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Heathrow Terminal 5 Agreement

The T5 agreement was a cost-plus contract (the customer pays the supplier actual costs, plus a fixed fee including overhead and profits) based on a partnership approach. Caldwell (Roehrich and Davies, 2009) noted that the T5 agreement was based on behaviour and relationships and allowed for “tailor-made” interactions between BAA and suppliers. Doherty (2008) discussed how contractors involved in the project referred to previous “games” they used with more traditional contracts, such as low bids. B to win the project, and then worked on the commercial protection of their company during the project. The T5 approach discouraged these methods by applying fair payment practices and changing the culture within the project. The cultural literature evaluated emphasizes that the success of this contract depends on the culture of the project. BAA has established a culture less focused on the contractual principles that are common in the construction field and has encouraged a behavioural approach. The reduction in contractual orientation has allowed for an informal approach which, in turn, has reduced the generally reported contractual conflict. Within T5, a target authorization was adopted instead of an individual target culture.

It is important to highlight the informal approach that may have been possible only because BAA carries all the risks, so it is likely that clients need to assess the risks and manage them themselves. Prior to the start of the Terminal 5 (T5) construction program, BAA reviewed a number of major UK construction projects to determine the results achieved, particularly where they had gone wrong. BaA decided that it needed an agreement to manage an adaptive and dynamic approach that would address uncertainties and include integrated teams. ALORS, BAA has written its own custom contract or its own contract. The same contractual terms apply to all major suppliers, regardless of their type or usual position, as subcontractors. And in order to support project governance in accordance with this agreement, a dashboard-based performance management system has been developed for the T5 project.