Image: The southern Lahti ring road is one of the largest alliance model projects in Finland.
I can easily say that Finland is number one in the use of the alliance model in Europe. If you add up infrastructure projects and the projects in the building construction sector, about one hundred alliance projects have been implemented in Finland”, says Procurement Director Pekka Petäjäniemi from the Finnish Transport Infrastructure Agency.
How did we get here? Some twenty years ago, the Finnish infrastructure construction sector thought to ask if the client and the contractor could cooperate more closely.
“To exaggerate a little, the tendering process in the construction sector used to mean that the client requested tenders for a certain project and then selected the cheapest tender. After that, the client’s role was mainly to supervise and look for errors”, says Petäjäniemi.
From the point of view of cooperation, this kind of setup is not optimal. The client and service provider should be working towards the same goal in construction and maintenance. The development of cooperation was a clear goal, but the means for doing it in practice were missing.
Petäjäniemi says that the development was spurred on by a conference organised in Germany where Australians presented an intriguing new concept, an alliance model for public procurement. The results were temptingly positive.
Model from Australia, pilot project in Pirkanmaa and Satakunta
Could the Australian alliance model work in Finland as well? The agency preceding the Finnish Transport Infrastructure Agency rolled up its sleeves and started looking into it. The big question was whether a project put out to tender would need to be priced with a total sum, or whether the Act on Public Procurement and Concession Contracts would allow other pricing models.
It was established that a service provider’s fee could be used in price comparisons. This means that the price is included in the tendering process, but the selection process focuses on qualitative factors, such as how the project will be managed and how cooperation will be carried out.
“With no legislative obstacles, we really started looking for a pilot project for the alliance model. The first project ended up being the Lielahti–Kokemäki track improvement project, worth about EUR 100 million. The project was launched in 2011 and construction was finished in 2015. The pilot taught us valuable lessons on things like developing cooperation and organising the workshops that are part of the alliance model”, Petäjäniemi explains.
The Lielahti–Kokemäki project was the first public alliance project in Europe. The project was completed on time, and the predicted costs were undercut by EUR 1.5 million. The project was aptly nicknamed “Liekki” (“Flame”), seeing as the resulting good experiences ignited a blaze of changes in the construction sector.
Image: Tampere Rantatunneli construction site in 2014.
True breakthrough of the alliance model was the Tampere Rantatunneli project
“The alliance model includes a development phase where the client and the implementer jointly plan the content and implementation of the project. In the development phase of the Rantatunneli project, we discovered many ways to achieve cost savings while speeding up construction. Cost savings amounted to EUR 20 million, or about 10 per cent of the costs of the entire project”, Petäjäniemi explains.
Construction of the Rantatunneli began in 2013, and the tunnel was finished in 2017. The project was very challenging and exceptionally successful. This was surely thanks to effective cooperation and the alliance model.
The model is spreading – and garnering interest around the world
The success of the Rantatunneli project opened doors for other projects as well. The Finnish Transport Infrastructure Agency has later used the alliance model to implement projects such as the southern Lahti ring road. Tampere had positive experiences of the Rantatunneli project, which is one reason why the city decided to implement the tram project with the alliance model.
Of the currently ongoing projects of the Finnish Transport Infrastructure Agency, the Hailuoto causeway is being constructed with the alliance model.
“The plan is to also implement the E18 Raisio section project with the alliance model, the project being exceptionally challenging in the technical aspect. The development phase is now ongoing, and the cost estimate is EUR 200 million. The project so challenging because it is located close to the Raisio city centre and there is a lot of traffic and business activity around the site”, says Petäjäniemi.
Petäjäniemi has personally travelled around the world to present the experiences gained from the alliance model. He has spoken on the subject in countries such as the United States, Germany, Great Britain, India and Qatar.
In the sector, contractors are particularly interested in the alliance model. Although there are plenty of good experiences already, clients still tend to have more reservations about the alliance.
“I can’t help but shake my head as some of my international colleagues seem to be grasping at straws to find a reason why the model could not work for them or what obstacles there would be to it. Of course, the alliance model requires a bold approach and willingness to do things differently, but that boldness is rewarded”, says Petäjäniemi.
Petäjäniemi is grateful for the fact that Finland was bold enough to start experimenting with a new way of doing projects in Finland in the 2010s. Due to that boldness, the use of the alliance model is maturing fast in Finland while many countries are only now taking their first steps with the model.
Image: Pekka Petäjäniemi, Procurement Director at the Finnish Transport Infrastructure Agency, has given presentations on the alliance model in numerous international seminars.
Not a miracle drug but a powerful tool
Although the alliance model has many positive aspects, it is not suitable for all transport infrastructure projects. Its competitive tendering phase is a relatively cumbersome process that lasts for months and ties up resources from both the clients and the service providers. Still, all projects can learn from the alliance model. The principles of the alliance model, such as shared rules and cooperation coaching, have now been applied in traditional contract models as well.
What kinds of projects is the alliance model best suited for?
“The alliance model is unbeatable especially in challenging and innovative projects. The alliance model is at its best in projects that involve many risks but also opportunities”, summarises Petäjäniemi.
Alliance model in a nutshell
What is it?
The alliance model is a way of implementing a construction project where the client and service providers form a joint organisation. All the parties share the risks, responsibilities and benefits.
Key features:
• Shared objective: All parties aim for the same outcome.
• Development phase before implementation: The feasibility and costs of the project are assessed together before a final decision.
• Sharing information openly: All information is shared transparently between the parties.
• Shared rules: The parties agree on procedures and objectives together.
Where has it been used?
• Lielahti–Kokemäki railway project
• Tampere Rantatunneli
• Tampere tramway
• Hailuoto causeway
• Southern Lahti ring road
• E18 Raisio section (development phase in progress)
Benefits:
• Cost savings
• Fewer delays
• Innovative solutions
• Better communication and stakeholder support