Effectiveness of Alliances between Operating Companies and Engineering Companies

Abstract

Operating companies have formed ongoing alliances with engineering contractors for revamp work in operating plants. For the operating company, the alliance helps reduce overhead by eliminating cyclical work, allowing the company to focus on its core business. Ongoing alliances are different than traditional alliances, in that revamp work is harder to estimate and more likely to grow in scope and cost than new capital projects. Hence, ongoing alliances are fertile grounds for breeding mistrust. A study of five ongoing alliances found three distinct types of alliances. Operating and engineering companies have different motives for forming alliances. Key success factors include maintaining a core team, a climate of trust, and good procedures. Key factors that affect satisfaction within an alliance include the age of the alliance, the avoidance of traditional financial measures of performance and incentive fees, and close integration of operating and engineering company staff. Best practices for ongoing alliances are identified.