FAR EASTERN UNIVERSITY

Institute of Architecture and Fine Arts

INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

A RESEARCH PAPER SUBMITTED TO
ARCHITECT ARNULFO DADO

BY

AMEDO, JOHN AEMIEL

CHUA, JON EDRICK A.
DE JESUS, MARIA KAREN F.
FLORES, REYNALDO ATARA
MADARANG, CAESAR IAN
MANGAPURO, MANGGA MADJOS
ROA, ROSSLOU AIRA
PALOMIQUE, RUTH IRISH A.
POSTRANO, ROSE MARIE
VANGUARDIA, ANNE PAULINE

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE REPORT
IN PROPRAC 3, 2nd SEMESTER 2015-2016

FEBRUARY 2015

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

ABSTRACT

An inter-firm alliance is an organizational structure to govern an incomplete

contract between separate firms and in which each firm has limited control. Because
the partners remain separate firms, there is no automatic convergence in their
interests and actions. As a result, to deal with unforeseen contingencies inherent in
the incomplete contract, the partners need to make decisions jointly. A teaming
agreement or design team arrangement involves two or more companies combining
resources to bid on a government contract. Typically, this involves a large
corporation and one or more small businesses, with the large corporation acting as
the prime contractor to the government and the smaller company or companies
serving as subcontractors to the prime contractor. The biggest risk encountered in
such agreements is that after spending time and effort in preparing the agreement,
the smaller company will not receive the share of work expected if the project bid on
is awarded.

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

OBJECTIVES

To give the class additional information about the Inter-firm alliance and
design team arrangements.

To give the class an overview on how different people within an inter-firm

alliance and design team work.

What are the advantages and disadvantages of an inter-firm alliance and

design team arrangement?

INTRODUCTION

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

The importance of this is to know what are the dos and donts in the situation
of inter-firm alliance and design team arrangements. To know the flow of the project
to segregate each people on their specific job to create a system for a more organize
team.

INTER-FIRM ALLIANCE
Introduction
Inter-firm alliance is an alliance is commonly defined as any voluntary initiated
cooperative agreement between firms that involves exchange, sharing, or codevelopment and it can include contributions by partners of capital, technology, or
firm-specific assets. Identified as one of the key mandates for the construction
industry moving forward is the need to both recognize and strengthen the
relationships and engagement between the various disciplines.

Inter-Professional Relationships
Architects routinely retain consultants. This relationship means that the
architect also has vicarious liability for any damage caused by the consultants
negligence. Insured architects will want to review their consultants insurance status,
as they, for all intents and purposes, will serve as their consultants insurer if that
status is inadequate. Similarly, if an architect agrees by contract to limit the liability of
a consultant, the architect may find that the risk of the consultants negligence has
been shifted to the architect and the architects insurer. At times architects are subconsultants to other professionals or subcontractors to construction contractors.
Examining the prime design professionals coverageor the professional liability
coverage of a construction contractor through which the architect is providing
services to a clientcan alert the sub-consultant professional to gaps in coverage
that could result in the sub-consultant becoming the only target of a claim.

Architect Consultant Relationship

The architect may seek consulting arrangements with a wide variety of design
professionals and specialistseven with other architects. The most common interprofessional relationship is that between the architect and the professional engineer
responsible for the detailed design and engineering of one or more of the buildings
systems.
Consultant Services and Responsibilities
4

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

Consultant services to the architect are outlined in the architect-consultant

agreement. These services, and other contract terms and conditions, should be
carefully coordinated with those in the architect-owner agreement.
Services
As the architect and owner establish the services to be included in the
architects agreement, both parties may consider the need for the services of other
design professionals. It is advisable to review the list of services required to
accomplish the project and establish who will be responsible for each. Each
professional service identified may be provided by any of the following:
The architecture firm, through its own staff.
A design professional subcontracted to the architecture firm. The design
professional may be another architect, an alliance partner, or another firm acting as a
consultant to the architect.
A consultant to the owner. This arrangement may include a construction
manager, a project or program manager, an independent design professional for
another portion of the project, or another architecture firm performing a portion of the
architecture serviceswith or without coordination by the architect.
The owner. The owners staff may provide services themselves or by some
other arrangementwith or without coordination by the architect.
Clarifying responsibilities between the owner and the architect accomplishes at least
two:
Role in project planning. When the architect-consultant relationship is
formed early in the projector before the project begins, in a strategic alliance or a
team put together to acquire the projectthe consultant can be involved in project
planning. The consultant then is in a position to commit to services, scope, schedule,
and fee before the architect makes these commitments to the owner.
The responsibilities of the architect. As the prime design professional, the
architect assumes primary contractual responsibility to the owner for the accuracy
and completeness of the work of the architects consultants.

DESIGN TEAM ARRANGMENTS

5

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

Introduction
A teaming agreement is similar to a memorandum of understanding in that it
sets forth the terms and conditions under which each member party in a design-build
team will operate. It defines the role of each team members and their relationship
between the parties. The teaming agreement is a legal document since it will form
the basis for subsequent contracts between the parties should the team is successful
in being selected for the design-build project. Accordingly, each of the parties
entering into a teaming agreement should obtain their legal counsels opinion with
respect to the document. While teaming agreements generally involve designers and
constructors other key consultants may become involved depending on the type of
design-build project that is proposed.
The project design team may be a very small group- even a single architect
who has the necessary expertise and performs all of the professional services
required. Often, however, the team includes other firm with special expertise in
building engineering systems. Where design or construction consultants are
required, it is common for the architects to select them and add them to project team
and the architect is responsible to the clients for their professional services. The
architect -consultant relationship may be establish just for project at hand, it may be
a strategic alliance developed between the alliance developed between the
participants , or the two firms may have a long standing working relationship.
Design-build team members are usually selected on the basis of the experience,
expertise, value and reputation that each member will bring to the team.
Organizational Structure
The design-build team, once formed, need to determine the type of
organizational structure that is best suited for their situation and most likely to
achieve the owners requirements. There are two basic options:

One is to form an individual entity, such as a joint venture or limited liability

company.
One of the team members will have the prime contract with the owner and
subcontract the work to the other team members.

Certain factors to be considered before selecting the Organizational Structure: It

must be compatible with jurisdictional statutes and licensing laws. Other factors to be
considered in selecting the organizational structure include:

Owners preference
Type of design-build project
Liability issues

A brief discussion of the options for structuring a design build team follows:

Joint Venture

Ability to achieve owners

objectives

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

An association of two or more entities for the purpose of performing a designbuild project.
The entities maintain their separate identities and join forces, usually, for a
specific project.
From both a legal and a tax standpoint a joint venture is viewed as a general
partnership.
Accordingly, each joint venture partner is jointly and severally liable for both
the actions and debts and obligations of the other party.

Limited Liability Company

An entity possessing attributes of both a general partnership and a

corporation.
As the name suggests, the entities in an L.L.C. limit their liability to the assets
of the L.L.C. and are not individually liable for its debts and liabilities.
For tax purposes, the L.L.C. is treated as a partnership.

Prime-Subcontractor Relationship

The most common organizational structure for performing design-build

projects.
This type of relationship enables the owner to receive the benets of single
point responsibility and accountability.
Any one of the following entities may be the prime contractor and subcontract
the appropriate portion of the work:
o Constructor Led Team
o Designer Led Team
o Developer Led Team

Once the team members have been selected and the organization
structure determined, the parties have to assign the roles and responsibilities of each
party in the preparation of the teams proposal. They also need to address the
allocation of proposal preparation costs, the protection and ownership of condential
and/or proprietary information and the exclusivity of the teaming arrangement. They
also need to discuss post-award issues should they be selected for the project.
Under this structure, one party, usually the constructor because of their nancial
resources executes the design-build contract with the owner and subcontracts the
design portion and other project elements.

Sharing Risks and Providing Services

7

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

The allocation of risks and rewards on a project offers a unique

opportunity for the team members to ensure that their respective interests
are properly aligned and truly interdependent. The single most important
factor in determining the likelihood of success for a design-build team is
the degree to which its members function as a true team.

Compensation

An essential element of any teaming agreement is the compensation to

be paid to each member. To some extent, these provisions will be affected
by the structure of the design- build team.

Allocating profits and losses

The sharing of profits and losses from a project offers the design-build team
its best opportunity to build incentives for teamwork into its agreement.
Financial rewards and penalties are the most powerful incentives to members
of design-build teams, outweighing all of the promises, philosophies and
platitudes in the teaming agreement.

Many design-build projects involve other potential risks and rewards

beyond project profits and losses. The risks commonly occur in traditional
projects as well and include the following:

Owner insolvency
Force majeure events
Subcontractor claims and
defaults
Cost overruns

Risks

Functional failure of the facility

Delays
Equipment malfunctions
Design errors or omissions
Construction accident claims

Common problems in Inter-firm alliance and Design team arrangement

Misunderstanding with the field of work of each part of the alliance.
Miscommunication of each member.

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

Advantages

You can gather more data and more ideas to create the best outcome for the
project.
More people are working, so it means lesser work of each worker so the
production of work is much easier and faster.
The division of label is much easy and more organize.
A particular benet of a joint venture is that it affords the owner access to both
the designer and constructor(s).

Disadvantages

When the alliance didnt work, the whole project will turn into a mess and
worst it might be ruined.
This kind of set up, some workers tend to procrastinate.
A disadvantage of the L.L.C. is that, because its liabilities are limited, owners
are reluctant to enter into a contract with them without some form of security
guaranteeing the L.L.C.s obligations.

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

Recommendations

Avoid misunderstanding within the alliance; make sure that the client and the
project is the focus and the centre of the activity, the project.

Cooperation is very important so maintain the good communication and

cooperation to produce more clever ideas.

The head of the team should treat each member equally because each of
them has their own expertise on their specific jobs.

Each member of the team should have similarly minded philosophies with
regard to ethics, business practices and values.

10

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

CONCLUSION

We therefore conclude that Having an inter-firm alliance and design team

arrangement might be a tool for a humongous triumph if you handle it properly
or an abrasive failure for each members of the parties.

11

Professional Practice 3: INTER-FIRM ALLIANCE AND DESIGN TEAM ARRANGEMENT

REFERENCES:

12