Strategies for Design-Build in Korea Using System Dynamics Modeling

Increasingly adopted by both public and private organizations, design-build (DB) has become a favored construction project delivery system, outperforming other systems in terms of cost, schedule, and quality. However, DB has been especially criticized by the public sector for practicing subjective evaluation, for requiring excessive resources, and for providing only limited accessibility to small and medium-sized contractors. In Korea, similar critiques have been raised, as these qualities have prevented public owners from benefiting from the potential advantages of DB. In order to address these challenging issues, the present research systematically analyzes the characteristics of the DB delivery system in Korea. Based on industry surveys and an extensive literature review, a qualitative system dynamics model is developed and used to propose and test hypothetical DB policy alternatives which are expected to enhance DB performance. Furthermore, after the appropriate customization processes, these research findings can also be applied to the industry settings of different countries.     

Hybrid Prequalification-Based, Innovative Contracting Model Using AHP

Design-build, cost-plus-time, and warranty are three innovative contracting methods used by the Federal Highway Administration (FHwA). Because of the challenges inherent in the nature of these approaches, contractors need to be capable and experienced to successfully deliver projects. It is then necessary to prequalify contractors to reduce the inherent risk of a project. Therefore, the objective of the research project described in this paper is to provide a methodology that will help public owners prequalify and select contractors within the context of the three delivery methods mentioned above. As a result, a hybrid prequalification and selection model to screen contractors who want to submit bids on public projects using any of the three innovative contracting methods above was developed. The analytical hierarchy process (AHP) was used to make prequalification decisions when multiple criteria are used. In addition, three case studies were developed to evaluate the application of AHP to the prequalification criteria in the three innovative contracting methods. AHP was utilized as an effective prequalification decision-making tool that eliminates subjectivity and produces decisions built on consistent judgments.     

Comparative Analysis of Project Delivery Systems Cost Performance in Pacific Northwest Public Schools

Alternative project delivery systems such as construction management at risk (CMR) are increasingly used in public school construction in the United States. CMR is expected to benefit owners with a guaranteed maximum price (GMP), decreased change order cost, and increased cost “certainty.” This paper empirically compares cost growth performance of the CMR and design-bid-build (DBB) methods in Pacific Northwest public school projects. Data were collected from state records and previous studies on 297 completed schools in Oregon and Washington. The analysis of the data shows no statistically significant difference between CMR and DBB in construction change order costs, school project costs exceeding the GMP in 75% of the cases, and a statistically significant difference in cost growth between CMR and DBB projects during buy out, making CMR projects less efficient at controlling cost growth at buy out. These results counter some of the traditional expectations of the CMR delivery method.     

Owners Respond: Preferences for Task Performance, Delivery Systems, and Quality Management

Twenty years ago, public owners did almost all of their own design work and project inspection, but this is no longer the case. Innovative construction ideas of 15 years ago are now considered mainstream, and newer ideas are taking their places. Fifteen years ago, the concept of fast-track construction was still being researched and many federal agencies refused to fund it; today, most large federal projects call for some sort of fast tracking. These systems allow construction input into the design process of construction projects. Whoever performs tasks such as scope development, prebid cost estimates, and quality assurance can significantly affect the quality of the project, as can which delivery system is used. The Construction Institute of ASCE sponsored a survey of construction owners to determine what delivery systems are used in their projects and whom they select to perform various tasks. The survey also sought to ascertain the owners’ satisfaction level with the performance of the individuals and systems they choose. This paper, written for practitioners and researchers, describes the results of that survey.     

Structural Equation Model of Construction Contract Dispute Potential

This paper presents the results of a structural equation model (SEM) for describing and quantifying the fundamental factors that affect contract disputes between owners and contractors in the construction industry. Through this example, the potential impact of SEM analysis in construction engineering and management research is illustrated. The purpose of the specific model developed in this research is to explain how and why contract related construction problems occur. This study builds upon earlier work, which developed a disputes potential index, and the likelihood of construction disputes was modeled using logistic regression. In this earlier study, questionnaires were completed on 159 construction projects, which measured both qualitative and quantitative aspects of contract disputes, management ability, financial planning, risk allocation, and project scope definition for both owners and contractors. The SEM approach offers several advantages over the previously employed logistic regression methodology. The final set of structural equations provides insight into the interaction of the variables that was not apparent in the original logistic regression modeling methodology.     

Predicting Performance of Design-Build and Design-Bid-Build Projects

Design-build (DB) and design-bid-build (DBB) are two principal project delivery systems used in many countries. This paper reports on models constructed to predict performance of DB and DBB projects on 11 areas, using project-specific data collected from 87 building projects. The study included collecting, checking, and validating industry data, and the statistical development of multivariate linear regression models for predicting project performance. Robust models are developed to predict construction and delivery speeds of DB and DBB projects. Gross floor area of the project is the most significant factor affecting speed. Besides this, for DBB projects, contractors’ design ability, and adequacy of plant and equipment would ensure speedy completion of the projects. For DB projects, if the contract period is allowed to vary during tender evaluation, this would slow down the project. Robust models to predict turnover and system quality of DB projects are also constructed. A DB contractor’s track record is an important variable. They must have completed past projects to acceptable quality and have ability in financial, health and safety management.     

Economic Value of Combined Best Practice Use

This paper measures the value of best practices based on data taken from the Construction Industry Institute Benchmarking and Metrics database. A three-step process provides the basis for measuring the potential benefits of increased best practice use. First, a practice use index is derived to model the way in which best practices are utilized on actual projects. The index combines data from eight best practices to create a single measure of practice utilization. Second, a project performance index, combining cost and schedule metrics, is derived as an indicator of overall project performance. Third, the practice use index is correlated with cost, schedule, and overall project performance metrics. Both owners and contractors benefit from increased practice use. Potential cost savings for owners range from $1.7 to $3.4 million, depending on industry group and project size. Potential cost savings for contractors are higher, averaging $7.2 million for the typical $88 million heavy industrial project. Benefits from schedule reductions are most apparent for owners. On large building projects, schedule reductions for owners average 27 weeks. Finally, improvements in overall project performance on the order of 30% are observed for both owners and contractors.     

Impact of Change Orders on Labor Efficiency for Electrical Construction

Change orders are a source of many disputes in today's construction industry. The issue at hand is whether or not the execution of change orders work has a negative impact on overall labor efficiency on a construction project. Previous literature demonstrates evidence that change orders affect labor efficiency. Attempts have been made to quantify these impacts by many researchers, with limited success. Using the electrical construction industry, a research study has been conducted to quantify the impacts of change orders on labor efficiency. In this paper, results of hypothesis testing and regression analysis are presented. A linear regression model that estimates the loss of efficiency, based on a number of independent variables, is also presented. The independent variables used in this model are (1) qualitative and quantitative criteria used to determine whether projects are impacted by changes or not; (2) the estimate of change order hours for the project as a percentage of the original estimate of work hours; (3) the estimate of change order hours for the project; and (4) the total number of years that the project manager had worked in the construction industry. Additional projects were used to validate the model, with an average error rate of 5%. The results of this research study are useful for owners, construction managers, general contractors, and electrical specialty contractors, because they provide a means to estimate the impact of a change order under certain project conditions. This research also identifies factors, which, when understood and effectively managed, may be used to mitigate the impact of a change order on project costs and efficiency.     

Communicating Design Quality Requirements for Public Sector Design/Build Projects

This paper reports the results of a research study focused on how public sector owners articulated the requirements for design quality management in design/build (DB) projects. The research used the content analysis of 75 DB requests for proposals located in 35 states with an aggregate contract value of over $700 million with the mean price per project at roughly $15 million. The projects came from seven federal agencies as well as several state agencies. It found public owners are not availing themselves of the opportunity to evaluate design-builder design quality management plans and are primarily relying on the qualifications evaluation process to ensure design quality requirements will be met. Additionally, virtually all of the public owners in the sample neglected to require constructability reviews as a design quality management requirement in spite of the published benefits of this type of review. Finally, the paper concludes this area is one where a great deal of improvement for practitioners remains and the reason for a lack of focus on design quality in DB projects is due to a failure to shift the owner’s procurement culture from traditional project delivery to DB.     

Capital Planning System Applied to Municipal Infrastructure

Public owners are challenged by limited and constrained capital sources for acquiring and sustaining infrastructure facilities. They also generally lack supporting automation tools and techniques for analyzing capital investment and project execution decisions, elucidating the impact of these decisions in a holistic manner, and leveraging alternative delivery methods and financing means for competitive advantage. An automated decision support system in development at Massachusetts Institute of Technology provides an integrated planning framework for public owners and engineers to confront these issues. The system, called CHOICES, models life cycle cash flows of capital projects using variable delivery methods and finance options and aggregates them with forecasted operating revenues and expenses at a portfolio level. This paper describes the application of CHOICES to a municipality in Massachusetts. Capital program scenarios were developed using pace of execution and alternate funding sources as primary considerations. Development and analyses of the scenarios suggest that the current municipal environment hinders local infrastructure management and procurement. This is a first-order problem; its solution is likely to outweigh the choice of project delivery for many municipal governments, and it forces municipalities to consider a wide array of alternatives for fulfilling local requirements.     

Contractor’s Opportunistic Bidding Behavior and Equilibrium Price Level in the Construction Market

The competitive bidding system has been to blame for abnormally low bids, which are considered as one of the main causes of poor project quality. Previous studies have regarded the pricing of bidders as an optimum decision based on contractor’s cost and market competition level. However, the sell to produce characteristic of construction projects may induce contractors to offer a low bid and then make up the amount initially sacrificed from beyond-contractual reward (BCR) gained through cutting corners and claims. System dynamics was adopted in this study to develop a contractor’s pricing model with consideration of the dimensions of cost, market competition, and BCR. The model was then examined by statistical analysis of data collected from 44 highway projects in Taiwan. It was found that the equilibrium market price is significantly associated with BCR, which is assumed to be determined by the strictness of the owner’s construction management, including both soundness of contract and tightness in construction supervision. Research results suggest that contractors divide the market into different segments according to the owner’s strictness of construction management and the equilibrium price level of each market segment varies. The price level for projects with a strict owner is remarkably higher than for those with relatively less strict owners. Improvement in the construction management system of projects is crucial to lower the possibility that contractors gain BCR and do opportunistic bidding, and to further enhance project quality.     

Owner’s Role in Construction Safety

Despite dramatic improvements in recent decades, the construction industry continues to be one of the industries with the poorest safety records. Recent improvements are due, in part, to the concerted efforts of owners, contractors, subcontractors, and designers. While past safety studies have investigated the roles of contractors, subcontractors, and designers, the owner’s impact on construction safety has not been previously investigated. This paper will present the results of a study on the owner’s role in construction safety. Data were obtained by conducting interviews on large construction projects. The relationship between project safety performance and the owner’s influence was examined, with particular focus on project characteristics, the selection of safe contractors, contractual safety requirements, and the owner’s participation in safety management during project execution. By identifying practices of owners that are associated with good project safety performances, guidance is provided on how owners directly impact safety performance.     

Impact of Change Orders on Labor Efficiency for Mechanical Construction

Change orders have become an everyday occurrence in construction. It is widely accepted by both owners and contractors that change orders have an effect on the labor efficiency, but these effects are difficult to quantify and frequently lead to disputes. Data from 61 mechanical construction projects were collected to develop a statistical model that estimates the actual amount of labor efficiency lost due to the change orders. The input variables needed in the model are as follows: (1) The original estimated labor hours; (2) impact classification; (3) total estimated change hours; (4) number of change orders; and (5) the timing of changes. The results of this study show that impacted projects have a larger decrease in labor efficiency than unimpacted projects. Additionally, the later a change order occurs in the life of a project the more impact it will have on the labor efficiency. The results appear to be consistent with the intuition of experienced professionals. Although each project has unique characteristics, the resultant model provides owners and contractors with a baseline measure of lost labor efficiency.     

Analysis of Owner’s Design and Construction Quality Management Approaches in Design/Build Projects

This paper explores and classifies current approaches to evaluating quality in design/build (DB) proposals. It does so by a thorough content analysis of 78 requests for proposal (RFPs) for public DB projects with an aggregate contract value of over $3.0 billion advertised between 1997 and 2002. In most DB projects, the owner requires the DB contractor to establish a firm-fixed price on a project that has not yet been designed. Usually, the owner also fixes the project delivery period. In the traditional design/bid/build (DBB) system, quality is fixed through the plans and specifications. Thus, in DBB, with schedule and quality fixed, the cost of construction is the factor in which the owner seeks competition. Conversely, in DB, with cost and schedule fixed, the scope and hence the level of quality is the main element of competition. This paper identifies the six owner approaches to articulating DB quality requirements in their RFPs. The six approaches are quality by qualifications, evaluated program, specified program, performance criteria, specification, and warranty. These are important for DB contractors to understand so that they can craft their proposal in a manner that is both responsive to the owners’ requirements and consistent with the owner’s system to make the best value contract award decision.     

Outside the Budget Box—Public/Private Partnership as a Creative Vehicle for Finance and Delivery of Public School Facilities

Our public schools face almost irresistible pressures to upgrade and expand facilities and deliver better, more advanced, and higher-quality education while tax revenues and therefore budgets are shrinking each year. Class sizes grow in old and outdated facilities, and municipalities and school districts have few resources to address the pressing space needs. There is little public support for increased funding. However, there is a way to deliver educational facilities that uses less public capital than traditional project finance. Public/Private Partnership (PPP) is a delivery method that has traditionally been used on large infrastructure projects in developing nations, in order to allow more development for less public capital investment while maintaining the overall quality of construction. In recent years, PPP has gained acceptance in Europe and now in the United States as a means of public school finance and construction. This paper discusses PPP, its fundamental principles, and the various ways it can be employed in the delivery of educational facilities, as well as its advantages and disadvantages.     

Partnering: Why Project Owner-Contractor Relationships Change

Over the last decade, research in the construction industry has explored the owner-contractor relationship in project management resulting in a different paradigm called partnering. Partnering is a relationship characterized by cooperation and collaboration in contrast to the adversarial relationship more commonly experienced between owners and contractors. This study utilized data collected from 276 construction projects to examine the stability in the owner-contractor relationship. Owner-contractor relationships were classified as being adversarial, guarded adversarial, informal partners, or project partners. Fifty-eight percent of the projects experienced some fundamental change in working relationship—either positive or negative. Projects that began as formal partnerships were the most stable with over two thirds ending as they began. Guarded adversarial was the least stable with fewer than 30% maintaining this kind of relationship at the end of the project. Content analysis of the reasons stated for the change revealed factors that contribute to an improvement or deterioration in working relationships. The writers use this analysis to make recommendations for sustaining and improving partnerships between owner and contractors.     

Project Manager’s Decision Aid for a Radical Project Cycle Reduction

Currently there are no formal decision tools or guidelines to assist owners and project managers in choosing delivery systems and project strategies that would allow significant reductions in the project cycle time. The development of a decision aid that would allow a project manager to prioritize and apply project cycle reduction techniques would be a valuable tool for achieving project cycle time reduction in projects. This paper presents a new high performance project delivery system called “project manager’s game planner” (PMGP) designed to assist a decision maker in identifying and utilizing an optimal set of radical reduction techniques (RRTs) with the greatest potential for success in achieving cycle time reduction. Additionally, the PMGP can assist the user in identifying the top RRTs during any of the five project phases: preproject planning, design, material management, construction, and start-up. Most projects can utilize this PMGP to improve the project performance whether to achieve significant cycle time reduction or to simply achieve effective project execution.     

Strategies for Planned Project Acceleration

Departments of transportation in the United States are under increasing pressure to accelerate projects to meet user-defined constraints and reduce the inconvenience to the traveling public. Although there is information about acceleration projects in other industries, there has been little specifically aimed at highway projects. A domestic scan sponsored by the National Cooperative Highway Research Program was tasked with providing information in this area. The objective of this paper is to synthesize the resulting information into fundamentals that support successful planned accelerated highway project delivery. Case studies of how departments of transportation successfully accelerated the construction of four very different projects in California, Florida, and Texas serve as the basis for identifying these fundamentals. The fundamentals include upfront and detailed planning, designs that facilitate accelerated construction, a collaborative environment for project stakeholders, and incentives and disincentives to motivate construction contractors.     

Analysis of Federal Design-Build Request for Proposal Evaluation Criteria

This study’s objective is to identify the benefits federal owners are seeking through the design-build process by analysis of research data gathered from 110 requests for proposal (RFP) evaluation plans issued for $1.5 billion of federal work by 11 different agencies. The output from this study was then compared to a 1996 study whose authors sought to analyze the reasons cited by owners to use design-build project delivery. That study included a survey of 108 owners of public and private projects, which represented over $12.5 billion of construction. The goal of comparing the 1996 survey with the results of the new research project is to discover correlations between owner attitudes and the selection criteria identified in government RFPs. The comparison produced some interesting results. First, although owners in 1996 cited schedule as the most significant reason for selecting design-build delivery, the federal RFP content analysis found it to carry a very low average weight. Another finding shows that federal RFPs give price a very heavy weight in the government selection processes, again differing significantly from the previous survey of owner attitudes. Finally, the current study found that the qualifications of the firms and individuals that formed the design-build team were significantly more important than the proposed technical design approach. Thus, this paper concludes that the typical federal agency was looking for a low price from a well-qualified design-build team.