Optimising Contracting for Alliances in Infrastructure Projects

Conflicts between purchaser and contractor are a major problem in infrastructure development. Consequences of conflicts are massive cost overruns and delay. For this reason, the construction sector makes increasing use of project alliancing, one of the modern frameworks of delivery of complex projects. Alliancing is applied to encourage the parties to a contract to adopt a more cooperative attitude with a view to improving efficiency in terms of cost, time and quality. In this paper a problem is identified considering the effectiveness of alliancing: the 'legal framework' used for an alliance - particularly contracts - tends to be of a competitive nature. As a result, if a serious conflict arises, and the contract starts playing a central role, damage may be done to the parties' relationship. This again may threaten the success of an alliance. It is argued that, to effectively support cooperation models such as the alliance, an alternative legal framework needs to be designed that actually prevents parties from reverting to uncooperative and adverse behavior in the event of conflict. In the second part of the paper, the essence and possible design of such a framework is explored. Negotiation and conflict theory is used to give insight into the ways in which a legal framework may facilitate cooperation. Finally, the paper gives a broad outline and some examples of a contracting process in which these insights are incorporated