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Main Roads alliance

SIX consortia have lodged expressions of interest to build Main Roads’ next big project, the Roe Highway stage seven extension from South Street to the Kwinana Freeway.

The assessment process facing these groups will be unlike anything Main Roads has previously done.

The biggest difference is that nobody has been asked to assess the cost of building the road.

Instead, Main Roads has planned a series of inter-views and workshops to assess the capabilities of each consortium and their suitability to work in an alliance.

This process will culminate in the selection of a preferred proponent. Only then will the selected contractor enter commercial discussions with Main Roads to finalise the design, assess the risks and ultimately decide the price of the project.

Main Roads is hoping its alliance contracting model will deliver a better outcome for the project.

“The whole thrust of alliancing is to come up with innovations and breakthroughs,” Main Roads project manager special projects Mike Kapitola said.

“It’s been shown in Queensland, where they have done projects similar to this, that there have been substantial savings, innovations and breakthroughs.”

Mr Kapitola said he expected these benefits would emerge both during the negotiation phase, when the design and the risk sharing formula was being finalised and after the alliance was formalised.

“Once the target price is set in place, the challenge for the alliance will be to better it. That’s when we believe we will get even better value for money,” he said.

The process adopted by Main Roads also offers the potential for time saving because work on environmental approvals, project scope and design can proceed while the contracting arrangements are still being finalised.

In a traditional tendering arrangement, all of the approvals, design and documentation would have to be completed before tenders could be called.

One of the key tasks facing Main Roads is to ensure the target price negotiated with its preferred proponent is competitive.

Mr Kapitola said Main Roads would prepare its own “business as usual” estimate of the project’s likely cost.

It would also engage an independent consultant to prepare a cost estimate based on the detailed project designs and risk sharing formula prepared by the alliance partners.

Industry observers say it is no coincidence that new Main Roads Commissioner Menno Henneveld was formerly at the Water Corporation, which pioneered alliance contracting in WA. The $150 million upgrade of its Woodman Point wastewater treatment plant marked the first example of relationship contracting in action on a major public infrastructure project, according to engineering company Clough.

The Water Corporation, Clough and Halliburton KBR undertook the project, completed last year, collaboratively. The three companies even formed a new company, known as WA21, to foster a common culture and objectives among the project team.

The shared risk and reward structure helped to produce a number of technical and performance breakthroughs, including multi-million dollar savings in project costs, according to Clough.

The Water Corporation also has five-year alliance contracts with United Group and Thiess for its ongoing maintenance work.

It is understood the Water Corporation has modified its approach for two current projects –  the upgrade of its Beenyup and Subiaco wastewater treatment plants, costing a total of $117 million.

It moved to a similar arrangement to the city rail project, with two short-listed bidders preparing detailed designs and costings.

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