Collaborative contracts can improve productivity and help meet carbon targets

Created: March 18, 2020. Updated: March 18, 2020.

Conventional procurement contracts are often used in construction projects as a default option. But studies of new collaborative contracts are demonstrating that they can lead to better productivity and CO2 outcomes, by better aligning the project owner’s goals with those of other project partners.

Collaborative contracts are on the rise in construction industry as an alternative to traditional adversarial procurement contracts. In collaborative contracts, the different partners in a project work together to develop key deliverables including the scope, schedule and budget. This is in contrast to conventional procurement, in which the project owner usually allocates specific project responsibilities and risks to each participant.

Collaborative models grew out of a frustration with problems with conventional contracting, which risk incentivizing participants to do the bare-minimum, shirk responsibility for problems, and can lead to inefficiencies caused by the sequential approach to design and construction. Now, new studies are showing that the collaborative approach can better meet project goals, including productivity and carbon targets.

For example, a newly published study by the consulting firm McKinsey & Company, of eight large capital projects, determined that collaborative contracts resulted in a 15 to 20 percent improvement in cost and schedule performance compared with traditional contracts.

Using collaborative contracting to cut carbon

But can these contracts also raise the bar when it comes to cutting carbon emissions?

A growing body of research and project outcomes are showing that it can. The Implementation of Procurement Requirements for Sustainable Collaboration in Infrastructure Projects (Impres) study looked at the implementation strategies used to drive greenhouse gas reduction in a range of large infrastructure projects in five countries world-wide, including Australia, the Netherlands, Sweden, the UK and the US. The research, which was co-funded through the Construction Climate Challenge (CCC), showed that collaborative contracting models in the cases studied encouraged innovation and integrated knowledge of different participants to in reaching climate goals. In the cases studied, collaborative contracts:

  • Helped break silo-thinking and integrate the supply chain in order to reach greater carbon reductions.
  • Allowed for continuous learning and more transformational innovation.
  • Incentivized contractors to find ways to fulfil client goals while building less

So, how to succeed with collaborative contracting? The CITT project (also co-funded through CCC) looked at case studies to see which collaborative factors that are needed to improve emission reductions throughout the supply chain. Of particular importance are leadership, information-sharing and incentive mechanisms. Among its recommendations the research team concluded that to reduce emissions the industry should try to move away from the traditional ‘design-bid-build’ business model towards a collaborative, client-centric model where the client acts as a trusted leader to encourage information sharing, and that there should be incentives in place to ensure strong collaboration.

Collaborative contracting models are being adopted in climate-ambitious construction projects

Since collaborative contracts are demonstrating real benefits, it’s perhaps little wonder that an increasing number of ambitious building projects are adopting a collaborative contracting approach. These include for example the Powerhouse collaboration between the real estate company Entra, the builder Skanska, the environmental organization ZERO, Snøhetta architecture and design office, and the consulting company Asplan Viak to collaborate on low carbon solutions including Norway’s biggest new energy positive building, which is designed to generate more energy in its operational phase than it consumed through the production of building materials, construction, operation and disposal of the building. Another example is the @one Alliancelaunched by Anglian Water together with six key contractors to deliver on a range of capital investments. Through the collaboration, the initial goals of the program were surpassed to achieve a 55 percent reduction in embodied carbon and a 41 percent reduction in operational carbon, alongside significant cost savings and improved speed of delivery.