Understanding construction consortia: Theory, practice and opinions

Firms form consortia in order to win contracts. Once a project has been awarded to a consortium each member then concentrates on his or her own contract with the client. Therefore, consortia are marketing devices, which present the impression of teamworking, but the production process is just as fragmented as under conventional procurement methods. In this way, the consortium forms a barrier between the client and the actual construction production process. Firms form consortia, not as a simple development of normal ways of working, but because the circumstances for specific projects make it a necessary vehicle. These circumstances include projects that are too large or too complex to undertake alone or projects that require on-going services which cannot be provided by the individual firms inhouse. It is not a preferred way of working, because participants carry extra risk in the form of liability for the actions of their partners in the consortium. The behaviour of members of consortia is determined by their relative power, based on several factors, including financial commitment and ease of replacement. The level of supply chain visibility to the public sector client and to the industry is reduced by the existence of a consortium because the consortium forms an additional obstacle between the client and the firms undertaking the actual construction work. Supply chain visibility matters to the client who otherwise loses control over the process of construction or service provision, while remaining accountable for cost overruns. To overcome this separation there is a convincing argument in favour of adopting the approach put forward in the Project Partnering Contract 2000 (PPC2000) Agreement. Members of consortia do not necessarily go on to work in the same consortia again because members need to respond flexibly to opportunities as and when they arise. Decision-making processes within consortia tend to be on an ad hoc basis. Construction risk is taken by the contractor and the construction supply chain but the reputational risk is carried by all the firms associated with a consortium. There is a wide variation in the manner that consortia are formed, determined by the individual circumstances of each project; its requirements, size and complexity, and the attitude of individual project leaders. However, there are a number of close working relationships based on generic models of consortia-like arrangements for the purpose of building production, such as the Housing Corporation Guidance Notes and the PPC2000.

Ownership rights in performance-based contracting: A case study of English law

Clients and contractors need to be aware of the project’s legal environment because the viability of a procurement strategy can be vitiated by legal rules. This is particularly true regarding Performance-Based Contracting (PBC) whose viability may be threatened by rules of property law: while the PBC concept does not require that the contractor transfers the ownership in the building materials used to the client, the rules of property law often lead to an automatic transfer of ownership. But does the legal environment really render PBC unfeasible? In particular, is PBC unfeasible because contractors lose their materials as assets? These questions need to be answered with respect to the applicable property law. As a case study, English property law has been chosen. Under English law, the rule which governs the automatic transfer of ownership is called quicquid plantatur solo, solo credit (whatever is fixed to the soil belongs to the soil). An analysis of this rule reveals that not all materials which are affixed to land become part of the land. This fate only occurs in relation to materials which have been affixed with the intention of permanently improving the land. Five fictitious PBC cases have been considered in terms of the legal status of the materials involved, and several subsequent legal questions have been addressed. The results suggest that English law does actually threaten the feasibility of PBC in some cases. However, it is also shown that the law provides means to circumvent the unwanted results which flow from the rules of property law. In particular, contractors who are interested in keeping their materials as assets can insist on agreeing a property right in the client’s land, i.e. a contractor’s lien. Therefore, the outcome is that English property law does not render the implementation of the PBC concept unfeasible. At a broader level, the results contribute to the theoretical framework of PBC as an increasingly used procurement strategy.

The competitive dialogue procedure: Advantages, disadvantages, and its implementation into English and Dutch law

Competitive Dialogue (CD) is a new contract award procedure of the European Community (EC). It is set out in Article 29 of the 'Public Sector Directive' 2004/18/EC. Over the last decades, projects were becoming more and more complex, and the existing EC procedures were no longer suitable to procure those projects. The call for a new procedure resulted in CD. This paper describes how the Directive has been implemented into the laws of two member states: the UK and the Netherlands. In order to implement the Directive, both lawmakers have set up a new and distinct piece of legislation. In each case, large parts of the Directive’s content have been repeated ‘word for word’; only minor parts have been reworded and/or restructured. In the next part of the paper, the CD procedure is examined in different respects. First, an overview is given on the different EC contract award procedures (open, restricted, negotiated, CD) and awarding methods (lowest price and Most Economically Advantageous Tender, MEAT). Second, the applicability of CD is described: Among other limitations, CD can only be applied to public contracts for works, supplies, and services, and this scope of application is further restricted by the exclusion of certain contract types. One such exclusion concerns services concessions. This means that PPP contracts which are set up as services concessions cannot be awarded by CD. The last two parts of the paper pertain to the main features of the CD procedure – from ‘contract notice’ to ‘contract award’ – and the advantages and disadvantages of the procedure. One advantage is that the dialogue allows the complexity of the project to be disentangled and clarified. Other advantages are the stimulation of innovation and creativity. These advantages are set against the procedure’s disadvantages, which include high transaction costs and a perceived hindrance of innovation (due to an ambiguity between transparency and fair competition). It is concluded that all advantages and disadvantages are related to one of three elements: communication, competition, and/or structure of the procedure. Further research is needed to find out how these elements are related.

Carbon reduction in buildings (CaRB) - Understanding the social and technical factors that influence energy use in UK buildings

Attempts to reduce the energy consumed in UK homes have met with limited success. One reason for this is a lack of understanding of how people interact with domestic technology – heating systems, lights, electrical equipment and so forth. Attaining such an understanding is hampered by a chronic shortage of detailed energy use data matched to descriptions of the house, the occupants, the internal conditions and the installed services and appliances. Without such information it is impossible to produce transparent and valid models for understanding and predicting energy use. The Carbon Reduction in Buildings (CaRB) consortium of five UK universities plans to develop socio-technical models of energy use, underpinned by a flow of data from a longitudinal monitoring campaign involving several hundred UK homes. This paper outlines the models proposed, the preliminary monitoring work and the structure of the proposed longitudinal study.

Health and safety on construction sites in Ghana

The state of health and safety on construction sites in Ghana was investigated using first hand observation of fourteen (14) construction project sites in 2009 and 2010. At each site, the construction project, workers and the physical environment of the site were inspected and evaluated against health and safety indicators taken from the literature. The results reveal a poor state of health and safety on Ghanaian construction sites. The primary reasons are a lack of strong institutional framework for governing construction activities and poor enforcement of health and safety policies and procedures. Also, Ghanaian society does not place a high premium on health and safety of construction workers on site. Interviews with workers indicated that injuries and accidents are common on sites. However, compensation for injury is often at the discretion of the contractor although collective bargaining agreements between Labour unions and employers prescribe obligations for the contractor in the event of injury to a worker.

Contractor project estimates vs. consultant project estimates in Ghana

Ten projects constructed in Ghana between 2003 and 2010 are examined and analysed to ascertain the reliability of estimated costs provided for the projects. Cost estimates for five of the projects were calculated by consultants and cost estimates for the five remaining projects were calculated by contractors. Cost estimates prepared by contractors seemed to be closer to actual costs than estimates calculated by consultants. Projects estimated by consultants experienced an average cost overrun of 40% and time overrun of 62% whereas projects priced by contractors experienced an average cost overrun of 6% and time overrun of 41%. It seemed that contractors had a better understanding of the actual construction processes and a clearer expectation of the needs of the client hence an ability to calculate estimates that were closer to reality. Construction clients in Ghana should rely on contractors for more realistic cost estimates as estimates by consultants may be inaccurate. Where consultants are employed, an allowance of up 40% should be added to the estimated costs as a margin for inaccuracy.

Risk pricing practices in finance, insurance and construction

A review of current risk pricing practices in the financial, insurance and construction sectors is conducted through a comprehensive literature review. The purpose was to inform a study on risk and price in the tendering processes of contractors: specifically, how contractors take account of risk when they are calculating their bids for construction work. The reference to mainstream literature was in view of construction management research as a field of application rather than a fundamental academic discipline. Analytical models are used for risk pricing in the financial sector. Certain mathematical laws and principles of insurance are used to price risk in the insurance sector. construction contractors and practitioners are described to traditionally price allowances for project risk using mechanisms such as intuition and experience. Project risk analysis models have proliferated in recent years. However, they are rarely used because of problems practitioners face when confronted with them. A discussion of practices across the three sectors shows that the construction industry does not approach risk according to the sophisticated mechanisms of the two other sectors. This is not a poor situation in itself. However, knowledge transfer from finance and insurance can help construction practitioners. But also, formal risk models for contractors should be informed by the commercial exigencies and unique characteristics of the construction sector.

The tendering process and performance analysis of a public building project in Ghana

A case study on the tendering process and cost/time performance of a public building project in Ghana is conducted. Competitive bids submitted by five contractors for the project, in which contractors were required to prepare their own quantities, were analyzed to compare differences in their pricing levels and risk/requirement perceptions. Queries sent to the consultants at the tender stage were also analyzed to identify the significant areas of concern to contractors in relation to the tender documentation. The five bidding prices were significantly different. The queries submitted for clarifications were significantly different, although a few were similar. Using a before-and-after experiment, the expected cost/time estimate at the start of the project was compared to the actual cost/time values, i.e. what happened in the actual construction phase. The analysis showed that the project exceeded its expected cost by 18% and its planned time by 210%. Variations and inadequate design were the major reasons. Following an exploration of these issues, an alternative tendering mechanism is recommended to clients. A shift away from the conventional approach of awarding work based on price, and serious consideration of alternative procurement routes can help clients in Ghana obtain better value for money on their projects.

Knowledge transfer processes in PFI: identification of barriers and enablers

Increasingly, the UK’s Private Finance Initiative has created a demand for construction companies to transfer knowledge from one organization or project to another. Knowledge transfer processes in such contexts face many challenges, due to the many resulting discontinuities in the involvement of organisations, personnel and information flow. This paper empirically identifies the barriers and enablers that hinder or enhance the transfer of knowledge in PFI contexts, drawing upon a questionnaire survey of construction firms. The main findings show that knowledge transfer processes in PFIs are hindered by time constraints, lack of trust, and policies, procedures, rules and regulations attached to the projects. Nevertheless, the processes of knowledge transfer are enhanced by emphasising the value and importance of a supportive leadership, participation/commitment from the relevant parties, and good communication between the relevant parties. The findings have considerable relevance to understanding the mechanism of knowledge transfer between organizations, projects and individuals within the PFI contexts in overcoming the barriers and enhancing the enablers. Furthermore, practitioners and managers can use the findings to efficiently design knowledge transfer frameworks that can be used to overcome the barriers encountered while enhancing the enablers to improve knowledge transfer processes.