Evaluation and Management of Political Risks in China's BOT Projects

The potential slowdown of the economic growth in China has led the government to increase spending in basic infrastructure such as roads, ports, and power generation facilities. There are opportunities in the infrastructure sectors for foreign investors. It is important however to identify and manage the unique or critical risks associated with investments in China's infrastructure projects. Such issues have received special attention with the closure of the Guangdong International Trust and Investment Corporation in 1998 and the subsequent confusion over government support and guarantees. This paper is based on the findings from an international survey on risk management of build-operate-transfer (BOT) projects in developing countries, with emphasis on infrastructure projects in China. It discusses specifically the criticality of the political and force majeure risks. Based on the survey, the following critical risks, in descending order of criticality, are identified: Chinese Parties' reliability and creditworthiness, change in law, force majeure, delay in approval, expropriation, and corruption. The measures for mitigating each of these risks are also discussed.     

Drivers of Conflict in Developing Country Infrastructure Projects: Experience from the Water and Pipeline Sectors

Despite the considerable scholarship focused on infrastructure investment in the developing world and the substantial sums of money spent each year on developing-country infrastructure, little attention has been given to understanding the drivers of conflict that shape the trajectory and cost structures of these massive investments. The manifestation of conflict among stakeholders in infrastructure projects ranges from the renegotiation of contract terms by project partners to popular protests among consumers of privatized services. The principal objective of this research is to identify combinations of country, project, and stakeholder factors that are associated with the emergence of legal and political conflict within natural gas and oil pipeline projects and water supply concessions and leases. The analysis includes data from 26 infrastructure projects spanning 31 countries and uses an analytical approach derived from Boolean algebra. Country-level characteristics, such as extent of democracy and rate of international NGO membership, are found to be important elements in the recipes for conflict among water supply projects but not for pipeline projects. Local impacts such as service price increases (water supply) and limited provision of oil and gas to the project host country (pipelines) are also important drivers of conflict for both subsectors. The involvement of one or more international financial institutions is also associated with the emergence of conflict in projects. Contrary to expectations, public consultation is associated with conflict in both subsectors. Overall, the study findings suggest that several factors associated with conflict in infrastructure projects can be minimized with careful project design.     

Improving Public Urban Services through Increased Accountability

This paper is concerned with the potential of accountability to improve the performance of public urban services. A number of assumptions are made in the literature relating to accountability; these concern the necessity of multiple strategies of accountability, information symmetries, sanctions, trust, homogeneous service users, community-level answerability, incentives, self-regarding behavior, and for users’ voice to be heard in service delivery. It is the purpose of this paper to reconsider these theoretical propositions for the functioning of accountability in light of practical experience from the United Kingdom, South Africa, Bangladesh, and South Korea. Each of these case studies was selected to illustrate a different form of accountability. The forms of accountability investigated in this research are professional, political, user, and managerial accountabilities. An assessment is made of whether accountability is demonstrated in these case studies in the way predicted by the literature. The empirical data demonstrate that factors like multiple strategies and information/resource symmetries are critical to accountability but that there is only partial evidence to support the need for sanctions, trust, incentives, self-interest, and user voice for effective service delivery. The research indicates the need for greater emphasis on the operation and maintenance of urban services and direct accountability to service users. However the assumption that service users are homogeneous is disputed. This paper concludes with a review of the practical implications of strengthening accountability as a means to improve the performance of urban services.     

Construction Engineering Process and Knowledge Requirements for Fostering Creative Design Solutions on Infrastructure Projects

Construction engineering for major infrastructure projects covers a wide range of activities to evaluate and select the techniques for assembling materials and components. Construction engineering inherently presents a very challenging opportunity for creative design, particularly on infrastructure projects. This construction engineering activity can be described as one of creating and developing workable, cost-effective, low-risk technical solutions for an array of infrastructure construction problems that must be solved from the plans and specifications stage through facility completion. The purpose of this paper is to illustrate a 10-step construction engineering process and define important knowledge requirements to foster creative design solutions using four case studies, including (1) positioning and holding a concrete bridge caisson in a 7-knot tidal current for a 4-month period; (2)?skidding a 55,000-t immersed tube tunnel element 200?m on dry land from casting site to launch site; (3)?building a major dam without the use of river diversion or on-site dewatering systems; and (4)?building underwater bridge piers without the use of conventional bottom-founded cofferdams. The creative design process was able to successfully devise a plan for solving highly technical construction challenges using a process-based approach. The key requirements of knowledge, skill, and experience necessary to perform these activities are presented to assist construction engineers in preparing for these creative opportunities.     

地质灾害治理工程施工中边坡稳定问题及滑坡治理方法

近年来,伴随国民经济发展速度的不断加快,现代化基础建设的重要性也逐渐突显出来。基础建设的力度的不断加大,导致人与自然发展失调,诱发诸多地质灾害。将青海省黄南藏族自治州州府隆务镇西山滑坡(Ⅸ、Ⅹ、Ⅺ、Ⅻ)灾害防治工程作为主要研究实例,结合工程项目实际情况,重点阐释边坡稳定问题与滑坡治理方法,为其他地质灾害治理工程项目的建设提供必要保障。     

Key Assessment Indicators for the Sustainability of Infrastructure Projects

Infrastructure projects have major effects on implementing the principles of sustainable development. Infrastructure projects will continue to be developed in the coming years, particularly in developing countries such as China and India; therefore, it is important to find methods and solutions for improving the sustainability of them. Although existing studies have suggested various methods for practicing sustainable development principles in the process of implementing infrastructure projects, effective assessment indicators are unavailable, which presents a barrier to the effective assessment of infrastructure project sustainability. This study introduces key assessment indicators (KAIs) for assessing the sustainability performance of an infrastructure project. The research data used for analysis were collected from a questionnaire survey given to three groups of experts, including government officials, professionals, and clients in the Chinese construction industry. The fuzzy set theory was used to establish KAIs. A procedure for using the KAIs is demonstrated by a case study. These research findings provide an alternative solution to appraise the sustainability of infrastructure projects.     

2000 Peurifoy Lecture: Construction Practices in Developing Countries

Many contractors are expanding into global markets. Further, many owners procure construction services to build facilities in developing countries. The construction practices in these countries differ in important respects from practices in industrialized countries. This paper reviews some of the more significant differences in construction practices in developing countries. Five primary factors are discussed: cost of labor, cost of money, technology and methods, infrastructure, and role of the design professional. The hypothesis is presented that the main driving factors affecting construction practices are the cost of labor and the cost of money. These two factors place speed of construction as a secondary objective. Low labor costs lead to construction practices being labor-intensive. There is a distinct absence of construction equipment, especially small lifting devices used for material handling. Additionally, the lack of infrastructure means that many materials commonly purchased in the United States from a vendor are fabricated using on-site labor in developing countries.     

Optimization Research: Enhancing the Robustness of Large-Scale Multiobjective Optimization in Construction

Many construction planning problems require optimizing multiple and conflicting project objectives such as minimizing construction time and cost while maximizing safety, quality, and sustainability. To enable the optimization of these construction problems, a number of research studies focused on developing multiobjective optimization algorithms (MOAs). The robustness of these algorithms needs further research to ensure an efficient and effective optimization of large-scale real-life construction problems. This paper presents a review of current research efforts in the field of construction multiobjective optimization and two case studies that illustrate methods for enhancing the robustness of MOAs. The first case study utilizes a multiobjective genetic algorithm (MOGA) and an analytical optimization algorithm to optimize the planning of postdisaster temporary housing projects. The second case study utilizes a MOGA and parallel computing to optimize the planning of construction resource utilization in large-scale infrastructure projects. The paper also presents practical recommendations based on the main findings of the analyzed case studies to enhance the robustness of multiobjective optimization in construction engineering and management.     

BOT Financial Model: Taiwan High Speed Rail Case

Owing to the high cost of large construction projects in recent years, build-operate-transfer (BOT) contracts are getting popular in the global construction market, especially in infrastructure construction. With BOT, the government is able to put projects on track without concerning itself too much about raising funds. On the other hand, due to the fact that the concessionaire who is awarded the project is responsible for the operation of the end facility for a certain period of time, reliable quality of the facility and effective operation could be expected. This paper introduces the financial model used by the Bureau of Taiwan High Speed Rail for its BOT projects. The parameters and variables of the model are presented. Its basic assumptions, input data, cost requirement, self-financing ability analysis, financial statements, and indices are discussed. The scenario analysis is used to highlight the application of the model.     

Empirical Study of Risk Assessment and Allocation of Public-Private Partnership Projects in China

Earlier research studies on public-private partnership (PPP) indicated that an objective, reliable, and practical risk assessment model for PPP projects and an equitable risk allocation mechanism among different parties are crucial to the successful implementation of these PPP projects. However, actual empirical research works in this research area are limited. This paper reports the first stage of a research study, which aims to identify and assess the principal risks for the delivery of PPP projects in China and to address their proper risk allocation between the private and public sectors. An empirical questionnaire survey was designed to examine the relative importance of different risk factors and to analyze the allocation of risk factors to different parties in PPP projects. A total of 580 questionnaires were sent out, and a total of 105 valid responses were obtained for data analysis. The Mann-Whitney U test is employed to investigate whether significant difference in perception existed first between the private and public sectors and second between industrial practitioners and academics in China. The empirical findings show that the three most important risk factors for PPP projects in China are (1)?government intervention; (2)?government corruption; and (3)?poor public decision-making processes. These findings reveal that the Chinese government intervention and corruption may be the major obstacles to the success of PPP projects in China. A major cause for these risks may be attributed to inefficient legislative and supervisory systems for PPP projects in China. After conducting the Mann-Whitney U test on the 105 survey respondents, the empirical findings indicate that the perceptions of all 34 risk factors in China between the private and public sectors were not significantly different. Similarly, there were no significant differences between academics and industrial practitioners except that the former perceived the problem of government corruption to be more severe than did the latter. For risk allocation, the empirical results indicate that the public and private sectors were in general consensus with most of the risks identified. The major risks that the public sector preferred to accept are within the systematic risk category, especially political, legal, and social risks. The private sector preferred to retain the principal risks within the specific project risk category, especially construction, operation, and relationship risks, in addition to economic risks within systematic risk category. The remaining risk, environment risk, is preferred to be shared between the two sectors. This research study enables international construction companies to better understand how risks should be assessed and allocated for PPP projects in China. It also assists in risk response planning and control for future PPP projects in China.     

Who Needs to Know What? Institutional Knowledge and Global Projects

Projections for future demand in infrastructure and buildings indicate that there will be increasing opportunities for firms to engage in construction projects around the world. However, international construction projects also face numerous uncertainties. Foreign firms engaged on these projects must work in unfamiliar environments, with differing regulations, norms, and cultural beliefs. This can increase misunderstandings and risks for the entrant firm. To reduce these risks, successful international firms strategically increase their understanding of the local area by collecting knowledge that is important for a given foreign project. This study compiles and analyzes data from 15 case studies of three types of international firms (developers, contractors, and engineers) engaged in international infrastructure development to identify the types of institutional knowledge that informants indicate are important for their international projects. Using institutional theory, we categorize the kinds of knowledge about foreign country operations that managers deem to be important, expanding prior studies by attending to normative knowledge in addition to regulative and cultural knowledge. Finally, we analyze the importance of different categories of knowledge according to firm type. This analysis provides entrant firms a tool to help identify important types of institutional knowledge to collect as they undertake international projects.     

Reliability and Stability Buffering Approach: Focusing on the Issues of Errors and Changes in Concurrent Design and Construction Projects

This paper proposes a new buffering approach, reliability and stability buffering, as a means to reduce uncertainty caused by errors and changes, in particular, when concurrent design and construction is applied to an infrastructure project. The proposed buffering provides a proactive mechanism to protect the planned performance of a project with a flexibly located and systemically sized buffer. For its implementation, the reliability and stability buffering is incorporated into a dynamic design and construction project model, which simulates the impacts of errors and changes on design and construction performance and evaluates the effectiveness of the proposed buffers. Applying this buffering approach into the infrastructure project in Massachusetts, this paper concludes that (1) the amount of hidden errors and latent changes was reduced; (2) the flexibly located and distributed buffers helped identify the predecessors’ errors and changes in concurrent design and construction; (3) the impacts of hidden errors and changes were minimized, preventing their ripple effect on the succeeding activities; and (4) the quality of the coordination process was increased. Thus it shows great potential to protect design and construction performance against uncertainty in concurrent design and construction delivery of civil infrastructure projects. Such benefit obtained from the proposed buffering should be relevant to researchers and practitioners because it provides the base for future investigation for the strategic utilization of schedule buffers in an uncertain environment as well as the guideline for their effective use in practice.     

Dispute Review Boards: Expected Application on Egyptian Large-Scale Construction Projects

The construction industry is heavily affected by the troubles arising out of construction disputes, especially when it comes to large-scale projects, as a direct result of the inherent complexity of such projects. This paper seeks the most suitable dispute-resolution mechanism for large-scale construction projects in Egypt, which is a developing country in the Middle East with an emerging reformed economical policy, a population in excess of 70 million people, and an increasing need for infrastructure and industrial development. This dispute-resolution mechanism was attained through a multistep methodology that (1) started with the study of the Arbitration process in relation to an Egyptian construction project with an initial contract price of 85 million; (2) continued with interviews of five senior experts in the field of construction disputes in Egypt about their views pertaining to the most efficient dispute-resolution methodology for Egyptian megaprojects; (3) developed a tailored questionnaire to assess the perceptions of 35 professionals toward the issue of construction disputes and dispute resolution mechanisms, including DRB; (5) concluded by carrying out a what-if scenario for the arbitration case of the large-scale construction project using DRB instead of arbitration. On basis of the analysis of the methodology, the authors concluded that despite the wide range of current dispute-resolution methodologies, the employment of DRBs in accordance with a set of 13 regulatory guidelines should mitigate the negative effects of disputes in Egyptian large-scale construction projects. Accordingly, this paper is both timely and valuable for all owners, contractors, and professionals who are acquainted with Egyptian megaprojects.     

Best Practices for Procuring Commissioning Services

Owners are increasingly recognizing building commissioning as an effective means of ensuring quality and maximizing energy performance. The demand for commissioning new construction projects has increased substantially over a short period of time with the growing demand for leadership in energy and environmental design certified buildings. However, the pool of experienced commissioning providers hasn’t increased at the same rate. Many owners are procuring commissioning services for the first time and don’t know how to best procure these services. The objective of the research described in this paper was to identify best practices for procuring commissioning services for new construction projects and to compare them with current practices. Issues that were evaluated include the timing of the commissioning provider involvement, the independence of the commissioning provider, certification of the commissioning provider, selection criteria, and the importance of a clear definition of the scope of work. Research results indicate that there is variation between current practices and recommended best practices. It is important for building owners and industry professionals to understand and implement the best practices recommended in this paper to maximize the benefits of the commissioning process.     

Modeling Cost Escalation in Large Infrastructure Projects

Cost overruns in large infrastructure projects have been commonplace in the past decades. Budgeting for cost escalation is a major issue in the planning phase of these projects. In this paper, we first review various methods of forecasting escalation factor and study the changes in construction costs in the past 25 years by analyzing movements of a cost index. We then introduce a system for modeling the escalation uncertainty in large multiyear construction projects. The system uses a Monte Carlo simulation approach and considers variability of project component durations and the uncertainty of escalation factor during the project lifetime and calculates the distribution for the cost. System application is demonstrated using a numerical example. The system can be used by planners and cost estimators for budgeting the effect of cost escalation in large projects with multiyear schedules.     

Applicability of 4D CAD in Civil Engineering Construction: Case Study of a Cable-Stayed Bridge Project

Four-dimensional (4D) computer-aided design (CAD) has been credited with improving construction planning procedures. The integration of three-dimensional CAD with schedule information has enabled the effective detection of design and planning flaws in many construction projects. However, the benefit of 4D CAD has been centered on architectural constructions, as other areas such as civil infrastructure have seldom been the target of 4D CAD application. This paper presents a case study in which a cable-stayed bridge construction was analyzed and modeled using the 4D graphic simulation approach. The cable-stayed bridge was chosen for the case study because it suitably represents the complex nature of modern civil infrastructure. 4D CAD models were developed at three different levels of detail: activity, discrete operation, and continuous operation. The clear definitions of the three levels of detail of 4D CAD and their application results for the cable-stayed bridge are presented herein.     

Political, Economic, and Legal Risks Faced in International Projects: Case Study of Vietnam

The aim of this research is to investigate the political, economic, and legal (PEL) risks faced by foreign firms when undertaking construction projects in Vietnam. The specific objectives are to investigate the types of PEL risks faced and the risk response techniques adopted. The data collection instrument was a questionnaire with open ended questions. The data collection method was in-depth face to face interviews with 18 experts from France, Hong Kong, Malaysia, Singapore, and the United States who have managed construction projects in Vietnam. The major risks faced include corruption, termination of public projects, bureaucratic administrative system to obtain permits and approvals, changing and inconsistent regulations, inadequate legal framework, fluctuation of exchange, and interest and inflation rates. Ways to respond to these risks are recommended by the experts. Foreign firms undertaking construction projects in Vietnam may make use of these findings to identify their PEL risks and determine the appropriate risk response measures to give their projects a higher chance of success.     

Neurofuzzy Decision Support System for Efficient Risk Allocation in Public-Private Partnership Infrastructure Projects

The performance of public-private partnership (PPP) infrastructure projects is largely contingent on whether the adopted risk allocation (RA) strategy is efficient. Theoretical frameworks drawing on the transaction cost economics and the resource-based view of organizational capability are able to explain the underlying mechanism but unable to accurately forecast efficient RA strategies. In this paper, a neurofuzzy decision support system (NFDSS) was developed to assist in the RA decision-making process in PPP projects. By combining fuzzy and neural network techniques, a synthesized fuzzy inference system was established and taken as the core component of the NFDSS. Evaluation results show that the NFDSS can forecast efficient RA strategies for PPP infrastructure projects at a highly accurate and effective level. A real PPP infrastructure project is used to demonstrate the NFDSS and its practical significance.     

Critical Success Factors for PPPs in Infrastructure Developments: Chinese Perspective

With the rapid growth of the Chinese economy, the desperate demand for infrastructure developments has created bottlenecks in the country’s sustainable development. Infrastructure investment could not be funded completely by the government alone. Taking Beijing as an example, there will be about 2,400 infrastructure projects to be developed during 2006–2010 with a total investment of over RMB 470 billion, which may impose budgetary pressure on the government. As a result, public-private partnership (PPP) could be considered as a favorable option to help provide these rapidly demanded public works and services. In order to investigate the potential for adopting PPPs in the People’s Republic of China, this paper aims to explore the critical success factors (CSFs) necessary to conduct PPP projects. The views from Chinese experts were collected via an empirical questionnaire survey. The respondents were invited to rate a total of 18 CSFs that contribute to the success of PPP projects as gleaned from the contemporary literature. The results of this survey were analyzed by the factor analysis technique. The findings showed that the 18 CSFs could be grouped into five underlying factors including: Factor 1—stable macroeconomic environment; Factor 2—shared responsibility between public and private sectors; Factor 3—transparent and efficient procurement process; Factor 4—stable political and social environment; and Factor 5—judicious government control.