Document background
The Project Alliance Agreement (PAA) is utilized in the United States when traditional contracting models are insufficient for complex, high-risk projects. It emerged as a response to the limitations of adversarial contracting approaches, particularly in large infrastructure and construction projects. The PAA creates a legal framework for genuine collaboration, establishing joint management structures, shared risk/reward mechanisms, and collective decision-making processes. It typically includes provisions for target cost arrangements, performance incentives, and transparent pricing mechanisms. This agreement type is particularly relevant in jurisdictions where collaborative contracting is recognized and enforced, with U.S. courts generally supporting its unique risk-allocation approach.
