In search of a happy medium: price components as part of alliance team selection

In project alliancing the construction project owner and service providers assume joint responsibility for project planning and construction through a common organization; the parties also share project-related risks. That allows integrating a wide range of expertise in support of successful implementation of demanding ventures. In order to fully exploit alliancing, the key service providers must be involved in project planning from an early stage which often makes use of the full-price criterion in the selection of service providers questionable. On the other hand, selection involving no price criteria leaves it uncertain whether the project will be profitable or not. Thus, it is not immediately clear how the price aspect should be integrated in the criteria of alliance team selection. This publication hopes to increase the understanding of the appropriateness of using price factors by delving into the practices and experiences of the Australian infrastructure sector. The presently used form of project alliance is an Australian innovation which is why it is justified to chart their experiences. The presentation begins with a review of the Australian guidelines for team selection and the underlying motives. Research related to the subject and the spirited debate in the sector are also delved into. Admittedly, the discussion and writing have focussed on the comparison of so-called extreme models - i.e. selection based on full price and selection that totally excludes price. Consequently, the conducted discussions are included in the publication as a frame of reference although the main aim of the work is to seek solutions in-between these extremes. The essential goal of the publication is to determine whether it is possible to find some intermediate forms that would integrate the good features of both extreme models so that projects could be carried out based on both broad-based competition and good, creative collaboration. An answer to the question was sought by trying to find and describe the procedural solutions of those Australian projects where team selection is based on price tenders for some cost items or parts in addition to capability assessment (i.e. partial price selection). These items do not cover the total project price leaving part of the project unpriced. An estimate for the part in question is prepared on the basis of offered component prices and/or the owner's own cost-estimate items to determine the comparative price. Three partial price (price component) selection projects will be described in more detail. Application of this method has so far been scarce. Experiences from the projects have, however, been for the most part encouraging and support the validity of partial price selection. Yet, it must be remembered that different projects call for different selection methods derived from project properties and boundary conditions of implementation. Use of price components may also make a project considerably more challenging unless the content of components is defined clearly enough.