Competitive Collaboration

To manage the infrastructure rebuild following the Christchurch earthquakes, one of New Zealand’s largest natural disasters, a new model was created, which utilised both competition and collaboration to drive performance.

The size and scale of the project – $2.2 billion and more than 700 projects over five years – necessitated the new approach.

SCIRT was based on an Alliance Agreement between national and local government and five civil engineering contractors, but was not a conventional alliance.

As with most collaborative relationship contracts, there was a “pain share/gain share” payment that was shared between the contractors and the clients. However, in a departure from usual alliances, the contractor delivery teams competed for the construction work, which was allocated according to performance in both cost and non-cost Key Result Areas (KRAs). Strong drivers were thus created for both competition and collaboration.

“Those companies who performed better were allocated more work,” said SCIRT Executive General Manager Ian Campbell. “Delivery teams were paid a fee based on the target cost of work done. Poor performance therefore meant less fee earned; good performance increased the fee.”

The difference between target cost (budget) and actual cost for each project was added to a gain share/pain share pot, a share of which (nominally 50% but variable depending on non-cost performance) was paid to (or paid by) the contractors at the end of the programme according to the amount of work each had done.

This encouraged collaboration because all contractors needed to perform to ensure an overall “gain” rather than “pain” result.

All contractors started out being allocated an equal amount of work; however, each company’s share altered over the course of the programme.

Because all the contractors shared pain or gain, it was in all their interests to help each other deliver the best possible outcome.

Contractors typically understand how to compete better than how to collaborate, said Campbell, so achieving effective collaboration was the greater challenge. He says the devil was in the detail and while the concepts were simple, implementation was more difficult. However, he said on balance, “the value from both was more than could have been gained from one or the other alone.”

Tags:Competitioncollaborationallianceperformancegain share/pain share