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It's not easy to make a partnership work

PARTNERING

Those contractors and clients eager to tie the knot on partnering deals should take heed. If you want a long-term relationship, building up trust is essential.

Jon Fletcher reports

IT'S A LOVE thing, as Ian Burnett knows all too well. Ian's relationship with his partner ran into trouble just over 12 months ago and, although he's made amends, he says things will never be the same again.

He puts a lot of the couple's problems down to the pressures of maintaining a long-distance relationship.

'A lot of it was about trust, ' he says.'Unless you can see the whites of someone's eyes, you don't get trust.'

Ian is director of the Leeds office of Wates; his partner is Durham County Council.More than 10 years after Sir Michael Latham first championed collaborative working, the relationship between the two highlights the problems still plaguing partnership deals between public sector clients and construction firms.

Yet despite these continuing problems, the ties between government and contractors are becoming ever more intricate and binding.

Wates won its £150 million five-year deal with Durham Council in August 2002.An early attempt to share office space with council staff failed, creating a physical barrier to match the commercial divisions between client and contractor.

'Perhaps it was down to our naivety, ' says Mr Burnett.'You have got to earn trust. It was as though we were sitting in separate silos.'

Partnering, particularly when it involves only one private sector partner, demands an enormous leap of faith by the client in forfeiting the ability to test prices in the open market.

Trust is paramount and was put to the test when the council began to channel smaller jobs through Wates.The first year of the agreement saw the firm take on 90 projects with a total value of only £12 million - an average of just over £130,000 per project.

As Mr Burnett remembers: 'Some schemes were just too small for us to be cost-effective on.That's what brings mistrust.'

Doubts about value for money at such an early stage in the relationship inevitably took their toll.

The decision was taken to remove the smaller projects from the deal, leaving the contractor to concentrate on the larger pickings. Even so, says Mr Burnett: 'It has taken until now to start to see clear benefits.'

In the past year the deal has resulted in cost savings in the order of 5 per cent.

'The supply chain is really starting to drive some of the cost issues out, ' Mr Burnett claims.

The deal was also restructured to make it easier to build trust.Wates bosses joined forces with council managers to form an integrated taskforce, while employees from both sides moved into shared offices.

In doing so, the Durham partnering agreement sidled a step closer to the latest face in partnering scene - the Local Education Partnership, or LEP.

The Government's £2 billion-a-year Building Schools for the Future programme continues New Labour's love affair with big-money public spending initiatives. LEPs have been developed by Partnerships for Schools, the agency running the programme, to standardise the relationship between local authorities and private sector partners.A LEP sets out the contractual relationship between the private sector, the local authority and PfS. In theory, all three take a financial stake in a LEP Company, or LEPCo, which then manages all of the contracts channelled through the partnership.

The idea itself is not new.Healthcare aficionados will be familiar with the LIFTCo, a similar special purpose vehicle used in Local Improvement Financial Trust schemes.

In bringing together the contracting authority and the contractor under one roof, Wates and Durham mimicked Building Schools for the Future and Lift, though without the financial buy-in.

Integrating public and private partners in Durham seems to have paid off. PfS hopes the same will be true of Building Schools for the Future.

On the face of it, local authority investment in the Local Education Partnerships should unite the various parties in the pursuit of common goals - build good, lasting schools; make and save money; don't screw up.

But how keen are local authorities to invest cash or assets in a private enterprise aiming to make money out of building schools? PfS points out that a stake in a LEPCo will entitle a local authority to a share of the profits.

Council officers may, perhaps understandably, find this idea a little difficult to deal with.

There is already evidence that local authorities are baulking at the prospect of having to pay to join a company they will then pay to build schools. Project managers on Sunderland's BSF programme are rumoured to be hoping to opt out of any financial stake in their LEP and bosses on at least one London scheme are thought to be having similar doubts.

Paul Foster is a partner with consultant EC Harris whose work on Building Schools for the Future has placed him in the partnering front line.

He questions the importance of the local authority's cash role in a LEP and suggests that the ends - collaborative working - are more important than the means.

'What is fundamental is that the public sector is a shareholder. It is not such a big issue whether they should pay for that shareholding.

'If the bidding entity needs the financial support, maybe it doesn't have the wherewithal to bid in the first place.'

Then suddenly, before you know it, we're back on love.Mr Foster suggests that partnering is 'like a marriage' and explains: 'You've got to take on different roles at different times.You can't always have one dominant partner. It just doesn't work.'

n See page 24 If partnering is a marriage, then Wates' experience demonstrates another problem.Mr Burnett and the council could easily have ended up taking verbal pot-shots at each other.

One of the main sticking points was Durham Council's decision to pass projects valued as low as £70,000 through a contractor more used to deals 100 times that size.

This sort of mismatch is not exclusive to partnering deals but has the potential to be far more damaging in a relationship that is intended to last for years.Get it wrong at the start and you're left with a 10-year headache.

Mr Foster sees client uncertainty as one of the greatest barriers to successful partnering.He says: 'Lack of clarity equals extra cost.That's not appreciated and comes as a bitter pill.

'You have to make decisions up-front. If the public sector doesn't go in with clarity around what they actually want, it will impact on the relationship.'

This is particularly worrying for Building Schools for the Future, where the boundaries are still fluid. Some councils are toying with the inclusion of primary schools in an initiative that was originally aimed only at secondary schools.Others whisper of the potential to go even further - to broaden the scope of an LEP to include other public sector building projects such as libraries and leisure facilities.There is even greater uncertainty around the idea of educational attainment. In a speech in December, Sally Brooks, head of schools capital and buildings at the Department for Education and Skills, hinted that the private sector will be judged not only on the quality of the buildings it provides, but also on the performance of the pupils in those buildings.

She says: 'The importance of the education vision underlines everything. It will be interesting to see what happens to BSF if we cannot show we're adding value.'

Many in the private sector are troubled by the idea of becoming responsible for educational performance. Phil Jones (pictured right), senior partner with consultant Ridge, shares their scepticism: 'What is being said is that contractors have to take on educationalists to deliver. I'm not sure whether the industry can grasp that. I'd suggest it could be a long haul.'

It is absolutely vital that councils are clear from the word 'go' how these elements will be built into contracts and how performance will be measured.

An explicit link between buildings, the firms that build them and the success of what goes on inside them will carry partnering into uncharted territory.All this at a time when the basic premise of partnering still does not seem to have sunk in. For many parts of the public sector, 'best value' still simply means 'best price'.

That said, there are pockets of good practice. Paul Foster is optimistic: 'There are some education authorities that are as far forward as anyone could wish to be.The closer I get, the more I think that Partnerships for Schools has come up with a structure that can really work well.'

He may be right but, for the structure to work, the industry has to sort out the basics.

A recent RICS report contains worrying evidence that this is still some distance off.One client admitted: 'We are not comfortable about trusting contractors. It's like climbing into a pool full of sharks and trusting that they are not going to bite you.'

If these attitudes endure, partnering could give love a bad name.

The £7 million NetPark Complex, procured through the £150 million partnering deal between Durham County Council and Wates, has provided Durham University with a new Advanced Instrumentation Centre that links telescopes around the world

Uneasy partners

A NEW RICS survey carried out by Gerard Wood of the University of Salford finds that the barriers to collaborative working identified by Sir Michael Latham in 1993 are still present.

Clients interviewed for the study admit in private to many of the failings highlighted by contractors, with one acknowledging: 'We are not an easy client to work for. I'll be honest.We change our mind a lot.'

Another client quoted in the report agreed that changes in approach at management level often fail to filter down to the officials actually running projects.He says: 'You can have a believer at the top and a lot of Luddites below.'

The report concludes: 'The claim that partners should be equal is perhaps over-optimistic. From the perspective of clients, it is evident that their buyer dominance is the most advantageous position for them to be in and they have little intention of shifting.'

Worrying words for contractors.