RANKING CONSTRUCTION PROJECT CHARACTERISTICS

Transcription

1 RANKING CONSTRUCTION PROJECT CHARACTERISTICS Favié, Ruben Eindhoven University of Technology Maas, Ger Eindhoven University of Technology This paper is concentrated on ranking project characteristics in order to be able to choose the type of procurement method (such as Traditional or Design & Construct) that can best be used for the design and build stage of a construction project in the future. There are several project characteristics that are defined in literature. But which of these project characteristics are the most important ones? If we know that, a client, in the future, might be able to choose his procurement method better, because the project characteristics are the main criteria for selecting a procurement method. To reach this goal, the first step is to list the relevant project characteristics from literature and practice. The second step is to make these criteria measurable in order to be able to match the characteristics with the procurement method characteristics. This paper will include the relevant project characteristics and the ranking of those by comparing literature with practice. In the future the most relevant project characteristics can be compared with the characteristics of the existing procurement methods in order to be able to make the right choice for a procurement method. KEYWORDS: project characteristics, procurement method, procurement, ranking INTRODUCTION The construction sector in The Netherlands is, just like in other countries, in motion. Increasing project complexity forces the traditional sector to change. This complexity is to a large extent caused by the increasing demands of clients, society and the people living near the project. Other causes are, in addition to this, the technological developments and legislation. The changes in the construction sector are next to development and renewal of products, also concentrated on the processes. These processes are necessary to be successful in the ever changing and complex environment. One of the changes is the use of new, more integrated procurement methods. The question is when to use which of these methods? There are several parameters that can influence the choice of a certain procurement method. These are, for example, the economical and political situation, the legislation and the type of client. This paper is concentrated on the characteristics of building projects. These characteristics are a major parameter for the choice of a procurement method. The aim of this paper is to find the most important project characteristics that distinguish one project from another.

2 The construction process The construction process is split up into phases that follow each other in time. The output of phase 1 is the input of phase 2, etcetera. The construction process phases are: Programme phase Design phase Preparation phase Realisation phase Maintenance phase Every phase has its own characteristics and therefore asks for specific competences from the persons and companies that are cooperating in that phase. Next to the different phases, the construction industry also knows different branches. Traditionally, the market is divided into residential building, non-residential building and civil engineering. Even within these branches, a lot of different projects with a big number of typical characteristics are possible. Procurement One of the processes in the construction process, that receives a lot of attention in the international, scientific world as well as in the national building practice, is the way that clients select their contractors. Contractors are companies that execute jobs ordered by a client. Selecting a contractor can be seen as a purchasing or procurement process. The procurement process is seen as the process that starts with the specification of the client s demands and ends with the follow-up and evaluation of the contract. The aim of it is to acquire the construction work that meets the client s needs. Van Weele (2007) describes the following steps in a company s procurement function: 1. Determining specification 2. Selecting supplier 3. Contracting 4. Ordering

3 5. Expediting and evaluation 6. Follow-up and evaluation Applied to the construction sector, determination of specifications (fully elaborated technical specifications or only a couple of drawings or functional ideas), the selection procedure (which procedure and criteria) of the contractor en the contracting, are the most important. These are the first three steps of Van Weele s (2007) procurement function. He calls this the initial or tactical part of procurement. The way of handling this part of the process determines to a large extent how, later on in the process, the quality assurance, the payments and the follow-up are arranged and who is responsible for which part. Specifically for the construction sector, Kumaraswamy en Dissanayaka (1998) have described this initial procurement function and the possible choices that can be made. The next choices have to be made: Work packaging; Functional grouping Payment modalities Form of contract Selection methodologies Functional grouping One of the decisions that has to be made is the functional grouping of a project. There are a lot of different ways to set up a construction project organization. The traditional process, in which a contractor is contracted based on specifications and drawings, is much segmented. More integrated organizational forms, in which one company or consortium of companies is responsible for the design and execution of a project, like a Design and Construct contract, requires a total different attitude of the contractor as well as the client. Organizational forms like Design-Build-Finance-Maintain (DBFM) integrate even more tasks and responsibilities. The above-mentioned contractual forms differ from one another in the division of responsibilities, tasks and roles and functions. Next to that, they also differ in the moment on which the contractor is contracted. In the traditional process, the client (usually together with a consultant) develops a design and specifications until the final design. The moment on which the contractor is contracted is then just before the starting of the realization phase. In a

4 Design and Construct contract, the contractor also develops a part of the design. In that case, the contract has to be signed earlier in the process. In a DBFM contract, the contractor also is responsible for (a part of) the financing and the maintenance. In the two other contractual forms, the financing is clearly with the client, at the beginning of the process. This task is in a DBFM contract with the contractor which means that the moment of contracting is at the front of the process. These shifts in the moment of contracting mean that each time different kind of performances are demanded of the client and the contractor. Therefore, in every single case, an other division of the roles and responsibilities is necessary. A visualization of this shifting moment of contracting can be seen in Figure 1. The visualization is originated in the logistic decoupling point of Hoekstra and Romme (1992). Client Contractor Traditional Design & Build DBM DBFM DBFMO Programme Design Preparaton Realisation Maintenance Figure 1. The Construction Process Transfer Point As stated above, there are a lot of differences between the different procurement methods for construction projects. These differences lead to advantages or disadvantages for a client when he is planning to build something. Every client must look carefully for the right organizational for his project. According to Kumaraswamy and Dissanayaka (1998), the characteristics of the client and the project characteristics are the input for choosing the right procurement method. The choice for the right procurement method is of great importance to the project outcome. The question that this paper deals with is: Which are the most important project characteristics that distinguish one project from another?

5 RESEARCH METHODS In order to find the most important project characteristics, a literature study has been conducted. The characteristics that were found in literature, were listed and compared to each other. Next to that, a workshop was held with 16 experts from the construction practice in which they were asked to list their most important project characteristics. The experts worked in groups of 4 and came with lists of characteristics. The results from the literature study and the expert panel weren compared to each other and a list was made with a ranking of the characteristics. This ranking was made by counting the number of times that one characteristic was named in literature and by the experts. RESULTS Literature study Eight sources of literature were chosen in this research. These were eight papers. These papers have all listed project characteristics. These papers are: Baccarini (1996), Bennett (1991), Naoum (1989), Dissanayaka and Kumarawamy (1999) and Ling (2004) focus mainly on project characterics that only have to do with the project itself, like complexity, size and building type without regarding the project s environment. Only Bennett (1991) includes the economical situation as an important characteristic. Kuamaraswamy and Dissanayaka (1998), Chua (1999) and Tukel and Rom (1998), on the contrary, also include more environmental characteristics in their research like politics, local market situation and legislation. The list of project characteristics that came from this literauture review, is shown in figure 2. Expert panel On 23 November 2007, a workshop was held with 16 experts from the construction practice in which they were asked to list their most important project characteristics. Eight of the experts work as a consultant, 2 as clients (1 public and 1 private), 3 as contractor and 3 work in construction research. The experts worked in groups of 4 and came with lists of characteristics. The list of project characteristics that came from this workshop, is shown in Table 1.

6 Table 1. The list of project characteristics from literature, from the expert panel and the ranking of project characteristics. Project Characteristic #of times defined in literature #of times deinened in workshop Total # of times defined 1 Complexity of project (e.g. special ground conditions or technology requirements) Size of project (e.g. value; number of stories; floor area; km of road) Effects of relevant political, legal and economic systems, including market conditions Importance for the project to be completed on time Type of project (e.g. housing estate, road, dam, office building refurbishment) Form of contract (functional grouping of contract: separated or integrated) and the division of responsibilities and liabilities Specific location, special weather and environmental concerns Level of technological advancement project life span / lifecycle value of a project quality of a project Type of client (e.g. public/private/mixed; experienced/one-off/project staff caliber and their strengths, weaknesses and management style) Any other special conditions project funding Level of specialization required of contractors Availability of information at project inception and points at which any remaining information will be required/be available Nature and status of local construction industry, including available capacities of potential project participants, scarcity of work in particular fields, competitiveness percent of repetitive elements Availability of materials and equipment that are required for the works Ownership of building Type of specification Flexibility of scope of works when contractor is hired Project scope definition completion when bids are invited Importance for project to be completed within budget Importance for project to be delivered Selection process / methodology (bidding procedure, number of bidders, selection criteria, bidding environment) Performance of available contractors and consultants on previous (similar) projects in the area in terms of meeting cost, quality and time targets; safety records and client satisfaction levels: as compared with the procurement modalities used Local familiarity and confidence in/disillusionment with, particular types of procurement with reasons (as perhaps verifiable from local professional institutions and technocommercial networks ) technical approval authorities contractual arrangement Payment mode to the contractor (payment modalities such as fixed price or cost plus fee) Presence of special issues Extant to which bid documents allow additions to scope 1 0 1

7 34 Design completion when budget is fixed Bidder s knowledge of the budget Time given to contractor to bid Time given to owners / consultants to evaluate bids Extent to which the contractor period is allowed to vary during bid evaluation stage Number of bidders Prequalification or short-listing Bid evaluation and selection criteria Bidding environment density of a project From this table we learn that all the experts (all 4 groups) name the complexity, the environment of the project (politics, legal, economic, market conditions), the importance of the project to be completed in time, the functional grouping, the level of technological advancement, the project life span / lifecycle and the required level of quality of a project as being important characteristics. In literature not one of the characteritics was defined by all sources. Six out of eight papers name complexity and size and only 5 papers defined type of project as being an important characteristic. CONCLUSIONS The results of this research are shown in table 1. As we can see, the project complexity is listed by almost every source. This means that in this research, this is listed as being the most important project characteristic. In order to be able to use this list for the selection of a procurement method, we should be able to measure the complexity of a project and compare it to the characteristics of the existing procurement methods. This research gives a start to that bigger research by listing the most important project characteristics that distinguish one project from another. REFERENCES Baccarini, D., 1996, The concept of project complexity - a review, International Journal of Project Management, 14, Bennett, 1991, International Construction Project Management: General Theory and Practice, Butterworth-Heinemann, Oxford Chua, D.K.H, Kog, Y.C., Loh, P.K., 1999, Critical Success Factors for Different Project Objectives, Journal of Construction Engineering and Management, Vol. 123, nr. 3, pp Dissanayaka, S.M. and Kumaraswamy, M.M, 1999, Comparing contributors to time and cost performance in building projects, Building and Environment, Vol. 34, pp

8 Hoekstra, S. and Romme, J., 1992, Integral Logistics Structures: Developing Customer Oriented Goods Flow, McGraw-Hill, Londen. Kumaraswamy, Mohan M. and Dissanayaka, Sunil M., 1998, Linking procurement systems to project priorities, Building Research & Information, 26:4, Ling, F.Y.Y., 2004, Key Determinants of Performance of Design-Bid-Build Projects in Singapore, Building Research & Information, 32(2), March April, Naoum, S.G., 1989, An investigation into the performance of management contracts and the traditional methods of building procurement, Brunel University. Tukel, O.I., Rom, W.O., 1998, Analysis of the Characteristics of Projects in Diverse Industries, Journal of Operations Managament, 16, Van Weele, A.J., 2007, Grondslagen van inkoopmanagement, Kluwer, Alphen aan den Rijn.