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Performamce of Construction Projects: Essays on Supplier Structure, Construction Costs and Quality Improvement
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0002-1729-3933
2011 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The performance of the construction industry and its contribution to the welfare of society in comparison to other industries such as the manufacturing industry has lately been the focus of many commissioned reports and academic research publications. The so-called “iron triangle” of time, cost and quality have been the most important metrics of construction project performance, especially for the selection of appropriate procurement methods. The perceived inefficiencies emanate from, among other things, increasing construction costs, conflicts and client dissatisfaction, the fragmented nature of the industry, low competition, cost overruns and delays, and lack of quality improvement. There is observed disparity in increases in housing construction costs and an apparent lack of quality improvement of infrastructure transport projects. In Sweden, metropolitan regions experienced higher construction cost increases, while small regions showed less costs increases during economic booms. In order to address these perceived inefficiencies, numerous strategic and project level decisions that influenced the way that publicly owned properties and projects are procured, constructed, operated, and maintained have been made. The decision to transfer quality-related activities and quality assurance responsibilities from client to contractor approximately 25 years ago is one of the decisions that could have an impact on current quality of infrastructure transport projects. The disparity in increases in construction costs and quality improvement concerns could not only influence the performance of construction projects, but also can affect the way different actors in the sector interact with each other and achieve their divergent objectives.

The aim of this study is twofold. First, it tries to explain the observed disparity increases in construction costs between big (metropolitan) and medium/small regions. Second, it attempts to ascertain the extent of quality problems in infrastructure transport projects after the transfer of quality assurance responsibilities, and suggests measures that could improve the quality of infrastructure transport projects. Surveys and interviews were used as a means to collect data concerning both supplier structure in relation to housing construction costs and quality of construction projects. Other empirical data from a secondary source were also used.

The first part of the research offers an understanding of the behavior of contractors in specific economic situations, specifically by taking into consideration the long-run relationship between contractors and owners/developers. It ascertains that if contractors/subcontractors display opportunistic behavior during the economic boom, the result will be increased higher construction costs. We utilized transaction cost theory in exploring construction sector structures in an attempt to understand changes in the sector from an efficiency perspective. The analysis can also enrich the current understanding of the governance structure of Swedish construction firms and how they could influence construction costs.

As the response from the survey suggests, quality of infrastructure projects has not decreased after the transfer of quality assurance from client to contractor. However, the high number of respondents that indicated quality is the same as before the transfer raises a concern of lack of quality improvement. Respondents have overwhelmingly indicated that the lack of public client competence was one of the contributing factors of quality problems. It is argued that with client competence it is important to build-up through proper knowledge management, incentive systems, and training. Further, the retention of new skilled and experienced workers is an essential element for continuous quality improvement goals and objectives. A second opinion practice from independent experts and committees that focuses on the quality aspect of the projects can be introduced in the provision of infrastructure transport projects. Finally, it is argued that without client competence and a company culture that creates the right incentives, no procurement method can guarantee high quality.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology , 2011. , v, 34 p.
Series
TRITA-FOB, 2011:3
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:kth:diva-47448ISBN: 978-91-978692-9-4 (print)OAI: oai:DiVA.org:kth-47448DiVA: diva2:455370
Public defence
2011-11-22, F3, Lindstedtsvägen 26, KTH, Stockholm, 13:00 (English)
Opponent
Supervisors
Note
QC 20111111Available from: 2011-11-11 Created: 2011-11-09 Last updated: 2014-01-21Bibliographically approved
List of papers
1. Construction cost - central concepts, categories and determining factors
Open this publication in new window or tab >>Construction cost - central concepts, categories and determining factors
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Causes of construction cost escalations can be numerous and any effort to ascertain them in order to explain regional disparities requires that all the major construction cost components affected by the increase must first be recognized. Imprecise concepts and categories as well as mix-up of what constitute cost or price makes it difficult to systematically identify these cost constituents. The aim of this paper is to synthesize these concepts and systematize the factors that determine construction cost factors in a way that makes it easier to tackle the issue of Swedish regional construction cost escalation differences. The factors influencing construction costs were divided into four groups/layers based on the extent to which the construction actors, especially contractors and clients, could influence the factors; project-specific factors, client-contractor related factors, competition and market conditions, and macroeconomic and political factors. Factors in the first and final groups may not contribute valuable analysis that explains the regional construction costs differences. The other two groups of factors; client and contractor-related factors and competition and market conditions could have huge influences on construction costs and hence could explain different construction costs increase observed between metropolitan and smaller regions in Sweden.

Keyword
Construction costs, direct and indirect costs, overrun, cost esclation
National Category
Construction Management
Identifiers
urn:nbn:se:kth:diva-47669 (URN)
Projects
Doctoral Thesis: Performance of construction projects
Note
QC 20111114Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
2. Long-run relationship, Vertical Integration and International Competition:: Can they contribute to explaining regional construction cost differences?
Open this publication in new window or tab >>Long-run relationship, Vertical Integration and International Competition:: Can they contribute to explaining regional construction cost differences?
(English)Manuscript (preprint) (Other academic)
Abstract [en]

The existence of opportunistic behavior by contractors or sub-contractors in the bidding process encouraged by the governance structure of construction companies as well as the kind of relationship that exist between contractors and clients is thought to have some bearing on the rising construction cost observed in some regions of Sweden. Three hypotheses were formulated concerning the impact that long run relationship between contractors and developers, vertically integrated firms, and the increase of international competition could have on the construction cost increase. The hypotheses were tested by collecting data from a number of projects from six cities in different regions. The semi-structured survey produced inconclusive results. Long run and collaborative relationship was prevalent in small region though respondents in this region did not see a strong connection between construction costs increase levels and the kind of observed relationship. In the Stockholm region short-term relationships were mostly prevalent. Vertical integration and foreign competition impacts on construction costs were not significant in either region.

Keyword
Construction costs, vertical integration, long run relationship, competition
National Category
Construction Management
Identifiers
urn:nbn:se:kth:diva-47672 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Note
QS 2012Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
3. Organizational modes in the residential building sector in Sweden
Open this publication in new window or tab >>Organizational modes in the residential building sector in Sweden
2009 (English)In: Construction Management and Economics, ISSN 0144-6193, E-ISSN 1466-433X, Vol. 27, no 2, 153-163 p.Article in journal (Refereed) Published
Abstract [en]

Traditional organizational studies emphasize department groupings and the management style of differentorganizations that are often based on common tasks, products, geography and processes. They also mainlyemphasize the connection between construction supply chain and procurement methods but have not analysedof how external factors shape the organization structure and consequently the supply chain. Three things areanalysed: the impact of competitive pressure, required competence and degree of flexibility on various modes ofconstruction organization used for producing multi-family residential housing in Sweden from a transactioncost theory perspective. Organization structures depend on the level of project engagement, competencedemanded by the preferred organization mode as well as the economic environment, and the level ofconstruction activities.

Keyword
Organization structure, flexibility, risk allocation, competition, competence
National Category
Construction Management
Identifiers
urn:nbn:se:kth:diva-46522 (URN)10.1080/01446190802699503 (DOI)2-s2.0-67650315444 (Scopus ID)
Projects
Doctoral thesis: Performance of construction projects - Essays on supplier structure, construction costs and quality improvement
Funder
Formas
Note
QC 20111114Available from: 2011-11-09 Created: 2011-11-03 Last updated: 2017-12-08Bibliographically approved
4. The effect of subsidy on housing construction in various regions of Sweden
Open this publication in new window or tab >>The effect of subsidy on housing construction in various regions of Sweden
2010 (English)In: Journal of European Real Estate Research, ISSN 1753-9269, Vol. 3, no 3, 228-244 p.Article in journal (Refereed) Published
Abstract [en]

Purpose – The purpose of this paper is to explore the extent that interest subsidies have impacted onthe total production of Swedish single- and multifamily houses. It also intends to examine whethertenure neutrality provision of interest subsidy that subsidy policy advocates was maintained.

Design/methodology/approach – Using a multiple regression of two models, a balanced paneldata from 1975 to 2006 that consist of various related construction cost variables of all regions ofSweden will be analyzed. Instrumental variable (IV) and seemingly unrelated regressions (SUR) will beutilized to examine the role of subsidy on housing production and tenure neutrality, respectively.

Findings – The results seem to indicate that a general subsidy is expected to be ineffective since itmay increase the existing stocks of a low demand region but not the housing stocks of big regionswhere the demand is high. Moreover, a targeted subsidy may change the balance between differenttypes of housings since lower construction costs due to the subsidy could favor the development ofcertain profitable housing types.

Originality/value – The paper tries to substantiate (empirically) the assertion that subsidy policiescontributed both to the production of housing units in low demand regions and distortion of thepreference of different tenures.

Keyword
Sweden, Housing, Construction Industry, Goverment policy
National Category
Economics
Identifiers
urn:nbn:se:kth:diva-47433 (URN)2-s2.0-84858810303 (Scopus ID)
Note
QC 20111114Available from: 2011-11-09 Created: 2011-11-09 Last updated: 2014-01-21Bibliographically approved
5. Quality in infrastructure projects: concepts and framework for explanatory and exploratory studies
Open this publication in new window or tab >>Quality in infrastructure projects: concepts and framework for explanatory and exploratory studies
(English)Manuscript (preprint) (Other academic)
Abstract [en]

There is a shift from conformance approaches of construction projects to excellence in terms of real performance. One of the major goals of today’s project is to achieve the highest level of quality rather than just meet the specified level of quality. In Sweden, approximately 25 years ago, major construction contractors replaced the traditional client/owner control system of public finance construction projects with quality assurance systems managed by the contractors themselves. Anecdotal evidence exist that shows that the quality of infrastructure projects may not be as high as before due to many different reasons, including low productivity and incentive problems. However, thorough formal investigations that evaluate the effectiveness of the quality assurance transfer have not been carried out.

The main purpose of this paper is to understand the extent and type of quality problems in infrastructure projects as a foundation for studies about what can be done to improve quality. It aims to explore the extent of any perceived quality problems that could be associated with quality assurance transfer. The type of research question issues that this paper intends to address is very complex in terms of describing what constitutes quality and what people remember about projects that they might or might not have been involved in many years ago. This entails the use of different types of research processes and approaches such as realistic research, descriptive and exploratory questionnaire as well as explanatory studies that would not only allow us to ascertain the overall quality level of infrastructure transport projects. However, it also gives us some indication of those specific concerns needed for further investigation.

The results of our survey suggest that there has not been a deterioration of the (relative) quality level of infrastructure projects after the transfer of quality assurance from client to contractor. However, the expectation that the transfer would improve the quality level does not seem to be fully materialized since almost half of the respondents suggest that the quality level remained the same as before the transfer. The lesson drawn from this is that the question of what really happened to quality and why is less important than finding ways to improve quality in the future.

Keyword
Infrastructure projects, quality improvement, quality insurance, quality concepts
National Category
Construction Management
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-47676 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note
QS 2011Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
6. Decision-making theories in relation to quality of infrastructure transport projects
Open this publication in new window or tab >>Decision-making theories in relation to quality of infrastructure transport projects
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Infrastructure transport projects are characterized by long-term assets that often require an enormous initial investment, and high operating and maintenance resources. They also involve many stakeholders with divergent goals and objectives. Generally, the realization of these projects takes several years from the inception of the project to planning, construction, and the operational phase. Numerous decisions will be made during the realization of a project. Some decisions occur within a single organization such as an owner’s decision to adopt a procurement or contracting strategy, while other decisions involve more than one organization or actor such as quality assurance procedures during the construction phase.

The aim of this paper is to explore the extent to which decisions intended to ensure meeting project members’ planned budget, time and technical specifications could have produced a less desirable quality level of transport projects. An online survey of 68 respondents and a critical analysis of quality-related decisions during the construction and final inspection of infrastructure transport projects indicate that current quality assurance practices could be the source of an inadequate quality level or lack of quality improvement.

The competence level of a client is indicated as one of the sources of quality problems. The decision to transfer quality assurance responsibility from client to contractor may have contributed to this lack of a client’s competence skills, creating a higher dependence on a supplier’s judgment of the quality level of projects. A recurring acceptance of an adequate quality level could become the norm rather than seeking the highest level of quality specified during the contracting phase. Thus, a downward spiral of quality level acceptance could hamper the drive toward quality improvement goals for infrastructure transport projects.

Keyword
Decision-making, competence, infrastructure projects, quality assurance, quality improvement
National Category
Construction Management
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-47681 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note
QS 2011Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
7. Frame work for quality improvement of infrastructure projects
Open this publication in new window or tab >>Frame work for quality improvement of infrastructure projects
(English)Manuscript (preprint) (Other academic)
Abstract [en]

In order to achieve high quality that not only gives acceptable return value to society but also satisfies the needs of all the stakeholders of infrastructure projects, comprehensive understanding of issues pertaining to the quality of the project is needed. The aim of this study is to provide an overview the most common procurement methods used in constructing infrastructure transport projects and analyze how these methods contribute to the desired quality of the final product in relation to client competence. An on-line survey of construction actors was carried out to ascertain quality level of Swedish infrastructure transport projects and determinant factors of quality problems. An equal number of respondents indicated that the quality of infrastructure projects has either increased or remained same level over the past twenty years. They also pointed out luck of client competence that is vital in realizing the desired quality level through proper procurement, monitoring and evaluation procedures. Public clients heavily rely on traditional design-build procurement that requires considerable client involvement of a project. Thus, the association of quality problems and luck of client competence may not be a mere coincidence but an overlooked outcome of current situation.

Keyword
Competence, infrastructure, transport, procurement, quality, warranties
National Category
Construction Management
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-47684 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note
QS 2011Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
8. Procurement type and quality in infrastructure projects
Open this publication in new window or tab >>Procurement type and quality in infrastructure projects
(English)Manuscript (preprint) (Other academic)
Abstract [en]

One of the major goals of any project is to achieve the highest possible quality level without adversely affecting the anticipated cost and schedule. The final quality of a project is determined by a number of factors and there is no simple deterministic relation between these underlying factors and the level of quality. A fundamental question is whether quality can be increased by choosing a particular procurement method or the risk for low quality is higher with certain procurement method. Despite the existence of large literature in this area, there has not been clearly formulated that quality is independent from the choice of procurement type. We argue that given the right conditions all procurement methods can give good results, and given the wrong conditions all of them can lead to low quality.

The aim of this paper is to try to synthesize both theoretical and empirical results about the performance of different procurement method and present arguments that make this statement convincing. The theoretical framework used in this paper is general contract theory and transaction cost theory while the result from questionnaire carried out within the project provided important empirical background.

Two questions that are central to the debate of the choice of procurement method in relation to quality of the final project are who should do the detailed design and should construction and operations be bundled. A client with low technical competence may choose design-build procurement method as the client then only has to specify the characteristics of final product. This same client can also contact with technical consultant and make the detailed design together that would allow client to use design-bid-build procurement method. The main conclusion is that there is no quick fix when it comes to improving quality in infrastructure projects and there is no a procurement method that guarantees a better quality than another.

Keyword
Construction, infrastructure projects, procurement methods, quality
National Category
Construction Management
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-47687 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note
QS 2011Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved
9. What can the client do to improve the quality of infrastructure transport projects?
Open this publication in new window or tab >>What can the client do to improve the quality of infrastructure transport projects?
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Public sector clients play different roles in the provision of transport infrastructure projects. They are responsible to identify the needs of end-users, determine performance objectives of projects and ensure that the most appropriate procurement method that minimizes risks and optimizes outcomes is chosen. Public sector client could also have a major influence on the actions and behavior of other actors in the sector that ultimately improve the overall performance and productivity of construction sector.

The purpose of this paper is to present and argue for a number of statements about what is important in order to improve quality in new infrastructure projects. The paper tries to synthesize both theoretical and empirical results concerning organizational performance, especially the role of client competence for the quality of the project. Results from the questionnaire carried out within the project but presented elsewhere and extensive literature review are mainly utilized.

We argued that knowledge and incentives are two crucial dimensions for getting high quality. The internal process of client organization such as design type, procurement method, and construction procedures could be influenced by client’s internal resource capacity. Thus, a more structured and proper knowledge management will not only minimize the loss of tacit knowledge and enhance public sector’s internal process capacity but will also reduce reliance on specific procurement method without economic and technical justifications. Furthermore, certain strategies such as incentive schemes, second opinion practices, post-review reporting for accountability and transparency purposes could improve public sector’s knowledge assets. It is expected that only a public sector client with skilled and experience workforce supplemented with appropriate knowledge management can succeed to fulfill their societal responsibilities.

Keyword
Client competence, knowledge management, infrastructure, internal process, quality
National Category
Construction Management
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-47689 (URN)
Projects
Doctoral Thesis: Performance of Construction Projects
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note
QS 2011Available from: 2011-11-11 Created: 2011-11-11 Last updated: 2014-01-21Bibliographically approved

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