Partnering

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Developed by Kasper Lykke Wind

Partnering is a form of collaboration management concept within the construction industry, in which the client, engineer, architect and entrepreneur enter into a partnership based on dialogue, trust and shared responsibility. Partnering was established in the early 1980s in the USA where a full partnership relation between the oil company Shell and the engineering firms Parson & SIP was established and has recently gained ground in the construction industry, as a well-known collaboration between key project stakeholders.

Partnering is part of the development in the construction industry, which is trying to catch up with the manufacturing industry by changing the low productivity development. In partnering, a main focus is for the participants to share the same values and thereby obtain a better starting point for the construction processes and thus a better result, which will be a success for all partners.

History

The basic principle of partnering was already presented in the 1920s in Britain; a partnering relationship between Bevis-Marks & Spencer, but the term partnering is considered established in the beginning of the 1980s in the United States of America.

The litigation in the construction industry exploded in the early 1980s in the USA, so the industry started to work with some basic management principles to deal with the organizational conflicts, and the first full partnering relationship was established between the oil company Shell and the engineering firms Parson & SIP. However, the partnering concept as it is known today was first introduced by the US Corps of Army Engineers in the late 1980s, as a concept of the Japanese management tool Total Quality Management (TQM). The purpose of the new founded concept was to improve productivity and efficiency in the construction industry. The first projects showed a clear improvement of the efficiency throughout the entire construction processes and even reduced the costs.

In the 1990s, the English government imposed some new initiatives in the construction sector to reduce the rising costs of projects, including conflict management. The results of partnering have been recognized all over the world the recent years and the experience shows that the construction projects often can be built faster and cheaper with a better final result.

As a result of partnering, the Danish Government has ordered the governmental clients to carry out a systematic assessment prior of any construction project to evaluate, whether partnering is beneficial in the specific case or not.

The Basics of Partnering

In partnering, a collaborative partnership is established in which counteraction and distrust is replaced with fellowship and trust through an early involvement of all partners. All expectations are attuned before the project starts, allowing an opportunity of the right decision making from the beginning.

Partnering consists as a minimum of a client, an engineer or architect and an entrepreneur, but it can also include investors, the government etc. The partners work together to find their common goals and how to achieve them. By exploiting partnering and incorporation of each one’s competencies and experiences, the productivity development can be increased, the poor quality of the projects can be changed to the better and the many disputes and accidents in the construction industry can be avoided.

Partnering is a philosophy of teamwork and understanding the other partners needs, and the construction management concept has shown to lower the costs and achieve a better end-result by sharing the risks.

Figure 1: First generation partnering

First Generation Partnering

First generation partnering is also known as project partnering, where this form of collaboration is used to address a given project, whereafter the collaboration ends.

The basic approach produces a range of benefits and experiences, which can be achieved through individual projects and afterwards used in other projects. It is achieved through sharing common project goals, open decision processes and agreeing on dispute resolution principles. First generation partnering is a process where the companies and employees can test their skills in partnering and explore the opportunities for a more effective collaboration with other companies. First generation partnering has shown to have a cost reduction of 5-30% and a time reduction of up to 40%.

First generation partnering is thus an essential step and experience base for all companies who want a solid basis for collaboration towards second- and third generation partnering, but is also considered to limit potential results if the collaboration is not continued. The limited repetition efficiency will reduce the effect of the results, because it takes time and experience to build a good and strong collaboration with great trust among the partners.

Second Generation Partnering

Figure 2: First generation partnering

Second generation partnering is known as strategic partnering, where this form of collaboration is adding a long-term strategy to a series of projects carried out between partners. Second generation partnering complies with the problems of the first generation partnering, where collaboration is not repeated and therefore prevents a more fully optimization of the construction industry.

Second generation partnering begins with a strategic decision in the collaboration between partners in an ongoing series of projects. The strategic collaboration focuses on common values and mutual respect, through which continuous improvement of the efficiency of all the construction processes can be seen. Second generation partnering can be described by The Seven Pillars of Partnering, where each pillar is a set of management actions that put this strategic partnering into effect. The Seven Pillars of Partnering are:

• Strategy – developing the client’s 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 how the involved firms work together by using collaboration 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.

Second generation partnering is resulting in better projects and helps the companies adapt to new technologies and changes, through continuous collaboration and experience sharing. Second generation partnering has shown to have a cost reduction of up to 40% and a time reduction of up to 50%.

Third Generation Partnering

Figure 3: Third generation partnering

Third generation partnering is also known as strategic partnering, where this form of collaboration is a systematic repetition of the collaboration between the involved partners. The main difference between second- and third generations partnering is seen in the role of the client. The client has a dominant position in second generation partnering, whereas in third generation partnering the client is considered to be a ‘costumer’.

The key features of third generation partnering are seen through the overall aim of a long-term continuous improvement in performance that both justify and deliver high levels of profits. Third generation partnering consist of two different main forms – permanent supply teams and supply teams as ‘resource stocks’.

The permanent supply teams are typically specialized in a particular type of construction process or a particular market segment, where the continuous collaboration of the same type of product makes it standardized and it also creates opportunities of a much higher efficiency in the construction industry. Unlike the permanent supply teams, the supply teams as resource stocks has a much better product selection, which also requires that more companies with the needed competences are involved for the chosen market area.

Third generation partnering achieves even better results by a systematic repetition, that makes the product more standardized and thereby more efficient. Third generation partnering has shown to have a cost reduction of up to 50% and a time reduction of up to 80%.

Core Values

In partnering, it is essential to have the same values in order to achieve fully functioning collaboration, in order to achieve the desired results. Poor communication, distrust and a defective collaboration can lead to the previously known problems where disputes, unexpected costs and less productivity occur.

Typical core values for collaboration in partnering projects in Denmark:

• Open and honest communication
• Confident and trust-based collaboration
• Shared responsibility
• Respect and equality
• Adherence to agreements
• Free sharing of knowledge
• Pleasant working atmosphere

Benefits of Partnering

Partnering may not solve all the problems encountered in the construction industry, but the concept produces a lot of benefits to the industry and the companies themselves. Partnering creates a framework for conflict resolution, improved communication and trust, better project performance and reduced litigations. It lowers the risk of cost overruns and delays, as a result of a better time and cost control over the project. Partnering secures a more stable workload, a higher client satisfaction and thus better project results. In addition, the client gets the opportunity to embellish its project, so that the client helps to make the retail decisions and together decide how the best possible result of the project is obtained.

In partnering, knowledge, experience and skills are shared between partners, which increase the value of the collaboration and this makes it possible to take on larger and more complex projects. Especially in the development of value engineering changes and constructability improvement, partnering increases the opportunity if innovation due to open communications and existence of trust among project parties. Partnering is a management technique that has the potential to change the construction industry to work in a more cooperative environment.

Figure 4: Collaboration vs. Cooperation

Problems of Partnering

Partnering does not always work without risks; to develop trust between two different companies can be a risk in itself, although trust is one of the key elements of successful partnering. Some companies might have some bad experiences with earlier relationships, which will make it more difficult to establish a trustful partnering. Instead of trying to develop a win-win environment among the parties, some of the parties try to procure benefits out of the collaboration and earn at the expense of others. Another relationship problem can be found in the sharing of risks. The failure of sharing risks can also be an obstacle when trying to achieve a complete partnering, as some of the parties may find it difficult to be accountable for others mistakes.

Partnering is costly because a formation of a partnering arrangement requires extra staff, time and resources, which causes some companies to reject the partnering concept, because it requires too much effort. Partnering is culturally opposed to the traditional implementation of construction projects and it may break with the former organization and how things were done earlier.

Partnering may also lead to laziness within the collaboration, if the companies have a long-term relationship and have worked on a series of projects together. The collaboration is well functional, but can also be the easy choice and less innovative, if the relationship is not worked on constantly.

It is important to understand the concept of partnering and the concept requires a lot of training, to be able to produce the many benefits.

The Future of Partnering

The future of partnering is undefined, but one might expect that in the coming years a refinement of many of the most central concepts of partnering will arise. Dialogue, team building and conflict resolutions might be optimized with the help of consultants companies and through training work-shops, where better tools are developed and the words can be put into action. The value aspect of the collaboration could in the future be better structured and put into system, so it becomes easier to discuss priorities in relation to the entire construction process. In addition, improved contracts and incentive schemes could expand the refinement of the management concept partnering.

In the future, one might think that a change of the traditional contract structures of the construction industry will happen, where new combinations of the construction work elements in different contractual forms will arise.

There is a tendency for many companies and partnerships to expand to strategic partners, where the optimization in the business space will be more advanced and long-term. Perhaps, an involvement of private parties in the financing business is the new step or an optimized use of the Public-Private Partnerships, which is another promising model of new forms of collaborations between public and private parties. A combination of the best public and private parties could release valuable dynamics and resources, which will increase the magnitude of the overall benefits.

The benefits of partnering are clear and there is no doubt that partnering has won its place in the construction industry, but whether partnering will continue to gain ground and keep developing is unknown.

Relational contracting

Relational contracting is in some ways similar to partnering, as it is a management concept, which is build on a relationship between parties instead of discrete transactions.

Relational contracting is a contracting concept that seeks to give an explicit recognition to the relationship between parties to a given contract. The relations are established through common internal values and sustained by the value of future relationships. The focus is on the relationship and not the deal itself and the responsibilities and benefits of the contract are apportioned fairly and transparently between the parties.

A relational contracting approach implies a commitment of moving towards common goals in the recognition of each parties expertise. The parties seek a long-term relationship instead of one-time partnerships, which increases the outcomes. The ‘norm-based’ approach ensures a trust-based and strategic beneficial partnership that has, just like partnering, shown to lower the costs of doing business, increase the efficiency and minimize the possibility of disputes.

Despite the possible outcomes, relational contracting shares some similar challenges as partnering regarding the parties involved in the contract. The concept involves a relinquishment of independence, as each party is more interdependent on others, an acknowledgement of shared costs and also to make an effort in seeking a common value-based company.

Annotated bibliography

The following literature related to the topic can be recommended:

Books:

• Anlægsteknikforeningen (2011), ”Anlægsteknik 2, Styring af byggeprocessen”, Polyteknisk Forlag.

This book will give you a detailed overview of how partnering is used in "Partnering by fully-inclusive contracting", "Partnering by main contracting" and "Partnering by single trade contracting".

• John Bennett; Sarah Jayes (1998), "The Seven pillars of Partnering: A guide to Second Generation Partnering"

This book will give a detailed explanation of second generation partnering and how it is used in the building industry.

• Erhvervs- og Byggestyrelsen (2006), "Vejledning i partnering", https://www.bygst.dk/media/13744/Vejledning-i-partnering.pdf, seen 06-06-2017.

This is a handbook for decision makers and participants in the partnering process, with particular reference to the public client.

Articles:

• Albert P. C. Chan; Daniel W. M. Chan; Kathy S. K. Ho (2013), "Partnering in Construction: Critical Study of Problems for Implementation", Journal of Management in Engineering (ASCE)

This article gives a critical point of view to th