BRIEFING

SUMMARY
Partnering is a contractual arrangement between two parties for either a specific
period of time or an indefinite period. The arrangement features teamwork,
continuous improvement, openness, and acceptance of new ideas, trust and
mutual benefit. The Reading Construction Forum suggests that this approach is
only the first step and a new, much more sophisticated second generation style
of partnering has emerged. Second Generation partnering is defined as a set of
strategic actions which embody the mutual objectives of a number of firms
achieved by co-operative decision making aimed at using feedback to
continuously improve their joint performance. Research suggests the emergence
of Third Generation Partnering where the construction industry manufactures and
markets products to sell to clients.

BACKGROUND
In the Final Report of Constructing the Team, the Government/Industry Review
of Procurement and Contractual Arrangements in the UK Construction Industry1,
Sir Michael Latham described a partnering agreement as a contractual
arrangement between two parties for either a specific period of time or an
indefinite period. Rather than the agreement being limited to a particular project.
Under the agreement, the parties work together in a relationship of trust, to
achieve specific primary objectives by maximising the benefit of each
participants resources and expertise. The Report summarised the following
features of partnering:

Teamwork between the supplier and client

Total continuous improvement
Openness between the parties
Ready acceptance of new ideas
Trust and mutual benefit

The Report notes that partnering can only be successful with the commitment of
the Chief Executives of the organisations involved, and by the selection of
individuals with a determination to work together. It adds that partnering
arrangements can also be beneficial between firms.
The Report states that partnering can improve quality and timeliness of
completion whilst reducing costs. In construction partnering can be applied to
term or option contracts. For public organisations a partner needs to be initially
sought through competitive tendering for a fixed period of time.
The Report sets out the main features of an effective form of agreement
(conditions of contract), these are summarised as follows:

A specific duty for all parties to deal fairly and co-operate with each other,
and with other subcontractors, specialists and suppliers.
A duty for the parties to work together as a team, with a shared financial
incentive to achieve this objective, i.e. a general aim to achieve win-win
solutions to challenges during the course of the project.
An interrelated package of documents, which clearly defines the roles and
duties of all involved parties. The documents should be suitable for all types
of project and any procurement route.
Written in clear language with Guidance Notes appended.
Separation of the roles of contract administrator, project or lead manager
and adjudicator. The project or lead manager should be clearly defined as
the clients representative.
Choices of allocation of risks, so they can be placed with the party best able
to manage them.
Minimise changes to pre-planned works information. Where variations do
occur, price in advance with provision for independent adjudication if
agreement cannot be reached.
A clear method of assessing interim payments e.g. milestones, activity
schedules or payment schedules. The arrangements are to be reflected in
subcontractor documentation.
Set out the period in which interim payments must be made, together with
the automatic right to compensation in the event of late payment.
Provide for payment by secure trust fund.
Provide speedy dispute resolution (as a last resort) by impartial
adjudicator/referee/expert.

GOOD PRACTICE
ICE MANAGEMENT
GUIDE TO PARTNERING
BOARD
IN THE CIVIL ENGINEERING SECTOR

Provide incentives for exceptional performance.

Make provision for advance payments including the cost of mobilisation
and prefabricated components.

THE REPORT NOTED THAT THE NEW ENGINEERING

CONTRACT (NEC) CONTAINED VIRTUALLY ALL THE
FEATURES REQUIRED IN A BEST PRACTICE CONTRACT IN
THE CORE CLAUSES AND PRIMARY AND SECONDARY
OPTIONS.

PARTNERING
In 1995 the Construction Industry Board (CIB) set up its twelfth working group
at the request of the Construction Clients Forum (CCF) to promote the uptake of
good practice in partnering between client and supplier at any point in the supply
chain. The Report they prepared2 is summarised as follows: -

FUNDAMENTALS
The working group noted that partnering as three essential components:

Establishment of agreed and understood mutual objectives

Methodology for quick and co-operative problem resolution
Culture of continuous, measured improvement.

Partnering is most likely to succeed where:

The clients procurement strategy takes account of the fact that the project
or programme is high value/high risk
The contractors interest is generated by the prospect of a central, high
value attractive account being added to the business

PROCUREMENT METHODS
CONTRACT

AND

CONDITIONS

OF

For partnering to be effective, it needs to be applied throughout the supply chain

i.e. between clients, consultants, lead contractors and suppliers and specialist
contractors. It can be applied with any of the procurement methods currently in
use e.g. traditional, design and construct and management contracting. The form
of contract should be modern and include the main features described in
constructing the Team. The Partnering approach should minimise the need to
resort to the contract.

COMMITMENT AND CULTURE

Commitment from the Chief Executive and through all management levels is
essential to effective partnering. For a company to change from an adversarial
approach to a partnering approach requires much dedication and hard work. The
first step is to achieve a whole team co-operative approach within the
organisation i.e. internal partnering. This needs to be achieved horizontally
between departments and vertically in the management structure. The culture is
summarised in the table below: What
Co-operative
Competent
Problem solving
Mutually supportive
Empowered
Trusting
Improving

How
Championing
Training and development
Internal partnering
Role swopping
Team building
Leadership
Can-do

Briefing Sheets are provided free of charge to help increase knowledge and awareness. They may be freely copied. Care is taken to ensure information is correct, however readers are advised to consult source
documents for authoritative information. The Institution of Civil Engineers is a registered charity No 210252, 1 Great George Street, London SW1P 3AA.

SELECTION
The following methods can be used to develop a list of potential partners:

Previous client experience.

The previous experience of the clients professional advisers.
Advertisement in the appropriate journals, care must be taken to emphasise
the partnering aspects.

The client then usually issues an information pack, and the contractor responds
with a presentation. At this stage a contract can be negotiated or tendered to a
short list of contractors.

to 40% and programme savings of 50% or more. Partnering is now defined in the
following terms:-

Partnering is a set of strategic actions, which embody the

mutual objectives of a number of firms achieved by cooperative decision-making aimed at using feedback to
continuously improve their joint performance.
Second Generation partnering begins with a client, consultants, contractor and
specialists co-operating in a series of projects. They jointly build up a Strategic
Team that builds up the Seven Pillars of Partnering as follows:

THE WORKSHOP
This is vital to any partnering project, even if the partners have worked together
before. Key features of the workshop are summarised as follows:

It should be run by an independent facilitator

It should be held in a neutral location
The length of the workshop should be one to two days (dependant on the
size and complexity of the project)
The workshop should facilitate team building and be attended by all key
organisations and individuals who will be working on the project, however
the total attendance should not exceed thirty

A typical agenda for the workshop would include the following:

Agree mission for the project

Identify key issues
Mutual objectives
Brainstorm problems
Agree solutions
Action teams
Role swopping
Exclude misfits
Problem resolution procedure (agreed procedure)
Agree a review workshop
Continuous improvement/measurement of key performance indicators (for
all parties)
Charter all to sign

Strategy developing the clients objectives and how consultants,

contractors and specialists can meet them on the basis of feedback
Membership identifying the firms that need to be involved to ensure all
necessary skills are developed and available
Equity ensuring everyone is rewarded for their work on the basis of fair
prices and fair profits
Integration improving the way firms involves work together by using cooperation and building trust
Benchmarks setting measured targets that lead to continuous
improvements in performance from project to project
Project Processes establishing standards and procedures that embody best
practice based on process engineering
Feedback capturing lessons from projects and task forces to guide the
development of strategy

Research carried out by the Partnering Task Force also suggests the emergence of
Third Generation Partnering where the construction industry manufactures and
markets products to sell to clients e.g. land, new or refurbished facilities, plant
and equipment, finance options and facilities management.

SELECTION OF CONDITIONS OF CONTRACT

There are two main contract options, the first is to use partnering as a project
management approach with a conventional construction contract. The second is
to use a contract, which embodies a partnering approach e.g. The Engineering
and Construction Contract (formerly the NEC) and PPC 2000. Use of PPC 2000
has been endorsed by both the Movement for Innovation and the Construction
Industry Council.

BENEFITS

Care needs to be taken when using (and signing) a Partnering Charter in

conjunction with conditions of contract, as the Charter may affect interpretation
of the contract if there is a dispute.

These are summarised as follows: -

SOURCE DOCUMENTS

1.

Cost savings, typically 2-10% on a project basis and up to 30% on a

strategic basis
Better programmes with time saving of 20-30%
Improved working relationships and team working especially on site
Repeat work and improved work flow
Less administration

RETHINKING CONSTRUCTION
In 1998 the Report of the Construction Task Force3 noted that Tesco Stores had
reduced the capital cost of their stores by 40% since 1991, through partnering
with an established smaller supplier base. Argent, a commercial developer has
reduced the capital costs of its offices by 33% and has achieved significant
savings in total project time by partnering with a limited number of contractors,
specialist sub-contractors and designers.

2.
3.
4.

Sir Michael Latham, Constructing the Team, HMSO, London 1994, ISBN 0
11 752994 X.
Construction Industry Board, Partnering the Team, Thomas Telford,
London 1997, ISBN: 0 7277 2551 3.
Department of the Environment, Transport and the Regions, Rethinking
Construction, DETR, London 1998, ISBN: 1 85112 094 7.
John Bennett & Sarah Jayes, The Seven Pillars of Partnering, Thomas
Telford, London 1998, ISBN 0 7277 2690 0.

John Hitchings, White Young Green, March 2001 using the source documents
listed above.

It is however the supply chains that is the main focus of the Task Force. The Task
Force considers the supply chain is critical in driving innovation and sustaining
an improvement in performance. They also consider it is essential that
participants share in the rewards of improved performance.

SECOND AND THIRD GENERATION

PARTNERING
The Partnering Task Force of the Reading Construction in the Seven Pillars of
Partnering4 suggests that the foregoing approach to partnering is only the first
step and a new, much more sophisticated second generation style of partnering
has emerged. They believe this strategic approach can deliver cost savings of up
Briefing Sheets are provided free of charge to help increase knowledge and awareness. They may be freely copied. Care is taken to ensure information is correct, however readers are advised to consult source documents for
authoritative information. The Institution of Civil Engineers is a registered charity No 210252, 1 Great George Street, London SW1P 3AA.