Best Intentions: Lessons Learned on International Partnering and Alliance Contracts
Authors: Farrell Susan , Ramsay Alastair , Watzke Jerry 
Published: October 2008

Although the energy industry is still in the early stages of partnering and alliancing, there is enough accumulated experience to be worth sharing information on what has worked and what has not. This paper explores the lessons learned in six agreements in the U.K., the U.S., and the Middle East.

It concludes that not all projects are potential candidates for partnering or alliances. Those likely to be successful will contain common characteristics of complexity, uncertainty, technology and duration. Management structure is moving towards integrated teams, although projects currently fall along a broad spectrum before becoming truly integrated. The risk/reward structure is becoming more complex over time, although it is unclear that tinkering with percentage sharing schemes will actually change the behavior of project participants and result in additional cost savings.

The use of team building techniques and facilitators may well enhance the alliance implementation, but the choice of both company and individual members is fundamental to success. The overriding success factor, however, is the setting of fair and achievable targets.

All of the managers surveyed stated that their projects benefited from the use of a partnering or alliance structure, Three of the projects were far enough along to cite significant cost savings.

Although some in the industry are still doubtful that alliances can make a true difference to a project's outcome, those who have participated are convinced they have achieved results which would have been unattainable in a traditional structure. They would add, however, that partnering and alliancing is not easy, and not for all projects. The industry must share practical information if significant learning is to occur.

Introduction

The energy industry is still in the early stages of exploring the optimal implementation of partnering and alliance agreements. Although the concept of a closer, more efficient working relationship among clients, contractors and suppliers is quite compelling, the actual implementation of such agreements is proving to be difficult.

This paper will explore the details of lessons learned in six partnering/alliance agreements in the U.S., the U.K. and the Middle East. The research follows SPE 30376, presented in September 1995 at Offshore Europe: An International Perspective of RishYUeward Contracting: Comparison of U.S., Middle East and U.K. Alliances. Details of the agreements are referred to in Tables 1 and 2.

Many common issues arose as the project managers of these six projects reviewed the specific successes and failures of the partnering approach. We will address fundamental questions relating to how the agreement should be structured and managed. Is there a real difference betveen integrated client/contractor teams and simply working more closely with each other? Why do some teams succeed and others fail? Is it necessary to have an Executive Board/Steering Committee? Who should be in the Alliance and who remain outside?

The risk/reward structure is critical to the whole concept of partnering and alliancing. What elements should be included? Does it matter how percentages are shared? Did the risk/reward structure result in the behavior it was designed to elicit?