Achieving best value in private finance initiative project procurement

The wherewithal of achieving best value in private finance initiative (PFI) projects and the associated problems therein are documented. In the UK, PFI has offered a solution to the problem of securing necessary investment at a time of severe public expenditure restraint. In PFI schemes, the public sector clients must secure value for money, while the private sector service providers must genuinely assume responsibility for project risks. A broad‐based investigation into PFI risk management informs the discussion in this paper. It is based on 68 interviews with PFI participants and a case study of eight PFI projects. The research participants comprised of contractors, financial institutions, public sector clients, consultants and facilities management organizations. The qualitative software Atlas.ti was used to analyse the textual data generated. The analysis showed that the achievement of best value requirements through PFI should hinge on: detailed risk analysis and appropriate risk allocation, drive for faster project completion, curtailment in project cost escalation, encouragement of innovation in project development, and maintenance cost being adequately accounted for. Factors that continue to challenge the achievement of best value are: high cost of the PFI procurement process, lengthy and complex negotiations, difficulty in specifying the quality of service, pricing of facility management services, potential conflicts of interests among those involved in the procurement, and the public sector clients' inability to manage consultants.     

Client satisfaction and quality management systems in contractor organizations

The construction industry is predominantly project based and quality is one of the client's prime concerns in their construction projects. Many clients, especially those in the Hong Kong public sector, require their contractors to have a Quality Management System (QMS) certified under ISO9000. Also, several contractors as well as clients themselves voluntarily implemented an ISO9000-based QMS in their respective organizations in order to target the various benefits perceived from such initiative. It was considered timely and worthwhile to explore the effectiveness of ISO9000-based QMSs in the Hong Kong. This paper portrays the key findings from a focused study that relate to the client satisfaction aspects from implementation of the ISO9000-based QMSs in the contractor organizations.     

Modeling relational transaction and relationship quality among team members in public projects in Hong Kong

Prior studies have found that relational contracting (RC) practices are helpful in nurturing good relationships among project team members. These empirical studies, however, did not differentiate by project type (i.e., public or private projects). In reality, the situation faced in public projects would be different from that of private projects since for example, some public sector participants may be indifferent to, concerned about or indeed opposed to, building close relationships with private sector counterparts. In the context of public construction projects, this study aims to develop models to explain the association between relationship quality and the extent to which RC practices are adopted. Data were collected via a questionnaire survey in Hong Kong, China. Using Multiple Linear Regression and Partial Least Square-Structural Equation Modeling (PLS-SEM), models for predicting the relationship quality among project team members were developed. The mathematical equations were validated by a case study. The models show that the relationship quality among project team members can be predicted by the extent to which these RC practices are implemented: (i) adoption of flexible strategies; (ii) readiness to compromise on unclear issues; (iii) willingness to commit on a long-term basis; (iv) attitude towards teamwork; (v) trust among team members; (vi) sharing of project information; (vii) understanding among team members; and (viii) alignment of the objectives of different parties. The models are recommended to public clients, consultants and contractors that aim to achieve good relationships in public projects.     

Financial viability of school retrofit projects for clients and ESCOs

The energy performance contracting market is potentially substantial but very little work has been undertaken to understand the characteristics of successful projects. This study uses a probabilistic analysis of four hypothetical projects in the UK schools sector under the 2014 policy regime, combined with qualitative interviews with practitioners, to explore the conditions for a viable project. It finds that the proposed approach has the potential to allow more detailed exploration of project structures and scope for creating greater understanding of likely returns and the factors affecting them. Evidence is found that the use of deterministic risk screening techniques such as simple payback results in viable opportunities being overlooked. The risk profiles for clients and contractors (energy service companies – ESCOs) are not symmetrical and they will each find different projects more attractive. The results suggest that greater consideration needs to be given to the precise risk allocation between client and contractor to ensure that likely returns are properly understood. This study demonstrates a method for exploring project characteristics that can be used to understand their impacts on the financial returns for clients and contractors.     

Analysing the novated design and construct contract from the client's,design team's and contractor's perspectives

The novated design and construct (ND&C) contract is one of the increasingly preferred options among developers of large commercial and residential projects across Australia. As a consequence of novation, the design team's obligation to the client gets transferred to the contractor who becomes responsible for carrying out the detailed design work at a later stage of project life cycle. Subsequently, there are some inherent factors that can depict the effectiveness of how all parties in the process interact leading to a successful delivery of project through ND&C contracts. A common set of 31 influencing attributes have been identified through a systematic research approach and their relative significance and impacts have been determined based on a structured questionnaire survey in selected construction projects. By performing the factor analysis, a total of eight factors significant to ND&C contracts were extracted, namely (1) impact of initial design; (2) client's involvements in post novation design; (3) selection of design team; (4) contractor's obligation; (5) morale in post novation; (6) experience of design team; (7) relationship between contractor and design team; and (8) expertise of DT in ND&C projects. With a clear understanding of the roles of clients, design team and the contractors, these findings could potentially contribute to develop a company's procedures or enhance existing knowledge in relation to the ND&C procurement approach.     

Using neural network to predict performance of design-build projects in Singapore

Design-build (DB) project success may be operationalised into 11 performance metrics. 65 factors that may affect DB project success are identified. Using data from 33 DB projects, correlation analysis shows that there are several factors that affect each performance metric significantly. Artificial neural network (ANN) technique is used to construct the models to predict project performance, and these models are tested using data from five new projects.This study finds that six performance metrics can be predicted with a reasonable degree of accuracy: project intensity; construction and delivery speeds; turnover, system and equipment quality. The key variables that affect project performance may be attributed to both contractors and clients. To ensure project success, contractors should have adequate staffing level, a good track record for completion on budget, and ability in financial management and quality control. Consultants should have a high level of construction sophistication, and have handled DB projects in the past. Clients also play an important part in ensuring DB project success. They would need to have construction experience and handled DB projects in the past. In addition, they should decide on the optimal level of design completion when the budget is fixed and tenders are invited. It is recommended that owners and contractors take note of the factors identified in this study, which significantly affect DB project performance.     

Clients’ needs,wants and expectations from contractors and approach to the concept of repetitive works in the Northern Cyprus construction market

Intense competition existing in the construction market creates an industry that is dominated by the client groups. This paper provides insights into private clients’ needs, wants and expectations from contractor firms in the Northern Cyprus building construction market, by presenting survey findings of 91 clients regarding this issue. Moreover, it presents their perspective related to doing repetitive works with the same contractors in possible future works. The study has clearly confirmed the fact that the clients in the specified market place high emphasis on a wide variety of factors. The importance assigned to these factors varies according to the categories or characteristics of the clients within the private building construction sector. Another striking finding was the responding clients’ willingness to do possible repetitive works with the same contractors assuming that they are fully satisfied with the existing or past projects. This opportunity, if used properly by the contractor firms in this market, may be the key to beating the competition and lead to the easy path to increase a contractor firm's market share. Furthermore, it was found that the responding clients expect much more than quality, finishing on time and within budget for full satisfaction and continuing to do repetitive works. The importance and hence the contribution of a set of criteria related to achieving full client satisfaction, and leading to possible repetitive works is presented. Although it would not be reasonable to determine general strategies on just a single study, the contractor firms in the Northern Cyprus construction market will benefit from the framework given within this paper by recognizing what is important and essential to private building construction clients in particular situations and hence present the capabilities of the contracting or potential contracting organizations in ways that meet this to best advantage. Although the results given are based on input from the Northern Cyprus construction market, we believe that the contractor firms in other countries, who specialize in building works for private sector may also benefit from the findings or at least the approach of this research as well.     

Construction industry clients: A survey of their attributes and project management practices

The recent growth of interest in the strategic decisions made by clients as to how to organize and manage their projects has not as yet been matched by any extensive and systematic analysis of clients' attitudes and approaches towards project management. This paper seeks to help redress this imbalance by presenting findings from a survey of 138 client organizations drawn from both the private and public sectors. Focusing upon their experiences on a recently completed, comparatively large (£1 million plus) project, the paper examines similarities and differences in the ways in which clients organize and manage their projects and assesses the impact of these practices on project performance. Differences in the type, size and typicality of the projects are also taken into account in the analysis. The main conclusions drawn from the data are that client experience has an important impact upon many of the decisions made, that strategic decisions are often internally driven as opposed to project-based, that additional work and inadequate briefing still continue to cause problems during construction, and that there is little direct evidence in favour of alternatives to traditional managerial and contractual arrangements.     

A contractor pre-qualification model based on the quality function deployment method

Contractors play a significant role in construction projects and selection of the most appropriate contractor for the project is a critical decision for clients. The pre-qualification of construction contractors is accounted as a very important step in contractor selection for every project. The main purpose of pre-qualification is to identify an array of eligible contractors, which is required for post-qualification steps and further considerations. Although there have been numerous models for contractor pre-qualification, there are inadequate researches to present a contractor pre-qualification model with consideration of the project objectives or the project owner’s requirements. A new contractor pre-qualification model was developed with the aim of resolving this issue. This model employs the quality function deployment (QFD) method, and considers both the project owner’s requirements and the contractor’s abilities. The results reveal that consideration of the project objectives or the project owner’s requirements and expectations can influence contractor pre-qualification.     

How (do) internal capabilities and the geography of business networks shape the performance of contractors in public procurement tenders? Evidence from the construction industry

Public procurement tenders (PPTs) represent one of the largest sources of income for construction companies; the identification of factors that could favour the winning of these projects becomes more and more interesting. Our work aims to explore how firm-specific capabilities (project management, project administration and innovation) and the geography of its business network shape the success of contractors in winning PPTs, measured as the average value of projects won by the firms. We propose an empirical study of contractors involved in public procurement projects in the construction industry in three Italian regions from 2008 to 2012 employing a fuzzy set qualitative comparative analysis. This methodology allows analysing how different combinations of causal conditions contribute to an outcome. Our research highlights that there are three successful strategies for firms attempting to obtain high-value PPT projects: (1) invest in high-level project management capabilities, engage in business networks with distant clients and intensify innovation capacity; (2) invest in high-level project administration capabilities, engage in business networks with local clients and suppliers (within 100 km), report a large number of certifications and show a high innovation capacity; and (3) invest in growth strategies to increase the size of the company.     

Factors influencing development of construction enterprises in Singapore

The literature stresses the importance of improvements in the effectiveness and efficiency of contractors if the construction industry is to fulfil its tasks in a cost-effective, timely and safe manner. Various factors are considered to be instrumental in the development of contractors. If the most important influencing factors in any country can be identified, measures can be taken to apply them in order to upgrade the contractors. The results of a study on the factors which have been important in the development of construction enterprises in Singapore are presented. A mailed questionnaire survey provided the basis for the study. The targeted respondents were local contractors, foreign contractors, and clients and consultants. It was found that the key factors could be grouped into four main categories: contractors' role; government's and institutions' help; practitioners' help and financial support; and clients' help. Recommendations are offered on measures which can improve the performance of contractors.     

Are competitive fee tendering and construction professional service quality mutually exclusive?

It is a little more than 15 years since the associations representing construction professionals in the UK surrendered to government pressure and abolished mandatory fee scales, predicting as they did so that inevitably abolition would lead to a decline in the standard of service provided to clients. Initially the abolition of fee scales had little impact on fee levels - in the UK economic and property boom of the late 1980s demand from clients in all sectors was high and fee levels remained at, or close to, pre-abolition levels. However, in the recession that followed, fee levels fell to unprecedentedly low levels, causing many commentators to be concerned that the quality of service provided to clients would fall. The main aim of this research is to establish whether clients' perceptions of service quality have declined as a result of lower fee scales. Following a literature search five hypotheses are presented namely, that clients' perceptions of service quality are: lower for fee tendered commissions; lower when the fee bid is particularly competitive; higher when the service is adequately specified by the client; higher when care has been taken with preselection of tenderers; and higher when adequate weighting to ability is given in the final selection process. The hypotheses have been tested by collecting data from 244 clients who anonymously assessed consultants, 60% of whom were chartered surveyors (just over half of these were quantity surveyors). Over half of the consultants were appointed by competitive fee tender, and although the service quality scores were lower for these consultants this result was not statistically significant. Therefore, the main hypothesis is not supported by the data but the fourth and fifth hypotheses are both supported by the study.     

Intra-team boundaries as inhibitors of performance improvement in UK design and build projects: a call for change

The success of the design and build (D&B) procurement route could be undermined by issues arising from the rigid professional cultures of individual participants within project workgroups. These have the potential to inhibit the achievement of a key espoused benefit of D&B procurement, i.e. that it promotes the integration of the design and construction processes for improved project performance. Cultural non-interoperability is identified as a significant potential barrier to effective change management, and to the achievement of innovation within the design and construction processes. This note argues that project responsibilities, which currently are delineated along professional identity lines, produce design and construction solutions that fail to fulfil the potential of D&B procurement. It is suggested that addressing cultural interoperability will require a fundamental and long term reshaping of the industry's structure, beginning with the professional bodies and the higher education system that underpins their future membership.     

Mitigating the health and safety influence of subcontracting in construction: The approach of main contractors

Subcontracting is noted for its adverse health and safety (H&S) influence in construction. Using interviews with five of the top 20 UK contractors and one medium-sized contractor, this study explored how main contractors manage the H&S influence of subcontracting with a focus on their in-house measures. Some in-house measures found are: restricting the layers of subcontractors on projects; working with a regular chain of subcontractors; implementing a H&S reward scheme for subcontractors; and insisting on non-working subcontractor foremen who have direct responsibility for the safety of workers in their trade. These measures appear to be influenced by clients, industry peer groups, and the moral justification for occupational H&S, and they offer inter-organisational learning opportunities for contractors in devising measures to mitigate the H&S influence of subcontracting. These findings should also allay concerns that removing some of the legislative hurdles in connection with on-going red tape debate will result in poorer H&S.     

Learning approaches for housing,service and infrastructure project organizations

Capturing and sharing experiences that may be applicable in several projects is generally recognized as a way of enhancing the performance of construction projects. Several studies have reported difficulties in applying learning approaches that could be applicable for a wide range of projects. The learning behaviour in three types of construction project: housing, service and infrastructure, is examined by the means of a questionnaire study including 51 construction projects and more than 800 responses from clients, designers, contractors’ managers, contractors’ workers and subcontractors. The effects of leadership, openness and influence are considered. Based on a factor analysis, three approaches to learning were identified: organizing for learning, experimenting and networking. While housing project organizations do not demonstrate any specific preferences, service project organizations show a focus on networking and infrastructure project organizations show the highest interest in experimenting. On the basis of these results it can be concluded that learning approaches are dependent on the type of project. Thus adopting different learning approaches for different types of construction project seems to be a more relevant strategy than implementing a ‘one size fits all’ learning approach for all construction project organizations.     

Industrialized construction in the Swedish infrastructure sector: core elements and barriers

Improving productivity and innovation is a central challenge in all industries, but particularly in construction where improvements have been slow. To meet this challenge, a recent investigation into the actions of Swedish government clients has recognized needs to improve planning during project procurement phases, increase numbers of turnkey contracts and raise industrialization of the sector. In response, the Swedish Transportation Administration has launched a research and innovation programme to foster an industrial approach and identify ways to increase the standardization of products and processes. However, increasing industrialization has been difficult to achieve in the project-based construction industry except in the process-based housing sector. Further, there has been little research on the concept of industrialized infrastructure construction and barriers to its implementation. Opinions and attitudes of clients, consultants and contractors in the infrastructure sector were investigated in relation to the core elements of industrialized construction, and the barriers hindering its development. Opportunities and obstacles related to both product and process standardization for continuous improvements and the relationships between clients and contractors are revealed. Hence, the implementation of industrialized construction requires tightly focused governance at the outset of projects and profound changes to established attitudes, norms and regulations.     

Changing collaborative practices through cultural interventions

After a parliamentary enquiry into construction industry malpractice, changes occurred in collaborative practices between clients and contractors in megaprojects within the Dutch construction sector. The enquiry meant that both clients and contractors were forced to acknowledge illegal practices of collusion and fraud. For those engaged in public–private relationships, a process followed of attempting to change collaborative practices. Three interventions in collaborative practices are recounted: (1) organizing personal networks between clients and contractors; (2) a competitive dialogue procedure; and (3) the right of withdrawal. These three interventions helped to change ‘first order’ practice, such as increasing mutual trust between client and contractor, supporting a mutual understanding of role positioning and dilemmas, and creating an understanding of the nature of the conflict but failed to change ‘second order’ practices. Two contributions to the understanding of project management are provided. New empirical data are presented on the challenges that public and private partners face in their attempt to implement new collaborative practices. It is shown how power is entangled in the emerging of new collaborative practices. The findings are based on a longitudinal ethnographic study of public–private collaboration in the Dutch construction industry in the period 2006–11.     

Beyond the ‘iron triangle’: Stakeholder perception of key performance indicators (KPIs) for large-scale public sector development projects

Performance measurement criteria vary from project to project. Despite much work on the subject, there is no commonly agreed framework of performance measurement on mega projects. To bridge this gap, this research targets to investigate the perception of the key performance indicators (KPIs) in the context of a large construction project in Thailand. The study explores the significance of key performance indicators in perspective of various construction stakeholders (client, consultants, and contractors). Findings indicate that the traditional measures of the iron triangle (on-time, under-budget and according to specifications) are no more applicable to measuring performance on large public sector development projects. Other performance indicators such as safety, efficient use of resources, effectiveness, satisfaction of stakeholders, and reduced conflicts and disputes are increasingly becoming important. This implies that the Thai construction industry is slowly departing from the traditional quantitative performance measurement to a rather mix of both quantitative and qualitative performance measurement on large-scale public sector development projects.     

Value-oriented stakeholder influence on infrastructure projects

Project stakeholder management deals with managing and fulfilling stakeholder expectations and has tended to focus on the viewpoint of the focal firm or the project rather than that of the project stakeholders. The stakeholders' perspective is important because they can significantly influence projects, particularly infrastructure delivery involving both public and private actors. This study focuses on the ways that stakeholders pursue influence on projects through their expectation of project value. The goal is to identify the value-oriented reasons for stakeholders to utilize specific influence strategies. A multiple case study was implemented in three transport infrastructure projects. The study argues that stakeholders' expectations of project value creation explain the stakeholder influence strategies utilized. The findings link project value with stakeholder influence strategies and reveal four influence strategies in transport infrastructure projects, differentiated according to their different value priorities. The unique value-influence combinations of public infrastructure projects are revealed and discussed.