Alliancing in construction - Revision history

Tkokotas at 19:27, 20 November 2018

2018-11-20T19:27:01Z

← Older revision		Revision as of 19:27, 20 November 2018
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			''Developed by Gisle Skuggedal''


	==Abstract==		==Abstract==
	In construction projects clients often outsource work. This could be due to that the workload does not justify establishing an in-house capability, or benefits by reducing information asymmetry is outweighed by the cost of internal governance. When work is outsourced there is generally an information asymmetry between the client and the supplier. Where the supplier has the expertise. This information asymmetry may lead to opportunistic behavior by the supplier. Consequently, the client might want to switch supplier. However, the costs of switching supplier are often high and include transaction costs for re-tendering, costs for associated litigation and so on. The switching costs for a supplier is often lower as interim payments are frequently used.		In construction projects clients often outsource work. This could be due to that the workload does not justify establishing an in-house capability, or benefits by reducing information asymmetry is outweighed by the cost of internal governance. When work is outsourced there is generally an information asymmetry between the client and the supplier. Where the supplier has the expertise. This information asymmetry may lead to opportunistic behavior by the supplier. Consequently, the client might want to switch supplier. However, the costs of switching supplier are often high and include transaction costs for re-tendering, costs for associated litigation and so on. The switching costs for a supplier is often lower as interim payments are frequently used.

S162259: /* Definition of alliancing in construction */

2017-06-22T10:00:43Z

Definition of alliancing in construction

← Older revision		Revision as of 10:00, 22 June 2017
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	[[File:Alliancing_factors.png\|430px\|thumb\|center\|Distinction of alliancing factors (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name="Alliancing_factors">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		[[File:Alliancing_factors.png\|430px\|thumb\|center\|Distinction of alliancing factors (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name="Alliancing_factors">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]
	The factors which make up the general prerequisites, top management support and adequate resources, where presumed to be generic elements ~~need~~ in all type of construction projects. Thus, these elements do not contribute to our understanding of alliancing.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		The factors which make up the general prerequisites, top management support and adequate resources, where presumed to be generic elements needed in all type of construction projects. Thus, these elements do not contribute to our understanding of alliancing.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>

S162259: /* Definition of alliancing in construction */

2017-06-22T09:59:50Z

Definition of alliancing in construction

← Older revision		Revision as of 09:59, 22 June 2017
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	From Fig.<ref name="Alliancing_factors" /> it is seen that sustainable development was viewed as a desirable outcome of alliancing. An alliancing project can fail Hence a project is not defined as alliancing based on the outcome. Thus, alliancing will be defined based on the hard and soft elements listed in Fig.<ref name="Alliancing_factors" />. The hard elements refer to contractual and legal features, while the soft refer to elements directly related to relationship and people. Common goal and objective, and agreed problem resolution methods are both viewed as soft elements. Even though, they both indirectly relate to contract clauses. This is due to that both element have a stringer relation to relationship and people.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		From Fig.<ref name="Alliancing_factors" /> it is seen that sustainable development was viewed as a desirable outcome of alliancing. An alliancing project can fail. Hence a project is not defined as alliancing based on the outcome. Thus, alliancing will be defined based on the hard and soft elements listed in Fig.<ref name="Alliancing_factors" />. The hard elements refer to contractual and legal features, while the soft refer to elements directly related to relationship and people. Common goal and objective, and agreed problem resolution methods are both viewed as soft elements. Even though, they both indirectly relate to contract clauses. This is due to that both element have a stringer relation to relationship and people.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>

S162259: /* Abstract */

2017-06-22T09:58:31Z

Abstract

← Older revision		Revision as of 09:58, 22 June 2017
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	In construction projects clients often outsource work. This could be due to that the workload does not justify establishing an in-house capability, or benefits by reducing information asymmetry is outweighed by the cost of internal governance. When work is outsourced there is generally an information asymmetry between the client and the supplier. Where the supplier has the expertise. This information asymmetry may lead to opportunistic behavior by the supplier. Consequently, the client might want to switch supplier. However, the costs of switching supplier are often high and include transaction costs for re-tendering, costs for associated litigation and so on. The switching costs for a supplier is often lower as interim payments are frequently used.		In construction projects clients often outsource work. This could be due to that the workload does not justify establishing an in-house capability, or benefits by reducing information asymmetry is outweighed by the cost of internal governance. When work is outsourced there is generally an information asymmetry between the client and the supplier. Where the supplier has the expertise. This information asymmetry may lead to opportunistic behavior by the supplier. Consequently, the client might want to switch supplier. However, the costs of switching supplier are often high and include transaction costs for re-tendering, costs for associated litigation and so on. The switching costs for a supplier is often lower as interim payments are frequently used.

	Alliancing is a mean to even out the imbalance in information and switching costs, and in this way minimizing the window for opportunistic behavior One problem with alliancing is the complex nature of the concept, which makes it hard to define. It is important that alliancing parties has a common understanding of concept, to avoid a cross-purposed and ineffective discussion. In a meta-study conducted in 2006 by John F.Y. Yeung, Albert P.C. Chan, and Daniel W.M. Chan gather different definitions of alliancing used in articles from scientific journals and conference proceedings, and used Ludwig Wittgenstein’s idea of family resemblance to come up with a definition for alliancing. This definition will be presented in this article. Further the five core elements of alliancing identified in the meta-study, “Formal Contract”, “Real Gain-share/Pain-share”, “Trust”, “Long-term commitment” and “Cooperation and Communication” will be discussed.		Alliancing is a mean to even out the imbalance in information and switching costs, and in this way minimizing the window for opportunistic behavior. One problem with alliancing is the complex nature of the concept, which makes it hard to define. It is important that alliancing parties has a common understanding of the concept, to avoid a cross-purposed and ineffective discussion. In a meta-study conducted in 2006 by John F.Y. Yeung, Albert P.C. Chan, and Daniel W.M. Chan gather different definitions of alliancing used in articles from scientific journals and conference proceedings, and used Ludwig Wittgenstein’s idea of family resemblance to come up with a definition for alliancing. This definition will be presented in this article. Further the five core elements of alliancing identified in the meta-study, “Formal Contract”, “Real Gain-share/Pain-share”, “Trust”, “Long-term commitment” and “Cooperation and Communication” will be discussed.

			In the end the article will briefly presented the concept of relational contracts, which is closely related to alliancing..

	~~In the end the weaknesses of the definition and further works that should be done is discussed.~~
	==Problem of moral hazard==		==Problem of moral hazard==
	Whenever a client chooses to outsource work the problem of moral hazard will arise. There is no guarantee for the client that the contractor will give a consummate performance once he is hired. The problem of moral hazard arises due to several reasons, one of them is an asymmetry in information between client and contractor. Were the contractor due to his expertise will hold the most information<ref name="GMW">Winch, Graham M."Managing Construction Projects", 2002, Blackwell Science LTD, p:132-148</ref>. This gives the contractor the opportunity to behave opportunistically as he can have information that is critical for effective client decision-making. Opportunistic behaviour from the contractor can cause the client to want to switch contractor. However, the switching costs for client is high due to interim payments, transaction costs of retendering, and so on. On the other hand, the contractor has small switching costs compared to the client due to interim payments. Hence there is an imbalance in switching costs.		Whenever a client chooses to outsource work the problem of moral hazard will arise. There is no guarantee for the client that the contractor will give a consummate performance once he is hired. The problem of moral hazard arises due to several reasons, one of them is an asymmetry in information between client and contractor. Were the contractor due to his expertise will hold the most information<ref name="GMW">Winch, Graham M."Managing Construction Projects", 2002, Blackwell Science LTD, p:132-148</ref>. This gives the contractor the opportunity to behave opportunistically as he can have information that is critical for effective client decision-making. Opportunistic behaviour from the contractor can cause the client to want to switch contractor. However, the switching costs for client is high due to interim payments, transaction costs of retendering, and so on. On the other hand, the contractor has small switching costs compared to the client due to interim payments. Hence there is an imbalance in switching costs.

S162259: /* Definition of alliancing in construction */

2017-06-22T09:53:45Z

Definition of alliancing in construction

← Older revision		Revision as of 09:53, 22 June 2017
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	To have thorough understanding of the concept of alliancing, John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006)<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		To have thorough understanding of the concept of alliancing, John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006)<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>, went through alliancing literature and sorted out the main factors describing the concept of alliancing. These main factors were separated into three groups as illustrated in Fig.<ref name="Alliancing_factors" />.		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>, went through alliancing literature and sorted out the main factors describing the concept of alliancing. These main factors were separated into three groups as illustrated in Fig.<ref name="Alliancing_factors" />.
	[[File:Alliancing_factors.png\|430px\|thumb\|center\|Distinction of alliancing factors (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))~~<ref name=Alliancing_factors />~~<ref name="Alliancing_factors">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		[[File:Alliancing_factors.png\|430px\|thumb\|center\|Distinction of alliancing factors (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name="Alliancing_factors">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]
	The factors which make up the general prerequisites, top management support and adequate resources, where presumed to be generic elements need in all type of construction projects. Thus, these elements do not contribute to our understanding of alliancing.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		The factors which make up the general prerequisites, top management support and adequate resources, where presumed to be generic elements need in all type of construction projects. Thus, these elements do not contribute to our understanding of alliancing.<ref name="SD">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
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	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>

	[[File:sunflower_model.png\|430px\|thumb\|center\|Alliancing sunflower model(John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))~~<ref name=sunflower_model />~~<ref name="sunflower_model">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		[[File:sunflower_model.png\|430px\|thumb\|center\|Alliancing sunflower model(John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name="sunflower_model">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]

S162259: /* Trust */

2017-06-22T09:52:08Z

Trust

← Older revision		Revision as of 09:52, 22 June 2017
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	===Trust===		===Trust===
	[[File:Trust.png\|430px\|thumb\|Elements of trust<ref name=Trust />]]		[[File:Trust.png\|430px\|thumb\|Elements of trust<ref name="Trust">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
			family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]

	Trust is needed in an alliance without it, it is impossible to exchange any form of social or economic service. As any exchange requires that a party performing a service, can expect the other party retaliate the service with a service of similar value. <ref name="TR">ALF CROSSMAN AND LIZ LEE-KELLEY"Trust, commitment and team working: the paradox of virtual organizations", 2004, http://econ.au.dk/fileadmin/Economics_Business/Currently/Events/PhDFinance/Kauttu_Trust__commitment_and_team_working-___the_paradox_of_virtual_organizations.pdf</ref>		Trust is needed in an alliance without it, it is impossible to exchange any form of social or economic service. As any exchange requires that a party performing a service, can expect the other party retaliate the service with a service of similar value. <ref name="TR">ALF CROSSMAN AND LIZ LEE-KELLEY"Trust, commitment and team working: the paradox of virtual organizations", 2004, http://econ.au.dk/fileadmin/Economics_Business/Currently/Events/PhDFinance/Kauttu_Trust__commitment_and_team_working-___the_paradox_of_virtual_organizations.pdf</ref>

S162259: /* Real gain-share/pain-share */

2017-06-22T09:48:52Z

Real gain-share/pain-share

← Older revision		Revision as of 09:48, 22 June 2017
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	===Real gain-share/pain-share===		===Real gain-share/pain-share===
	Real gain-share/pain-share can be implemented in an alliance by a target cost contract<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. The Scottish Futures Trust expressed that the basic principle of these contracts is “that a target cost is agreed upon and then the contractor is paid for the work undertaken on a cost reimbursable basis”<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. When the project is finalised the final target cost, which is the original target cost with the addition of any costs related to employer changes and employer risk events, is determined. The final target cost is then compared to original target cost. Gains achieved by managing to keep the final target cost below the original target cost, will be shared on a pre-agreed basis. The same goes for losses associated with a final target cost higher than the original. This is the pain share. Fig.<ref name="Gain_share" /> illustrates how a typical real gain share/pain-share model works.		Real gain-share/pain-share can be implemented in an alliance by a target cost contract<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. The Scottish Futures Trust expressed that the basic principle of these contracts is “that a target cost is agreed upon and then the contractor is paid for the work undertaken on a cost reimbursable basis”<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. When the project is finalised the final target cost, which is the original target cost with the addition of any costs related to employer changes and employer risk events, is determined. The final target cost is then compared to original target cost. Gains achieved by managing to keep the final target cost below the original target cost, will be shared on a pre-agreed basis. The same goes for losses associated with a final target cost higher than the original. This is the pain share. Fig.<ref name="Gain_share" /> illustrates how a typical real gain share/pain-share model works.
	[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=Gain_share ~~/><ref name="Alliancing_factors~~">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein		[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=Gain_share">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]
	By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.		By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.

S162259: /* Real gain-share/pain-share */

2017-06-22T09:48:04Z

Real gain-share/pain-share

← Older revision		Revision as of 09:48, 22 June 2017
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	===Real gain-share/pain-share===		===Real gain-share/pain-share===
	Real gain-share/pain-share can be implemented in an alliance by a target cost contract<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. The Scottish Futures Trust expressed that the basic principle of these contracts is “that a target cost is agreed upon and then the contractor is paid for the work undertaken on a cost reimbursable basis”<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. When the project is finalised the final target cost, which is the original target cost with the addition of any costs related to employer changes and employer risk events, is determined. The final target cost is then compared to original target cost. Gains achieved by managing to keep the final target cost below the original target cost, will be shared on a pre-agreed basis. The same goes for losses associated with a final target cost higher than the original. This is the pain share. Fig.<ref name="Gain_share" /> illustrates how a typical real gain share/pain-share model works.		Real gain-share/pain-share can be implemented in an alliance by a target cost contract<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. The Scottish Futures Trust expressed that the basic principle of these contracts is “that a target cost is agreed upon and then the contractor is paid for the work undertaken on a cost reimbursable basis”<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>. When the project is finalised the final target cost, which is the original target cost with the addition of any costs related to employer changes and employer risk events, is determined. The final target cost is then compared to original target cost. Gains achieved by managing to keep the final target cost below the original target cost, will be shared on a pre-agreed basis. The same goes for losses associated with a final target cost higher than the original. This is the pain share. Fig.<ref name="Gain_share" /> illustrates how a typical real gain share/pain-share model works.
	[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share<ref name=Gain_share />]]		[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=Gain_share /><ref name="Alliancing_factors">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
			family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]
	By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.		By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.
	[[File:G_S_P_S_M.png\|430px\|thumb\|center\|Methods for achieving gain-share/pain-share ~~(John F~~.~~Y. Yeung~~, ~~Albert P~~.C. ~~Chan, Daniel W~~.M. ~~Chan (2006))~~<ref ~~name=G_S_P_S_M /~~>]]		[[File:G_S_P_S_M.png\|430px\|thumb\|center\|Methods for achieving gain-share/pain-share <ref name="G_S_P_S_M">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>]]
	The first example suggests a 50-50 split between the parties, without any caps. This is considered the most just gain-share/pain-share mechanism. It also ensures a strong partnering culture. However, the lack of any cap on the pain-share makes it hard for the employer to estimate what its final payment will be.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>		The first example suggests a 50-50 split between the parties, without any caps. This is considered the most just gain-share/pain-share mechanism. It also ensures a strong partnering culture. However, the lack of any cap on the pain-share makes it hard for the employer to estimate what its final payment will be.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>

S162259: /* Real gain-share/pain-share */

2017-06-22T09:44:41Z

Real gain-share/pain-share

← Older revision		Revision as of 09:44, 22 June 2017
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	[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share<ref name=Gain_share />]]		[[File:Gain_share.png\|430px\|thumb\|center\|Model of real gain-share/pain-share<ref name=Gain_share />]]
	By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.		By creating an environment where the employer and contractor share pain and gain, one has achieved an alignment of the contractors and employers’ goals. Both parties are motivated to control costs, as they share the risk of loss and profit through a gain-share/pain-share mechanism.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref> The gain-share/pain-share mechanism can be achieved in several different ways. Fig.<ref name="G_S_P_S_M" /> illustrates four different paths to achieving gain-share/pain-share.
	[[File:G_S_P_S_M.png\|430px\|thumb\|center\|Methods for achieving gain-share/pain-share<ref name=G_S_P_S_M />]]		[[File:G_S_P_S_M.png\|430px\|thumb\|center\|Methods for achieving gain-share/pain-share (John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=G_S_P_S_M />]]
	The first example suggests a 50-50 split between the parties, without any caps. This is considered the most just gain-share/pain-share mechanism. It also ensures a strong partnering culture. However, the lack of any cap on the pain-share makes it hard for the employer to estimate what its final payment will be.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>		The first example suggests a 50-50 split between the parties, without any caps. This is considered the most just gain-share/pain-share mechanism. It also ensures a strong partnering culture. However, the lack of any cap on the pain-share makes it hard for the employer to estimate what its final payment will be.<ref name="SFT">Scottish Futures Trust"REVIEW OF SCOTTISH PUBLIC SECTOR PROCUREMENT IN CONSTRUCTION: Guidance on the operation of target cost contracts and pain-share/gain-share mechanisms", 7. January 2017, http://www.scottishfuturestrust.org.uk/files/publications/Target_Cost_Guidance.pdf</ref>

S162259: /* Definition of alliancing in construction */

2017-06-22T09:43:27Z

Definition of alliancing in construction

← Older revision		Revision as of 09:43, 22 June 2017
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	family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>		family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>

	[[File:sunflower_model.png\|430px\|thumb\|center\|Alliancing sunflower model(John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=sunflower_model />]]		[[File:sunflower_model.png\|430px\|thumb\|center\|Alliancing sunflower model(John F.Y. Yeung, Albert P.C. Chan, Daniel W.M. Chan (2006))<ref name=sunflower_model /><ref name="sunflower_model">John F.Y. Yeung *, Albert P.C. Chan, Daniel W.M. Chan"The definition of alliancing in construction as a Wittgenstein
			family-resemblance concept", 7. January 2017, http://www.sciencedirect.com/science/article/pii/S0263786306001505</ref>]]

	==The five core elements==		==The five core elements==