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Industry Updates

Project Owners Should Embrace Partnerships

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Construction can be a very competitive industry, but there’s no law that every relationship needs to be adversarial. In fact, a recent article from consulting firm McKinsey & Co. says that there is increasing proof that large capital project owners should think about doing something different.

Today, McKinsey says, more collaborative agreements and operating models are found in integrated project delivery or project alliancing where key delivery partners work together early to define the project’s scope, schedule and budget. They then form a single contract and operate under a joint management structure.

McKinsey looked at eight collaborative-contract pilots and determined that they drove a 15 to 20 percent improvement in cost and schedule performance compared to traditional arrangements. “To break old habits and adopt more collaborative contracts, our analysis shows that project owners must start by fully understanding the elements of a collaborative contract and the spectrum of possible collaboration,” it says.

McKinsey suggests multiple steps for project owners to transition to this model, including assessing their structural readiness for collaboration. “By knowing where their strengths and weaknesses lie, owners can better select the appropriate level of collaboration for their organization,” it says.

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