The case for the Single TOC

Government clients are rightly focused on value for money.

When public money is being spent on major infrastructure, there must be confidence that the commercial model is driving an efficient outcome and that the price being paid is fair, transparent and defensible. Against that backdrop, it is easy to understand why competitive TOC and dual TOC alliance models have become increasingly attractive.

Competition feels like a natural safeguard.

If two proponents are competing against each other, including on price, surely that competition must drive a better deal for the client.

But does it?

I would argue that, in many circumstances, a single TOC alliance can produce better value for money and better project outcomes, while remaining closer to the underlying philosophy of the alliance model itself.

A single TOC process is still competitive

One of the misconceptions around a single TOC alliance is that the client somehow gives up competition. It doesn’t.

The competition simply occurs at a different point and on different criteria.

During the procurement phase, proponents can compete strongly on the things that should matter when selecting an alliance partner: capability, people, leadership, culture, methodology, innovation, understanding of the project, ability to collaborate and demonstrated capacity to deliver.

Those are not secondary considerations.

They are some of the most important determinants of whether an alliance will ultimately succeed. Once the preferred proponent is selected, the parties then work together to develop the Target Outturn Cost, or TOC.

The fact that there is only one proponent developing that TOC does not mean the client simply accepts whatever number is put forward.

Far from it.

A properly developed single TOC should involve rigorous challenge, transparent cost development, benchmarking, independent verification where appropriate, and significant client participation. And importantly, an alliance operates on an open-book basis. The costs are visible. The assumptions are visible. The quantities, rates, productivity assumptions, risk allowances and contingencies can all be interrogated.

The question, therefore, shouldn’t simply be:

“How many parties are competing on price?”

A better question might be:

“How robust is the process through which the price is being developed and challenged?”

Competition changes behaviour

There is another issue that deserves more attention. Commercial models don’t just determine how we pay for projects. They influence behaviour.

Consider the incentive facing a proponent developing a TOC in a competitive process. They want to win the project.

Naturally, that creates pressure to demonstrate that their solution can be delivered at an attractive cost. That may drive innovation and efficiency, which is positive. But it can also create another incentive: to make the TOC as competitive as possible.

Costs may be challenged aggressively. Allowances may become tighter. Risks may be interpreted optimistically. Items that might otherwise have been included could be pushed outside the TOC or treated on the assumption that they are unlikely to eventuate.

On bid day, that can look like excellent value for money. The more important question is what happens afterwards.

The “cheapest” TOC is not necessarily the best Value for Money

If a TOC has been driven down during competition beyond what the project realistically requires, the cost hasn’t necessarily disappeared.

The project still has to be delivered. The risk still exists. The work still needs to be done. And somewhere during delivery, those pressures may reappear.

That can result in greater focus on Adjustment Events, stronger arguments about whether something was or wasn’t included in the original TOC, and increasingly defensive commercial behaviour.

In other words, the project can begin to exhibit some of the behaviours that the alliance model was specifically designed to avoid.

Rather than asking, “What is the best outcome for the project?”, people can begin asking:

“Was that included in the TOC?”

“Who carries that cost?”

“Does this qualify as an Adjustment Event?”

“How do we recover this?”

Those are familiar conversations in more traditional contractual models. They should not become the defining conversations of an alliance.

The purity of the alliance model

At its heart, an alliance is built around a fundamentally different relationship between participants.

It relies on transparency, collaboration, collective problem solving and an alignment of commercial interests. The parties are supposed to succeed together.

A single TOC model supports that philosophy from an early stage.

Once the preferred alliance partner has been selected, the client and non-owner participants can turn their attention away from beating another bidder and towards solving the project together.

The conversation changes.

Instead of:

“How do we make our TOC more competitive than theirs?”

it becomes:

“What does this project genuinely require, and what is the best way to deliver it?”

That distinction matters. It allows the TOC development phase to become part of the alliance-building process itself.

The parties can test assumptions openly, explore alternatives, expose risks, investigate opportunities and develop a shared understanding of the project before delivery begins. That is much closer to the pure intent of an alliance.

A strong TOC is built on maturity, capability and competence. A successful single TOC process requires a mature and capable owner.

The client needs people who understand cost, risk, design, constructability, programming and commercial drivers.

They need to be capable of challenging assumptions without turning the process into an adversarial negotiation. They need good benchmarking and estimating capability. They need governance that is strong enough to interrogate the TOC while still supporting collaborative behaviours.

And ultimately, they need confidence in their own ability to determine whether the proposed TOC represents value.

That can be uncomfortable.

Competition provides an apparently simple answer: Bidder A is cheaper than Bidder B.

A single TOC requires a more sophisticated judgement. But major projects are sophisticated undertakings. We should be cautious about confusing a simple comparison with a better measure of value.

Value for money is more than the number at contract award

Perhaps the biggest issue is how we define value for money in the first place.

If we measure it purely by the TOC agreed at the beginning of the project, a highly competitive process may look attractive. But the client ultimately doesn’t buy a TOC. It buys a project outcome.

Real value for money needs to consider what happens through delivery: cost, schedule, quality, risk, relationships, innovation, disruption, decision making and the ability of the team to solve unforeseen problems together.

A TOC that is slightly higher but realistic, well understood and collectively owned may ultimately represent substantially better value than a lower TOC that creates commercial tension throughout delivery.

The lowest starting number does not necessarily produce the lowest final cost. And it certainly does not guarantee the best outcome.

Single TOC should not be the option we are afraid of

There is absolutely a place for competitive TOC and dual TOC models.

Different projects have different circumstances, risks and market conditions, and procurement models should always be selected deliberately.

But we should challenge the assumption that greater price competition inherently produces greater value for money.

A well-run single TOC alliance can deliver rigorous cost development, genuine transparency and strong value for money while preserving the collaborative behaviours that make alliances effective.

It requires maturity. It requires capability. And it requires the client to back itself. But that should not be seen as a weakness of the model. If anything, it is an argument for building stronger owner capability.

For projects that are genuinely suited to alliancing, the single TOC model should not be viewed as the risky exception.

It should be considered the default, the purest expression of the alliance model, with competitive TOC used where there is a clear project-specific reason to depart from it.

Because if we choose an alliance to create different behaviours, we should be careful not to design a procurement process that recreates the very behaviours we were trying to leave behind.