The NEC4 Alliance Contract (ALC)[1] represents one of the most progressive developments in the NEC suite of contracts. It moves beyond the traditional bilateral contracting model and establishes a single, multi-party agreement in which the client and key suppliers operate as one integrated team aligned behind shared objectives. In 2025, Thomas Telford (NEC publisher) acquired the Framework Alliance Contract (FAC-1) and Term Alliance Contract (TAC-1) forms originally published by the Association of Consultant Architects (ACA), bringing three alliance agreements into the “home of collaboration”.[2] However, the underlying principle of collaboration is not new. As Henry Ford observed a century ago, “Coming together is a beginning; keeping together is progress; working together is success.”
For those new to the ALC, it is not simply another standard form to learn; it is a fundamentally different commercial and behavioural model, requiring a shift in mindset as much as an understanding of its provisions. While the client and partners remain distinct legal entities, they are aligned within a single contractual framework with shared obligations and collective performance outcomes. This integration defines both the commercial environment and the legal structure within which the alliance operates.
The ALC is designed to support the delivery of complex programmes of work where integration, collaboration and long-term relationships are critical to success. Rather than appointing parties under separate contracts with fragmented risk allocation, the ALC brings the client and partners together under one contract, forming the “Alliance”. The ALC is particularly suited to major infrastructure programmes, long-term frameworks and highly regulated environments where coordination across multiple disciplines and stakeholders is essential.
A single contract, a single team
Traditional procurement models rely on chains of bilateral contracts, with risk allocated across interfaces that frequently become points of dispute. By contrast, the ALC establishes a single contractual framework binding all members of the alliance. All members of the alliance are signatories to the same agreement and act collectively as the “Alliance”, rather than as separate contracting parties. However, the contract preserves the legal identity of members
This structure removes many of the fault lines that arise in conventional arrangements and reframes relationships around shared delivery. The requirement to act in a spirit of mutual trust and co-operation is central to this approach and is elevated in importance within the ALC.[3] The alliance manager and all members are expected to operate in accordance with this principle, which underpins both governance and day-to-day delivery.
Shared objectives and collective success
A defining feature of the ALC is the use of alliance objectives, which sit at the heart of performance and commercial alignment.[4] These objectives, typically covering cost, time, quality, safety and broader outcomes, are linked to measurable targets within the performance table.[5]
Performance against these targets directly influences financial outcomes. Where the alliance meets or exceeds its objectives, all members share in the benefit; where performance falls short, the consequences are similarly shared.[6] This creates a strong alignment of incentives, encouraging behaviours that prioritise overall project success rather than individual commercial advantage. Financial outcomes are therefore driven not only by cost performance, but also by how effectively the alliance achieves its agreed objectives.
Governance and decision-making
The governance framework is central to the operation of the ALC. Strategic direction and key decisions sit with the alliance board, including on how to respond to defined events,[7] and resolving disputes.[8]
A critical feature of this structure is that, unless otherwise stated, decisions of the alliance board require unanimous agreement.[9] This requirement reinforces collaboration and ensures that all members are aligned in decision-making. However, it also introduces a potential governance risk where consensus cannot be achieved.
The alliance manager is responsible for the day-to-day management of the contract and for implementing the board’s decisions.[10] The implementation plan plays a key role in defining how the alliance operates in practice, including management structures, roles, systems and processes.[11]
Financial model and commercial structure
The ALC adopts an open-book approach to cost, based on defined cost,[12] with transparency across all alliance members. The total cost of delivering the works is captured as the alliance cost, which includes both the partners’ defined cost and the client’s costs.[13]
Commercial outcomes are determined through two primary mechanisms. Firstly, performance against the alliance Objectives is assessed through the performance table,[14] resulting in financial adjustments. Secondly, the difference between the alliance cost and the budget produces either a saving or an overspend, which is shared between the partners in accordance with the agreed framework.[15]
This model aligns financial outcomes with both efficiency and performance, reinforcing collective accountability for delivery.
Risk, compensation events & liabilities
The ALC does not remove risk, but it significantly reshapes how it is treated. Rather than allocating risk between parties in a traditional sense, most risks are effectively pooled and managed collectively through the commercial model. The ALC includes a compensation event mechanism. However, unlike other NEC4 contracts, compensation events adjust the budget, completion date and performance table, rather than providing a direct entitlement to additional payment.[16]
The contract retains a defined framework of liabilities. Client and partner liabilities are expressly identified, primarily in relation to matters such as intentional acts or omissions, third-party claims, intellectual property infringement and personal injury. Outside these defined liabilities, risks are generally absorbed into the alliance cost, subject to any recovery through insurance.[17]
No claims philosophy and dispute resolution
Clause 94.1 of the ALC provides that a failure by a member of the alliance to comply with its obligations does not give rise to enforceable rights at law between members, except in respect of defined client or partner liabilities. This represents a significant departure from traditional contracting. The contract removes most rights to bring claims between alliance members, shifting the focus towards collective problem-solving within the contractual framework. However, rights are not extinguished entirely. Defined liabilities remain, as set out in clauses 80 and 81.
Disputes are referred to the alliance board, which may obtain an opinion from an independent expert or refer the dispute to the senior representatives.[18] The contract also provides for the possibility of mediation by agreement.[19] Where the Housing Grants Construction & Regeneration Act 1996 applies, statutory adjudication rights remain available,[20] although the scope of disputes capable of referral is significantly reduced.[21]
Notable NEC4 ALC projects
Although relatively recent compared with other NEC forms, the ALC and alliancing models aligned with its principles have been used across a number of major programmes. In England, elements of the £7 billion National Highways Smart Motorways programme were procured using the NEC4 ALC model.[22] EDF chose the NEC4 ALC for its multi-billion pound investment programme of mechanical and electrical services at Hinkley Point C nuclear power station.[23]
Sheffield Hallam University in northern England chose the NEC4 ALC for the first phase of the £700 million, 20-year redevelopment of its city centre campus.[24] Internationally, the Palabora Mining Company commenced work in 2021 using the NEC4 ALC on a US$700 million development of its copper mine in South Africa.[25] More recently, in 2024, Network Rail adopted the NEC4 Alliance ALC to procure the proposed £1.4 billion Midlands Rail Hub programme.[26]
Use of the alliance model around the world
Alliance contracting has been extensively developed and applied in the Australian construction and engineering sector. Originating in the 1990s, it has gained prominence through public-sector delivery bodies such as Main Roads Western Australia and the Queensland Department of Transport and Main Roads. In Finland, several transport projects have been delivered over the last two decades, including the major expansion of Helsinki Airport.
The challenges
While the ALC offers clear advantages, its success depends fundamentally on behaviours. Where collaborative practices are not genuinely embraced, the contractual structure alone will not prevent the re-emergence of adversarial behaviours. The requirement for unanimous decision-making at the alliance board level may also constrain progress where alignment cannot be achieved.
The alliance model demands a high level of capability. Organisations unfamiliar with open-book working and integrated delivery may struggle to operate effectively. The principal challenges are therefore often cultural and organisational rather than contractual. Alliance contracting has also been met with scepticism, with questions raised over whether it provides value for money without the robustness of competitive tension and more structured governance in the early stages of procurement.[27]
Conclusion
The NEC4 Alliance Contract represents a significant evolution in contracting practice. It provides a framework for delivering complex programmes through shared objectives, collective responsibility and aligned commercial incentives. Its effectiveness depends not only on understanding the contract, but on adopting the behaviours required to make the alliance model work in practice, whilst maintaining governance and a level of commercial tension.
The ALC was first published in 2017 and represents a significant change to the other traditional bi-party contracting models available in the NEC4 suite of contracts.
David Hunter
April 2026
[1] NEC, NEC4 Alliance Contract (ICE Publishing 2017, amended January 2023).
[2] NEC User Group Newsletter Issue No. 138 July 2025
[3] cl 10.2.
[4] cl 11.2(5)
[5] cl 11.2(25)
[6] cl 53
[7] For example, a prevention event as defined by clause 18.1
[8] cl 21.5
[9] cl 21.3
[10] cl 21.7
[11] cl 11.2(20).
[12] cl 11.2(15)
[13] cl 11.2(3),22.2-22.4
[14] cl 11.2(25)
[15] cl 53.
[16] cl 63.7
[17] cl 80, 81 & 82
[18] cl 95.1, 95.2
[19] cl 97.2-97.6
[20] Option Y(UK)2
[21] cl 94.1
[22] NEC User Group Newsletter Issue No. 108 September 2020
[23] NEC User Group Newsletter Issue No. 95 January 2019
[24] NEC User Group Newsletter Issue No.107 July 2020
[25] https://www.neccontract.com/projects/palabora-copper-mine-extension-south-africa
[26] NEC User Group Newsletter Issue No. 130 March 2024
[27] Ross (2009), Alliance Contracting: Lessons Learned from the Australian Experience