The initial commercial framework is established during the Deciding to alliance phase including the following:
- An aligned commercial model:
- The customer outcomes (or business requirements) to be delivered by the alliance are clear, agreed and documented.
- Clear commercial targets have been established at the outset of the alliance. Including how value will be measured for Whole Life Cost, Capital Cost and Operating Cost.
- The proposed commercial model demonstrates how partners will generate a return, the level of performance required to generate that return and how performance remains aligned with the client’s business requirements.
- A commercial model focused on the required behaviours:
- The behaviours to be incentivised and created through the commercial model have been defined, for example collaboration, continuous improvement and customer service. The behaviours will be relevant to the particular business context.
- Clear principles established before procurement:
- Commercial model principles have been established prior to the procurement process including:
- The process for establishing current baseline performance.
- The process for setting targets (the principles have been defined at this stage, as detail will be agreed when the alliance is in place).
- The general incentive arrangements (pain / gain).
- Targets in the commercial model are aligned with a clear view of current baseline performance - with value and performance measured from this baseline.
- The alliance will generate a return by outperforming against the defined baselines.
- Initial scenarios have been run to demonstrate and validate how all the members of the alliance will operate within the commercial model.
- The capabilities required to deliver the outcomes have informed an initial view of the procurement process for both the main alliance partners and the extended supply chain.
- A balanced approach to managing risk:
- A clear risk strategy has been set out in advance of the procurement process, identifying how risk will be allocated and dealt with within the commercial model.
- Risk management processes allocate risk to the party best placed to manage it.
What comes next?
The next cell in the Alliancing Code of Practice grid is Creating behaviour
View the complete Alliancing Code of Practice grid