The purpose of (he paper is to compare the structure of six contracts considered by clients and contractors to be partnering or alliance arrangements. Two are in the U.K., three in the U.S. and one in the Middle East. Particular emphasis is placed on the management structure and risk/reward elements found in the contracts.
Basic project characteristics such as total value, work scope and length of agreement highlight the impossibility of applying a simple checklist to identify a likely partnering candidate. Each client determines if its project is best served through a partnering arrangement with a risk/reward structure.
The management of the agreements has more similarities than differences, with four of the six projects being managed via Integrated Teams. While only two contracts studied are termed alliances, there nevertheless appears to be a trend to alliances by companies with some partnering experience.
The risk/reward structure of the six contracts shows a great deal of variability. The sharing of upside potential is most frequently on a 50/50 basis between the client and the contractor. However, as multiple contractors are introduced into an alliance, the percentage sharing changes. One alliance treats all contractors equally for reward sharing, while another rewards in relation to relative value in the contract.
The sharing of downside risk is highly dependent on the amount of perceived risk in the contract. One contract shows zero downside for the client, several share 50/50 with the contractors, while another places most of the downside risk on the client.
The offshore industry is still at an early stage of implementing partnering, alliancing and risk/reward elements. One would expect an increasing number of alliances and more complex risk/reward structures as companies gain experience with the concepts.