of Design The contractor is responsible for what they advise or produce in phase 1, based
responsibility on the principle that they act as a consultant. This responsibility is based on the
standard contract DNR 2011. See Article11.

IP Provisions Article 14 details that the Client may use and copy the Contractor’s design for
any purpose connected with the construction or use of the Works unless
otherwise state in the Scope.

No Blame No Claim Not included.

Limitations on Liability Article 11 describes in the standard model that the contractor’s liability is
capped to the amount of the fee of the contractor in phase 1. The liability in
phase 2 is not arranged in this contract, but needs to be addressed in the
execution contract. See also our footnote in the model.

Termination The parties can terminate for some reasons (bankruptcy, etc.) Client can
terminate on completion of phase One if there is no agreement on price for
phase two. This after the procedure (Art.12) has run, without resolution the client
may then appoint another contractor to execute the work in phase 2.

Dispute Avoidance/ Dispute escalation proc. detailed in art.12. Use of experts from the Dutch
Resolution Council of Arb. for the Constr. Industry. Gen. disputes are adjudicated at either
the Court or the Council. (See Article 16)

Resource https://www.duurzaamgebouwd.nl/bouwteams

Summary The model ‘Bouwteamovereenkomst’ is a bilateral contract between client and

contractor and provides a complete set of rules for collaborative working in
phase 1, within a two-phase contract. It provides provisions about goals, setup
of the team, corporation, behaviour, obligations of the client and members in
the team, decision making, payment, liability and the process of agreeing on a
fair price for Phase 2. It can be used in combination with standard models for
the execution of project, classic as well as integrated.

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 AIA – Document C191 – 2009 – Standard Form Multi-Party Agreement for Integrated Project Delivery – 2009

Project type Project Partnering type

Origin/History USA. Published by The American Institute of Architects (AIA). The AIA offers a wide
range of standard form contract documents

Area of usage USA with reported use in Canada.

Scope of Usage Building

Parties Client, Contractor, Architect, multiparty partner collaboration is provided for.

Contract Documents Standard Form Multi-Party Agreement, General Conditions, Owner's Criteria, Target
Criteria Amendment, Target Cost Breakdown, Project Definition, Project Goals,
Integrated Scope of Services, Project Schedule, Digital Data Protocol (BIM).

Subcontracting/ Early The Parties shall identify key Project participants such as separate contractors,
Supply Chain Subcontractors, Consultants and suppliers critical to the definition and
Involvement accomplishment of Project Goals and involve them at appropriate times for the
benefit of the Project.

ECI Provisions The initial phases are Conceptualisation and Criteria Design (§ 3.1.2). These are delivered
under multiparty collaboration. As a minimum the preliminary evaluation shall include
alternative approaches to design and construction & take into consideration cost
information, constructability and procurement and scheduling issues.

Project Scope The Project work plan shall set forth the process by which the Project Management
Team proposes to develop a Project Definition consistent with the Owner's Criteria. The
Owner’s Criteria is set by the Client (Exhibit C).

Budgeting method Exhibit AA provides the Target Cost Breakdown, a detailed itemization of the various
elements of the Target Cost. At the conclusion of the Criteria Design phase, the Parties
other than the Owner shall agree upon a Target Criteria Proposal, making all such
adjustments to the Project Definition and Project Schedule as necessary. If the Owner
accepts the Target Criteria Proposal, the agreed-to Target Criteria, including the
Target Cost, shall be set forth in the Target Criteria Amendment (§ 3.2.1)

Pricing Mechanism Target Cost. The Parties jointly develop a Target Criteria Proposal for the Client's final
review and acceptance (§ 5.1). Set in a Target Criteria Amendment. In the event the
Parties are unable to arrive at a mutually agreeable Target Cost or are otherwise unable
to execute the Target Criteria Amendment, the Agreement shall terminate (§ 5.2).

Gain/Pain scheme Upon final completion of the Project, if the Actual Costs are less than the Target Cost,
then the Owner shall pay to the other Parties, as Incentive Compensation, a portion of
the difference between the Actual Costs and the Target Cost. (§ 3.2.1) When Actual
Costs for the Project exceed the Target Cost the Owner can specify whether or not it
is required to reimburse the other Parties for any further labour costs incurred.

Decision Making/ The Parties manage and direct the Project through their representatives on the Project
Project Management Executive Team (PET), comprised of one representative from each Party. (§ 2.2.2)
Procedures Decisions by the PMT shall be unanimous. If the team representatives are unable to
reach a unanimous decision on a matter, any Party's PMT representative may refer the
matter to the Project Executive Team (PET) for decision. Issues that are not resolved by
the PET may be referred by any Party's PET representative for resolution under Dispute
Resolution. (§ 2.2.3).

Risk Management The Project shall be delivered in a collaborative environment and shall endeavour to
Approach align individual interests with those of the Project. (§ 1.1.1)

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Early Warning Register Not mentioned.

Insurance AIA Document C191–2009 contemplates that the Parties will retain an insurance
consultant to provide assistance with respect to integrated insurance products such
as Owner or Contractor-Controlled Insurance Programs. (§ 7.1)

Partnering/ Each Party shall collaborate with the other Parties and key Project participants toward
Collaborative the successful accomplishment of the Project. Collaboration shall occur during all
Provisions aspects of design and construction of the Project (§ 3.1.1)

Independent The Owner and the Owner's auditors shall, during regular business hours and upon
Audit/Open Book reasonable notice, be afforded access to, and shall be permitted to audit and copy,
the other Parties' respective records and accounts. Agreed upon rates, unit prices, lump
sums and other agreed upon fixed dollar amounts shall not be subject to audit. (§ 4.6.2)

Scope of Design The Architect shall provide the Architect's Services, including planning and design. No
Responsibility fit for purpose. The Architect shall perform the Architect's Services consistent with the
professional skill and care ordinarily provided by architects practicing in the same or
similar locality under the same or similar circumstances. (§ 3.3.1.2)

IP Provisions If any Party receives information specifically designated by another Party as ‘business
proprietary’, the receiving Party shall keep such information strictly confidential and
shall not disclose it to any other person, except to its employees and those who need
to know the content of such information in order to perform services or construction
solely and exclusively for the Project (§ 4.6.3).

No Claims The Parties waive all claims against each other, except this waiver shall not extend to
claims arising out of a Party's wilful misconduct, arising out of any express warranty
obligations or an obligation to provide third-party warranties, arising out of any express
indemnification obligations, to the extent insurance proceeds are available through
insurance, for damages arising from liens, claims, security interests or encumbrances
against the Project. (§ 8.1)

Limitations on Liability The Parties waive claims against each other for consequential damages arising out of
or related to the Contract. (§ 8.2.1)

Termination The Client may, without cause and upon seven days' written notice to the Parties,
suspend the Project or one or more Party's performance under this Agreement the
Client then paying all sums due prior to the suspension (§ 10.1.1). The Agreement shall
terminate upon the Parties' failure to execute the Target Criteria Amendment (§
10.2.1). Upon such termination, the Client shall pay to the other Parties all amounts due
and owing under the Contract Documents at the time of such termination.

Dispute Avoidance/ Disputes that are not resolved by the Project Executive Team or Project Management
Resolution Team will be referred to the Dispute Resolution Committee (§ 2.3.1). The Dispute
Resolution Committee will consist of Party Representatives in senior management with
broad organizational responsibilities. It is possible to select from three choices of
binding dispute resolution: (1) arbitration before the Project Neutral, (2) arbitration or
(3) another method that the Parties must identify. Other types of dispute resolution
include litigation, dispute resolution board or a mini trial. (§ 9.1-9.6)

Resource https://www.aiacontracts.org/contract-documents/18471-multi-party-agreement----ipd

Summary The American Institute of Architects has an extensive array of standard form contracts
available for use in a number of varying contract arrangements including for
integrated project delivery either in the pre-construction phase or in the design-
construct phase. These can be reviewed on the AIA website as sample versions and
editable versions can be purchased for a reasonable amount.

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 NEC4 – Alliance Contract – June 2018

Project type Project Partnering type

Origin/History United Kingdom. The first NEC contract – then known as the 'New Engineering
Contract' – was published in 1993. Published by The Institution of Civil Engineers
and Thomas Telford Ltd.
Area of usage UK no reported use internationally was identified.
Scope of Usage Building & Civil
Parties Client, Consultant, Contractor, Subcontractor, Suppliers
Contract Documents NEC4 Conditions of Contract June 2018 Core Clauses, Contract Data – Part
One/Part Two, Schedule of Options (X & Y Clauses), Schedule of Cost
Components, Trust Deed
Subcontracting/Early Single multi party contract so that contractors, designers or suppliers below first
Supply Chain tier contractors or designers can become members of the Alliance. If they wish to
Involvement remain outside the Alliance they are contracted in the traditional way through a
separate bi-party contract as a subcontractor or supplier to one or more
members of the Alliance.
ECI Provisions Option X22 ECI can be used with the NEC4 Alliance Contract. Stage One and
Stage 2 to be defined and included in the Scope. Contractor provides proposal
for Stage Two. Alliance Board accepts, rejects or asks for a revised Stage Two
Proposal. If the Alliance Board does not accept the Stage Two Proposal the Client
may appoint another organisation to complete Stage Two.
Project Scope The Scope is referenced in the Contract Data and is separate from the Client’s
Requirements. The Client’s Requirements is a part of the Scope that can be
changed by the Client without any agreement by the other alliance partners. The
Scope describes the criteria which are required to be achieved and can be
changed by the Alliance Board during the course of the contract.
Budgeting method Budget Information is included in the Contract Data Part One as a forecast of
total amount paid to Alliance and forecast total Client’s costs. The Client would
appear to set the Budget & prepares the budget information. The budget
information is then priced by the Alliance Members. Ideally X22 Stage One
provision would allow for earlier budget reality checking.
Pricing Mechanism Target Cost. Financial model similar to NEC4 ECC Option C or D.
Gain/Pain scheme A reward scheme is detailed in the Performance Schedule which is agreed on by
the contract parties prior to contract signing.
Decision Making/ Alliance Board formed from each member of the Alliance including the Client.
Project Management Alliance Manager reports to the Alliance Board. (Clause 21) Management in
Procedures accordance with the Implementation Plan which should be a precise statement
of how the Alliance intends to provide the Works. Despite a NEC4 User Guide there
is little in the way of guidance as to management procedures and the drafting of
documents which are to be incorporated into the Contract Data – Part One.
Risk Management Alliance members collaborate with each other to achieve the Alliance
approach Objectives and the partner objectives of every partner to support delivery on a
best for project basis (Clause 20).
Early Warning Register Described in detail (Clause 15). As per other NEC4 Contracts Early Warning items
can be specified in the Contract Data – Part One. These are then developed
further following contract award by means of early warning meetings and
register. If a decision needs a change to Scope the Alliance Board is notified.
Insurance Each member of the Alliance provides insurance against death or personal injury
to its employees. Client provides loss or damage to the Works, Equipment, other

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 property except the Works. (Clause 84) Partners to provide insurance which may
be specified in the Contract Data
Partnering/ Wording identical to rest of NEC4 Suite. To act in a spirit of mutual trust and
Collaborative cooperation (Clause 10.1).
Provisions
Independent Audit/ Partners keep records of Defined Cost and other amounts determined at open
Open Book market or competitively tendered prices. The Partners allow the Alliance Manager
and the Client to inspect at any time the accounts and records.
Scope of Design Not mentioned unless detailed in the Scope. The Alliance carries out the design
responsibility necessary to provide the Works so inferred joint responsibility/liability (Clause 23).
IP Provisions The members of the Alliance retain copies of drawings, specs which record their
design for the [specified] period of retention. (Clause 23.5) Client may use and
copy the Alliance’s design for any period connected with construction unless
otherwise stated in the Scope.
No Claims Members of the Alliance agree to give up any enforceable right or obligation at
law except for an event for which the failing member has a liability (Clause 94.1).
The Alliance Contract includes for 7 compensation events similar in style to the
rest of the NEC4 suite (Clause 60).
Limitations on Liability Option X18 can be used to state partner’s liability and the end of liability date.
Termination The Alliance Board can terminate for 13 different reasons (Clause 90), wording
follows NEC4 ECC format. No termination for Client convenience.
Dispute Avoidance/ Disputes referred to Alliance Board. The AB refers the dispute to an independent
Resolution expert for an opinion or refers to senior reps of each member of the Alliance. The
senior reps may jointly appoint a mediator to assist them in the resolution of any
issues. (Clauses 95-97).
Resource https://www.neccontract.com/NEC4-Products/NEC4-Contracts
https://bit.ly/35pK9WS
Summary The NEC4 Alliance Contract is ‘the next level’ in the NEC suite of contracts. All
parties involved sign up to the same single contract which makes it a true alliance
contract. The Alliance has an Alliance Board and an Alliance Manager. The
Alliance itself consists of all parties who have joined together to deliver the
project. The Alliance can include subcontractors and when it does, these
subcontractors become a partner with the same standing as the other Alliance
members. This contract does away with the ‘them and us’ principles and puts the
interests of the project first. Important to keep in mind is the ‘no blame’ culture
pursuant to which there are severe restrictions on the parties' abilities to dispute
certain types of claims.

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 PPC2000 – Issued in 2000 and amended in 2008 & 2013

Project type Project Partnering type

Origin/History United Kingdom.

Area of usage UK no reported use internationally was identified
Scope of Usage Building & Civil projects
Parties Client, Consultant, Contractor, Client Representative, Specialist Partnering Teams
members which could include subcontractors and suppliers
Contract Documents Project Partnering Agreement and the Partnering Terms, Partnering Timetable,
Consultant Services Schedules and Consultant Payment Terms, Project Brief,
Project Proposals, Price Framework, KPl’s and Targets, Risk Register and any
additional and amended Partnering Documents developed in accordance with
the Partnering Terms
Subcontracting/Early Prospective Specialist Subcontractors and suppliers could be included as
Supply Chain Partnering Team members. a project bank account option allows payments to
Involvement be made into a designated account so as to assist onward cashflow to sub-
contractors and suppliers and thereby attract more competitive prices.
ECI Provisions The contract is two-stage. This means that the Team members are selected and
appointed on the basis of an initial process involving agreement of budget, profit,
central office overheads, site overheads and other price elements that can be
assessed at the point of selection, prior to final pre-construction development of
the requirements and designs. PPC2000 covers both pre-construction and
construction phase and allows the parties to move from one stage to the other
within a single contract. This however does not take away the right of the Client
to terminate for certain reasons following the first stage.
Project Scope The Scope is referenced in the Project Brief and Project Proposals. The Client’s
Requirements is a part of the Scope that can be changed by the Client without
any agreement by the other alliance partners. The Scope describes the criteria
which are required to be achieved and can be changed by the Alliance Board
during the course of the contract.
Budgeting method An initial process involving agreement of budget and other price elements that
can be assessed at the point of selection. The remaining details of pricing and
programme are then worked up and agreed during the preconstruction phase
by sub-contract tenders or business cases run by the contractor with client and
consultant participation, eventually building up to set an Agreed Maximum Price.
The contract describes and sets out processes for what is to happen during the
pre-construction phase.
Pricing Mechanism A fee is paid to those involved in the preconstruction phase. For the construction
phase, PPC 2000 allows for fixed price, or Target Price or even remeasurement if
appropriate.
Gain/Pain scheme The Partnering Team members shall implement any shared savings, shared added
value and pain/gain Incentives described in the Project Partnering Agreement
and otherwise recommended by the Core Group and approved by the Client.
Decision Making/ PPC 2000 provides for a ‘Core Group’, whose function is to review and stimulate
Project Management progress and implementation of the Partnering Contract. The Core Group consists
Procedures of individuals named by Team members. The Contract provides for mandatory
attendance at Core Group meetings, a quorum, and decisions by consensus of
those attending. Consensus is defined as ‘unanimous agreement following
reasoned discussion’.
Risk Management All and any proposed risk contingencies shall be notified by the contractor to the
approach client, but shall only be incorporated in the Price Framework and form part of the
Agreed Maximum Price if and to the extent that any such risk contingency has

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 been approved by the client after the contractor and other Partnering Team
members with relevant expertise have first reviewed each relevant risk.
Early Warning Register PPC2000 incorporates model forms of Partnering Timetable and Risk Register so as
to emphasise the importance of these documents as tools to support efficient
project processes. The Partnering Team members operate an Early Warning
system, whereby each Partnering Team member notifies the others as soon as it is
aware of any matter adversely affecting or threatening the Project or that
Partnering Team member's performance under the Partnering Contract.
Insurance Each member of the Alliance provides insurance against death or personal injury
to its employees. Client provides loss or damage to the Works, Equipment, other
property except the Works. (Clause 84) Partners to provide insurance which may
be specified in the Contract Data.
Partnering/ Partners agree to working in mutual cooperation to fulfil their agreed roles and
Collaborative responsibilities and apply their agreed expertise in relation to the Project, in
Provisions accordance with and subject to the Partnering Terms attached to this Project
Partnering Agreement and the other Partnering Documents described in or
created pursuant to the Partnering Terms based on trust, fairness, mutual co-
operation, dedication to agreed common goals and an understanding of each
other's expectations and values.
Independent Audit/ The Partnering Team members shall keep such records of their activities in relation
Open Book to the Project as are required by the Partnering Documents and permit inspection
of their activities and records in relation to the Project by other Partnering Team
members and by any third parties stated in the Project Brief.
Scope of Design Consultants are part of the Partnering Team. The Lead Designer and the other
Responsibility Design Team members shall develop the design and process of the Project, in
accordance with clause 8, with the objective of achieving best value for the
Client. The duty of care and warranties of the Partnering Team members are
described in clause 22 of the Partnering Terms. The default position is that of
‘reasonable skill and care’ respective to each Member's specific role. Specific
arrangements can be set out in clause 22 of the ‘Project Partnering Agreement’.
IP Provisions Each Partnering Team member shall retain Intellectual Property Rights in all
designs and other documents that it prepares in relation to the Project, and grants
to the Client and the other Partnering Team members an irrevocable, non-
exclusive, royalty-free licence to copy and use all such designs and documents
for any purpose relating to completion of the Project.
No Claims Not stated. Change management is an accepted part of the PPC2000 Contract.
Limitations on Liability No specific limitations on liability are mentioned. The Contractor is liable for, and
shall indemnify the Client against, any liability, damage, loss, expense, cost, claim
or proceedings in respect of personal injury to or death of any person and in
respect of loss of or damage to any property. The PPC 2000 provides an option to
amend its clause 22.1 to include bespoke wording in the Project Partnering
Agreement to adjust the parties' duty of skill and care towards each other. This
can include proportionate sharing of responsibility, or alternative arrangements.
Termination The Client may terminate the appointments of all Partnering Team members if,
due to non-achievement of any of the pre-conditions set out in clause 14.1 or for
any other reason not reasonably foreseeable by the Client arising at any time
prior to the date of the Commencement Agreement, it no longer wishes to
proceed with the Project. If at any time any Partnering Team member, other than
the client or the contractor shall breach materially the Partnering Contract and
shall not remedy such breach within ten (10) Working Days from the date of notice
from the client, the client or the contractor as appropriate may terminate the
appointment under the Partnering Contract of the Partnering Team member in
breach by notice to that Partnering Team member with immediate effect.
Dispute Avoidance/ the Partnering Team members involved in a difference or dispute, guided as
Resolution necessary by the Partnering Adviser, shall apply the Problem-Solving Hierarchy

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 described in the Project Partnering Agreement and shall use reasonable skill and
care to ensure that their employees named in the Problem-Solving Hierarchy shall
express their views and propose their solutions within its stated timetable in seeking
to achieve an agreed solution to the notified difference or dispute. Disputes are
escalated to the Core Group and if not resolved are subject to conciliation or
mediation. This is without prejudice to the rights of any Partnering Team member
involved in a difference or dispute to refer it to adjudication. Any difference or
dispute that is not resolved by adjudication may be referred to the courts or an
arbitrator as stated in the Project Partnering Agreement.
Resource www.ppc2000.co.uk
Summary PPC2000 Partnering Contract is the brainchild of Professor David Mosey an
acknowledged expert in the field of early contractor involvement. It incorporates
many best practice matters such as early supply chain involvement thereby
improving buildability and supporting a broad-based specialist and supply chain
management whilst also coupled with risk analysis, management and fair
allocation, strong project management and programming with an open and
good exchange of information between the Core Group and Partnering Team. It
has been readily promoted for use on a number of UK government projects which
are open to whole life costing and value engineering. The Contract has a role for
a Partnering Advisor to guide the project participants through the partnering
process.

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 National Alliance Contracting Guidelines - Project Alliance Agreement (PAA) –
latest edition September 2015

Project type Project Partnering type

Origin/History Australia. Published by the Australian Government – Department of Infrastructure &

Regional Development.
Area of usage Australia no reported use internationally.
Scope of Usage Building & Civil
Parties Client, Contractor, but other Participants are possible.
Contract Documents Project Alliance Agreement, Agreement Particulars, Alliance Charter, Responsibilities
Matrix, Project Owner’s VFM Statement, Reimbursable Costs, Corporate Overhead &
Profit, Risk or Reward Regime, Payment Procedures, Insurance Policies, Project
Proposal, Termination Payment, Client Representative, Issue Resolution Procedure,
Parent Guarantee, Form of JV Agreement.
Subcontracting/ Early Subcontract is any contract or purchase order, or arrangement made in respect of
Supply Chain the Works between a Participant (not the Client) and a Subcontractor Subcontracts
Involvement may only be entered into by any or all of the Participants on a Best for Project basis
and otherwise in accordance with the Contracting Strategy.
ECI Provisions No specific early contractor involvement provisions are stated however by its very
nature a Project Alliance incorporates the early involvement of participants.
Budgeting method Target Out turn Cost (TOC) is detailed in the Project Proposal, being the estimate of
all Reimbursable Costs, Corporate Overhead and Profit and Risk & Contingency
Provisions. The Participants will prepare a TOC Validation Report as part of the Project
Proposal. The Client must determine whether Corporate Overhead and Profit will be
payable to the Participants as: either – a mark-up percentage on the actual
Reimbursable Costs incurred; or – as a fixed amount with reference to the
Participants’ Reimbursable Costs component of the TOC; or – as a fixed dollar figure.
Pricing Mechanism Target Outturn Cost subject to revision only in accordance with change order
provisions.
Gain/Pain scheme Yes. Two alternatives are provided. Gainshare Amount (if any) if, under the Risk or
Reward Regime, a Gainshare Amount is payable; plus or minus (as the case may be).
Client may benchmark the performance of the Participants against the performance
of other alliances delivering other works or projects similar to the Works.
Decision Making/ The Participants have established the Alliance Leadership Team (ALT). The ALT
Project Management comprises representatives, each to be a senior member of the relevant Participant’s
Procedures organisation. The roles and responsibilities of the ALT are fully described in the
Governance Plan and the Responsibilities Matrix No decision can be made by the
ALT unless the decision is unanimous. Note certain decisions are reserved to be made
for the unilateral decision-making of the Project Owner (rather than the ALT) and
obliges the Participants to comply with any decision made by the Project Owner in
respect of matters such as suspension, a significant event which impacts the Works,
third party claims and the decision to terminate the Agreement where the Project
Owner has such a right.
Risk Management Alliance Principles are all Participants win, or all Participants lose, based on achieved
approach project outcomes, risks and responsibilities are shared and managed collectively by
the Participants, rather than allocated to individual Participants All important
decisions are made, and processes and systems are adopted, on a Best for Project
basis.
Early Warning Register Not mentioned.
Insurance Client takes insurance in joint names of the participants, subcontractors for Works
insurance/ Combined General Liability and Professional Indemnity and motor
vehicle. Participant(s) take out Construction & Equipment insurance, motor vehicle,

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 workers compensation. Excesses considered a direct cost and do not change the
target price.
Partnering/ In exercising their rights and performing their obligations under the Agreement, the
Collaborative Participants agree at all times to act in Good Faith. Good faith relates to the
Provisions behaviours and shared cultural values that the Participants aim to achieve in
delivering the alliance project, including cooperation and communication between
the Participants, and a requirement to always be fair and honest and act with
integrity.
Independent Audit/ Yes. Each Participant commits to make their records and other documentation that
Open Book relate to the Works available to each other (or each other’s nominated auditor) on
request. All transactions are fully open book.
Scope of Design The Participants must exercise Diligence in the management and execution of all
Responsibility design work, design development, design review, documentation, superintendence,
administration, manufacture, fabrication, supply, installation, erection, construction
and testing of the Works so as to ensure that the Works will be fit for the purpose and
of the quality and standard of work that is stated in the Scope of Works.
IP Provisions Ownership of Intellectual Property in any drawings, documents, any other
information existing prior to the date of the Agreement relating to or connected with
the Works (Pre-existing Intellectual Property Materials) remains with the Participant
who created the Pre-existing Intellectual Property Materials. The Participant grant to
the Project Owner an irrevocable, non-exclusive, royalty free licence to use the
Intellectual Property in the NOPs’ Pre-existing Intellectual Property Materials for the
Works and for any operation, maintenance, upgrade, augmentation, selling or
decommissioning of the Project.
No Claims The Participants commit to a ‘no-blame’ culture between them in relation to
disputes, errors, mistakes, defects, poor performance and other issues which may
arise; and the prompt and mutual resolution of all disputes, differences and other
issues by all Participants within the framework created by the Agreement. The
Participants agree to no litigation or arbitration between them. The Participants must
resolve the issue internally and otherwise comply with the procedure for the
resolution of issues.
Limitations on Liability Not mentioned. Exceptions to the no litigation or arbitration principle is where a
Participant has breached a Statutory Requirement or in respect of a Wilful Default by
a Participant. Subject to insurance cover, no Participant will be liable to another
Participant for any Consequential Loss sustained by a Participant, whether caused
by that Participant’s breach of the Agreement, negligence or otherwise.
Termination Client may terminate for convenience; a termination fee applies. Other grounds for
termination by a Participant including the Client are wilful default, material breach
of certain defined clauses, company insolvency.
Dispute Avoidance/ If the Participants (including the ALT) are not able to resolve an issue internally then
Resolution one of the following issue resolution mechanisms for resolution of the issue, referral of
the issue to arbitration or determination of the issue by an expert as per Schedule 14.
Resource https://www.infrastructure.gov.au/infrastructure/ngpd/files/Template_1_PAA.pdf
https://www.infrastructure.gov.au/infrastructure/ngpd/files/National_Guide_to_Allia
nce_Contracting.pdf
Summary The PPA contract includes brief guidance box notes in key clauses and the contract
is supported by the National Alliance Contracting Guidelines – Guide to Alliance
Contracting. However, this Guide is a general guide to alliancing and not a detailed
Guide to the PAA Contract itself. The PPA drafting is fairly legalistic in places and
worded with Australian State and Territory jurisdictions in mind.

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APPENDIX D: LIST OF DEFINITIONS
Alliance contracting is a form of relationship contracting characterised by a culture of
collaboration and cooperation between the parties delivering a project. The parties’ interests
are aligned and risks are shared through incentives offered by the client for how well the
project is delivered, as measured against agreed objectives.

Big Room: defined in lean construction methodology as a facility where multidisciplinary teams
(e.g. designers, builders, facility operators) are brought together and is specifically tailored to
improve collaboration, communication and creativity. It is closely linked with the concept of
co-location.

BIM: a process supported by various tools, technologies and contracts involving the generation
and management of digital representations of physical and functional characteristics of
places. Building information models (BIMs) are computer files which can be extracted,
exchanged or networked to support decision-making regarding a built asset.

Bouwteam (also known as construction project team): A ‘bouwteam’ or construction project

team can be characterised as a partnership between the client, the consultants engaged by
the client and a construction company to produce a design for the project. As a member of
the construction project team, the contractor contributes his expertise in the area of
execution, planning and the associated costs in the design phase.

CAPEX & OPEX:

CAPEX: Capital expenditures are purchases of significant goods or services that will be used to
improve a company's performance in the future. Capital expenditures are typically for fixed
assets like property, plant, and equipment (PP&E). For example, if an oil company buys a new
drilling rig, the transaction would be a capital expenditure.

It represents the company's spending on physical assets. The following are common examples
of capital expenditures: Manufacturing plants, equipment and machinery, Building
improvements, Computers and Vehicles and trucks.

OPEX: Operating expenses are the costs a company incurs for running its day-to-day
operations. These expenses must be ordinary and customary costs for the industry in which the
company operates. Companies report OPEX on their income statements and can deduct
OPEX from their taxes for the year in which the expenses were incurred.

The following are common examples of operating expenses: Rent and utilities, Wages and
salaries, Accounting and legal fees, Overhead costs such as selling, general, and
administrative expenses (SG&A), Property taxes, Business travel and Interest paid on debt.

Client: the appointing party.

169
Client Capture (Regulatory Capture): In politics, regulatory capture (also client politics) is a form
of corruption of authority that occurs when a political entity, policymaker, or regulator is co-
opted to serve the commercial, ideological, or political interests of a minor constituency, such
as a particular geographic area, industry, profession, or ideological group.

Competitive ECI: proceeding at the end of the ECI phase with at least one competitive tender
phase with the shortlisted ECI phase contractors.

No-competitive ECI: proceeding at the end of an ECI phase without tender/in first instance
with the selected ECI phase contractor.

Contractor: the appointed party, the main contractor.

ECI Execution Plan: a document that defines and outlines the client’s objectives for the ECI
phase and the requirements for the appointed ECI contractor(s) to perform during the ECI
phase.

ECI Services Execution Plan: a document that defines and outlines how an ECI contractor
team intends to accomplish the objectives set out by the client for the ECI phase.

Final Investment Decision: the point in the capital project planning process when the decision
to make major financial commitments is taken. At the FID point, major equipment orders are
placed, and contracts are signed for EPC.

Joint Communication: A formal system of communication between the management of an

organisation and the employees' representatives used prior to taking decisions affecting the
workforce, usually effected through a joint consultative committee.

Last Planner System: a planning and control technique developed by the Lean Construction
Institute that revolves around collaboration between trade foremen or design team leaders
(the last planners) in planning in greater and greater detail as the time for the work to be done
gets closer.

Lean Construction: Lean construction is a combination of operational research and practical

development in design and construction with an adoption of lean manufacturing principles
and practices.

Target Value Delivery: a management practice used throughout all phases of design and
construction to deliver projects within project constraints such as a defined budget, the
operational needs and values of the client.

Systems Engineering: a transdisciplinary and integrative approach to enable the successful

realisation, use, and retirement of engineered systems (definition of INCOSE – International
Council on Systems Engineering). Systems Engineering applied on construction projects
focuses on defining customer needs and requested functionality early in development,
defining requirements, design synthesis and system validation.

170
APPENDIX E: LIST OF ABBREVIATIONS
AIA – American Institute of Architects
BEP – BIM Execution Plan
BIM – Building Information Model
BoQ – Bill of Quantities
CCDC – Canadian Construction Documents Committee
CfD – Contract for Differences
CIR – Contractor’s Information Requirements
CM – Construction Manager
CSD – Cutter Suction Dredger
D&B – Design & Build
DBB ITT – Design-Bid-Build/Invitation to Tender
DBFM – Design Build Finance and Maintain
D&C - Design & Contract
ECI – Early Contractor Involvement
EIA – Environmental Impact Assessment
EIS – Environmental Impact Statement
EMAO – Economic Most Advantageous Offer
EMP – Environmental Monitoring Program
EPCI – Engineering, Procurement, Construction and Installation
FIDIC – International Federation of Consulting Engineers
IPD – Integrated Project Delivery
IPI – Integrated Project Insurance
IPR – Intellectual Property
KIPT – Kangaroo Island Plantation Timbers Limited
KPI – Key Performance indicators
LHVS – Land High Voltage Station
LPS – Last Planner System
MDBs – Multilateral Development Banks
MEP – Mechanical, Electrical and Plumbing
NEC – New Engineering Contract
NOx – Nitrogen Oxides
OHVS – Offshore High Voltage Station
PAA – Project Alliance Agreement
PDB – Plan Design Build
PDC – Planning, Design and Construction
PoMC – Port of Melbourne Corporation
PPP – Public Private Partnership
PSU – Project Start-Up
PFU – Project Follow-Up

171
RFI – Request for Information
SE – Systems Engineering
SEES – Supplementary Environmental Effects Statement
Sox – Sulfur Oxides
TLP – Tidal Lagoon Power
TRL – Technical Readiness Level
TSHD – Trailing Suction Hopper Dredger
TSS – Total Suspended Solids
QHSE – Quality, Health, Safety and Environment

172
APPENDIX F: TRADITIONAL VS ECI APPROACH TO
FACILITATE INNOVATION & SUSTAINABILITY

How ECI Can Facilitate Improved Level of Innovation and Sustainability

In the traditional project delivery approach, the client finalises a design through a consultant,
with a prescribed target for sustainability and/or innovation. In the consulting industry with
consultants preferring tried and tested solution which lowers both their and their clients risk
profiles, innovation is typically slow: the incremental type. A similar statement can be made for
sustainability. Unless something more systemic is targeted by the client, such as green port
concepts, ‘Working with Nature’ or nature-based solutions.

173
Traditional Approach

Sustainability and innovation in the traditional delivery approach lvii

Early Contractor Involvement

The open collaboration which ECI fosters as its principles are essential to ensure that
contractors and clients can collaborate to implements these more sustainable solutions while
at the same time providing significant environmental protection. Innovation and sustainability
are improved directly through the early collaboration the ECI offers.

174
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