CASE STUDY: Alliancing Association of Australasia

Alliancing Association of Australasia
CASE STUDY
March 2010

Team Savannah – Great Northern Highway Kimberley ECI Project

Main Roads Western Australia’s first combined Early Contractor Involvement (ECI) and Design and Construct (D&C) contract was based on relationship contracting principles and successfully delivered one of the biggest, most challenging road projects in the Kimberley region.

In October 2007, Main Roads Western Australia embarked on design and construction of 23km of realigned highway and three new bridges on the Great Northern Highway in the Kimberley region, 3,000km north of Perth.

A collaborative approach was undertaken to realise opportunities and savings, focus on sustainability outcomes and overcome the challenges of securing people, plant and supplies for a remote project spread over a 170km stretch between Halls Creek and Kununurra.

Team Savannah worked for eight months under an ECI contract to develop a scope and cost, then went on to successfully deliver the project on time in December 2009 and within budget through an incentivised D&C contract.

Essential information

Why a relationship approach?

Western Australia’s Great Northern Highway is the only sealed road connecting the state with the Northern Territory. The highway is the main land transport route between Perth and the Kimberley region and is a vital corridor for freight, transport, tourism and defence.

Subject to a harsh climate ranging from monsoonal wet seasons to desert-like dry months, some sections of the road needed upgrading to meet new road standards.

Federal Government funding became available in 2007 under AusLink’s Accelerated Upgrade Package and sections of the Great Northern Highway were identified as a priority due to factors such as poor geometry and narrow seal width. Some river crossings also needed improved load capacity and better flood immunity.

Main Roads Western Australia Project Director Mark Hazebroek, who was the project’s client representative, said it was not possible for works to be tendered under a traditional lump sum contract because the project was not well defined.

“The funding was announced before early project development and approvals were in place,” Mr Hazebroek said.

“The boom was also in full swing, so we could not afford to tie up three designers and three constructors in a detailed bidding process at a time when both our and their resources were stretched,” he said.

“But we wanted a contract model that would deliver a fit for purpose solution, provide the certainty of a lump sum and which would have a low demand on Main Road’s resources.

“From experience we knew that alliancing style contracts provide the flexibility to deliver exceptional project outcomes for a given budget.

“We also knew from experience how challenging it is contracting in the State’s far north, where you need to rely on natural road building materials and must therefore tailor standards to suit the harsh conditions and available materials.

“For example, pavement material is sourced from gravel pits off the side of the road so we need to locate and test it to determine appropriate pavement material standards.

“Likewise, it is not a well defined process to agree flood serviceability of bridges. We undertake modelling and then used engineering judgement to work out design floods for bridges.

“You can’t use that approach with a conventional Design and Construct (D&C) project, because you have to be very prescriptive.

“Other challenges requiring a more collaborative approach included scarcity of water for construction purposes and significant logistics getting people and equipment to site.

“So we chose an Early Contractor Involvement (ECI) process for the project development phase and a Design and Construct (D&C) model for delivery, with relationship contracting elements and incentives throughout.

“We saw the benefits of collaborating with industry during the ECI phase to determine a scope of works within the $116m budget, as this would ensure funding could be allocated prudently and within the timeframe required.”

Mark Hazebroek said the ECI tender process requested competitive rates for plant, labour, staff and key construction activities as well as a percentage margin for corporate overhead and profit.

BGC Contracting, Laing O’Rourke Australia and AECOM Australia were selected from four tenderers to work with Main Roads during the ECI phase.

They were reimbursed actual costs during the ECI phase. Following an intense review period, the ECI phase concluded with Main Roads accepting the D&C fixed price and Team Savannah were awarded the second phase contract. The ECI phase set the scene for enhanced relationships through the D&C phase.

Establishing and maintaining relationships

Team Savannah agreed that co-location during the ECI phase was a fundamental requirement to maximise synergies of the diverse team and to support the ‘one-team’ culture being developed.

A special-purpose project office included a large open-plan work area, breakout areas for informal interactions, an Ideas Room which facilitated capture and development of innovations and various meeting rooms.

Mark Hazebroek said collaborative principles were transitioned to the D&C phase by utilising a co-located site office and keeping the same governance and management teams as much as possible.

“We all knew each other when we started construction. There were no new people so relationships were very strong, even when inevitable D&C contractual issues arose, ” Mr Hazebroek said.

“These discussions can get difficult at times but relationships remained strong at all levels,” he said.

“The same senior executives stayed on our Project Management Board into the D&C phase, providing consistency in relationships. This team met monthly, unlike a traditional D&C where they would only meet every three months.

“We also kept the same consultants to maintain the focus on team health. This included allocating time for team building activities and asking for team feedback on relationship health through regular independent health check surveys.

“Our ECI Management Team transitioned into the Project Review Group and met monthly during the D&C phase; the same discipline managers were involved from the ECI phase.

“We also brought alliancing principles into the D&C contract by allocating a $1m performance pool, with the team setting performance targets for Key Result Areas (KRAs).

“The Project Management Board had to agree on how the team performed, whether targets were met and what were the benefits and lasting legacies for the environment and community.

“This was the first time Main Roads has included a performance bonus in a D&C contract and it worked well, driving the right behaviours.

“We were willing to allocate an incentive for these key outcomes and performance became a big topic of discussion. It kept the managers involved and focused on delivering outstanding outcomes.”

Achievements and challenges

Early works brought forward

The primary objective of the ECI phase was to fast-track scope development, statutory approvals and pricing of this remote infrastructure project. Tasks included detailed project planning, preliminary investigations and design, development of management plans, and preconstruction works where possible.

Mark Hazebroek said early works were brought forward into the ECI phase from the D&C phase, which increased the ECI budget from $3.5m to $12m but provided overall budget savings including time gains.

“We built the camp as part of the ECI early works, even though it would normally be part of the D&C contract, to keep the project moving,” Mark Hazebroek said.

“We also constructed a side-track and identified and stock-piled gravels so we could have a quick start-up. You don’t have this flexibility under a traditional D&C contract,” he said.

“Another example of the benefits of a more flexible approach was the inclusion of an on-site designer during the construction phase to avoid delays with resolving design issues from a remote site. This would normally be left out of a lump sum price in an effort to save cost.

“Having a designer on site proved effective during construction to manage adjustments quickly, particular in relation to foundations, drainage, culvert locations and levels – basically wherever we interfaced with the natural environment.”

Budget certainty

Team Savannah produced an early indicative price to provide a benchmark for future changes and highlight high cost areas where innovation could generate the greatest savings.

Mark Hazebroek said this also provided early warning that the available budget (which was not known to the team) was insufficient for the intended project scope.

“This led to the scope being tailored to suit the available budget, saving considerable time and resources and avoided potential delays of re-scoping and re-pricing in the event that the final priced scope exceeded the budget,” he said.

“The collaborative process also enabled a very distinct allocation of risk and it was clear which party carried which risks.

“Main Roads and Team Savannah shared the risk on bridge foundations, a traditionally difficult area, as we decided cost savings could be achieved by taking on the risk jointly.

“This risk provision was taken out of the contingency, which kept the price down, and when the risk did not eventuate there was a win-win for both parties,” he said.

Tackling challenges together

One area that proved difficult throughout construction was a shortage of water for construction.

“Team Savannah worked with local Main Roads people who knew the location of local bores and how to access flooded quarries. This eased the problem and demonstrated the value of sharing information.

“We also shared knowledge on construction issues, which was a real challenge considering the harsh conditions and the need to work with local materials such as gravels not experienced elsewhere.

“Team Savannah ran a joint workshop on pavements with Main Roads’ regional officers who had experience with the materials and knew, for example, the issues associated with compacting and working with the gravels.”

Sustainability commitment

During the ECI phase, Team Savannah simultaneously considered social, environmental and economic factors to ensure project works were consistent with sustainability principles.

New processes were developed to measure and assess all innovative, sustainable ideas and opportunities. An Innovation Task Team was established to develop a Sustainability Plan, which included a unique Sustainability Measurement, Assessment and Reporting Tool (SMART) to measure ideas.

More than 85 ideas were identified and assessed, with 37 sustainability commitments agreed for the D&C phase of the project. This focus on sustainability carried through to construction and the D&C contract included an incentivised KPI for sustainability.

“This incentivised approach to sustainability had not been previously incorporated in a D&C contract,” Mark Hazebroek, Project Director.

“We successfully demonstrated our commitment to this area and benchmarked indicators such as water and energy use and recycling for future projects,” he said.

“For example, the team set a target of 5% waste diverted for recycling, such as making decommissioned materials available for use on local community projects.”

Stakeholders:

The Great Northern Highway passes through land under National Title to the Gija people, who live at the Warmun community and nearby outstations.

Team Savannah decided to place their accommodation camp on a pastoral lease 20km south of the Warmun community. Early consultation identified some risks in the workforce interaction with the community.

After exploring the community’s needs and understanding how they would like to see the issue managed, a Memorandum of Understanding was developed.

The Chief Executive Officer of the Community Council confirmed that this was the first time that such an agreement had been offered and agreed for a project of this size.

He congratulated Team Savannah for their commitment to early engagement and said it confirmed a willingness to work with the community for mutual benefit.

Building on this historic accord, Team Savannah suggested the development of a second agreement, an Aboriginal Trainee Employment Strategy.

The REACH Foundation was engaged to assist in identifying and supporting young people to apply for the positions and Main Roads WA co-signed the agreement.

Ten young local people subsequently worked on the project, achieving commitments made by Team Savannah under its KRA for social outcomes and providing lasting community benefit.

750 year-old Boab Tree gifted

The design of a new bridge at Telegraph Creek north of Warmun required removal of a 12 metre high, 36 tonne boab tree which had a special place in the history of the Gija people.

Team Savannah offered to move the tree out of the way of machines working in the area and sought expert advice from Kings Park and Botanic Garden in Perth, who immediately expressed an interest in having the tree relocated to the Park.

The cost of this proposal was around $120,000 and was entirely guaranteed through sponsorship and in-kind contributions.

Team Savannah went back to the Gija People with a new opportunity for them to consider - the gift of the Boab tree to the Nyoongar people of the South West of Western Australia and an invitation for them to attend the Kings Park Festival to share Gija culture and stories of the boab tree.

Permission was granted and the tree was relocated, attracting massive media attention. The Gija people farewelled the tree with a smoking ceremony and the Nyoongar people welcomed its arrival, a little over a week later, at a ceremony in Perth.

The Gija Jumulu Tree (Boab) now stands tall and proud at Two Rivers Lookout in Kings Park and Botanic Garden, evidence that cooperation and a commitment to relationships can lead to exceptional project and community outcomes.

Innovation

Bridges

Bridges in the remote north-west of Western Australia have traditionally been made of steel or a composite construction to sustain major floods and to minimise transportation costs.

Team Savannah demonstrated to Main Roads that pre-stressed concrete TeeRoff beams could be made flood proof and would be more economical, both in terms of a lower upfront cost and reduced Whole of Life (WOL) costs as they required less maintenance.

Mark Hazebroek said the bridge beams were pre-cast concrete, which had not been done before in the remote north of Western Australia.

“The concrete beams were a real innovation. They were pre-cast in Perth and shipped to site, yielding significant savings compared to steel beams.”

Culvert materials

Main Roads specifications required a 100-year design life on drainage structures. Normally this would automatically require concrete pipes or culverts, because of their better long-term durability.

Team Savannah adopted a WOL approach and sourced information from local historical records to develop a much cheaper solution involving Corrugated Steel Pipe (CSP) culverts, even when allowing for possible future concrete lining of the inside of the pipe.

Culvert end treatments

CSP culverts can have a variety of end treatments, varying from plain or bevel ends with stone pitching to full concrete headwalls with aprons. Team Savannah implemented concrete headwalls because they had a lower WOL cost, even though they were more expensive upfront, due to the very high maintenance requirements of alternative treatments.

Pavement materials

With a lack of acceptable naturally occurring materials, a manufactured crushed rock was identified for use as the pavement basecourse.

Although the supplier offered a substantial saving on material of a slightly lesser specification than Main Roads’ standard, Team Savannah was able to use WOL costing to show that its use would not be economic, given the increased risk of pavement failure with the lower specification material.

Learnings and contribution to relationship contracting

Main Roads Western Australia has significant alliancing experience but this project was the first to apply relationship contracting principles through an ECI and incentivised D&C contract.

<<side bar:>>

Mark Hazebroek said the project’s learnings are transferable to future projects, regardless of size or scope and that other agencies in Western Australia, Tasmania and Northern Territory have applied the learnings gained by Main Roads WA.

He said one learning was that the length of the ECI phase is dependent on work required, such as clearances.

“Approvals differ from project to project, but there is real benefit in involving the contractor with these early so that commitments made are carried through to construction,” Mark Hazebroek said.

“On future projects it would be beneficial, if possible, to start the ECI process as early as possible to maximise collaboration and the opportunity for scoping up the project to provide budget certainty.

“We have also seen the benefit of early engagement with stakeholders like the Gija people, as this built very strong relationships and realised innovative and mutually beneficial opportunities.”

Another learning was the benefit of investing effort up front to develop a very good contract.

“We developed the contract together with Team Savannah and this, combined with powerful relationships, meant we did not have major ongoing contractual issues later during construction,” he said.

“The ECI approach also allowed us to move away from the standard risk allocation approach. Main Roads would use this type of contract again in the right circumstances and if the project drivers matched the model. We would of course incorporate improvements as a result of the lessons learned on this project.”

Mr Tony Petrusma, BGC Project Director said Team Savannah successfully developed and captured new processes for this and future ECI contracts.

“This was the first ECI project for both Main Roads and our Team Savannah consortium,” he said.

“Our relationship and ‘one team’ focus ensured we delivered on our commitment to achieve all project objectives,” Tony Petrusma, BGC Project Director.

“I think the ECI model uses the best attributes of both D&C and alliance models, provided the team can overcome the significant mind-shift in transitioning from a collaborative-style arrangement to a more contractual approach.

“It is certainly a model that should be used more by industry.”