Project managerial variables

Projects have been recognised as temporary organisations and social entities (Söderlund, 2004). To create value by using projects, an owner typically starts by selecting a project delivery model (PDM). A PDM defines the nature of the relationships between the parties involved in the project, to allocate the risks between the parties and identify the terms of the contract (Nawi et al., 2014). The major concern of the client and other stakeholders is whether or not the project will achieve the long-term, strategic objectives expressed as economic, environmental and societal goals. Thus, the PDM is often used to outline how project objectives can be attained and is therefore considered a core component of generating value in projects (Aapaoja et al., 2013; Hyvarinen et al., 2012). This holistic view of the PDM’s value creation process must remain throughout the project, ranging from the front-end

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(idea, selection, definition, financing) to the back-end (renovation, operation and maintenance) (Abi-Karam, 2006) to achieve the desired project outcomes.

Understanding the value drivers of a PDM can significantly affect the value created and added from the project for the owner (Ahola et al., 2008) and other stakeholders (Aapaoja et al., 2013). As found in the literature review (see Chapter 2), two main value creation processes (i.e., independent and co-creation) underpin three key components for creating project value; namely, governance strategy, mode of interaction and management foci (see Figure 3.3).

Figure 3.3: The value creation process in projects 3.3.2.1 Governance strategy

Project governance provides the structure for involving a set of relationships between stakeholders in the project and for determining objectives as well as the means for achieving and monitoring those objectives (Turner, 2006b). As previously discussed, project management literature highlights two governance mechanisms: contractual governance and relational governance. In contractual governance, parties coordinate project tasks by sharing technical information to deliver the project outcomes specified in the contract. In contrast, in relational governance , parties bound by common interests collaborate strategically to deliver the project, i.e., work together to explore alternative design choices and solve problems jointly in an effort to add value.

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While some studies find contractual and relational governance strategies to be substitutive (e.g. Dyer and Singh (1998), Ghoshal and Moran (1996), Larson (1992)), other researchers empirically demonstrate that they are complementary rather than mutually exclusive (e.g. Y. Liu et al. (2009), Poppo and Zenger (2002), Z. Zhang, Wan, Jia, and Gu (2009)). This research adopts the interrelated view of contractual and relational governance for analysing the impact on the mode of interaction between parties in projects.

3.3.2.2 Mode of interaction

Following the dominant logic of the project governance strategy, two modes of interaction between the client and contractors are considered: coordination and collaboration.

In a contractual governance strategy, project tasks are coordinated through the exchange of technical information to deliver the project outputs specified in the contract;

each contractor independently provides the deliverables specified in the contract. In this context, coordinative relationships between parties are essential to integrate planning and information sharing in order to control progress and understand the task requirements (Loebbecke, Van Fenema, & Powell, 2016; Walker & Lloyd-Walker, 2013).

In contrast, the dominant logic of the relational-based approach affirms that by looking after each other’s interests and even sharing gains and pain. The parties bound by shared interests strategically far beyond simple technical levels of coordination to deliver the project, by collaborating to explore alternative design choices and to solve problems in an effort to add value (Aarikka-Stenroos & Jaakkola, 2012). A value creation process demands collaboration among parties (i.e., client, designer and contractor) who share their resource complementarity, distinctive competencies and linked interests (Austin & Seitanidi, 2012).

Hence, collaborative work refers to the joint activities of two or more parties who are actively and reciprocally solving complex problems, exchanging necessary and critical information, achieving shared goals, reducing risks, and sharing gains and pains (Aarikka-Stenroos &

Jaakkola, 2012; Bedwell et al., 2012; Cheung et al., 2010; Gulati, Wohlgezogen, &

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Zhelyazkov, 2012; Hadaya & Cassivi, 2012; Prahalad & Ramaswamy, 2004; Vargo et al., 2008; E. Wang & Wei, 2007).

3.3.2.3 Management foci

Having decided how the key stakeholders should interact (i.e., coordination or collaboration), the choice between adopting the appropriate project control approach and doing things differently (i.e., innovating) is a crucial one to accomplish project objectives and increase project value.

As enshrined in the PMBoK(R) Guide, the project control focus is to monitor and control by tracking, reviewing, and regulating the progress or performance of the project, with the purpose of identifying and initiating any necessary changes in the project plan (PMI, 2013). This approach comprises a formal mechanism associated with legal documents for enabling the control processes and the decision-making surrounding key issues, such as resource allocation (Zwikael & Smyrk, 2015), where coordination is the predominant mode of interactions between parties (Pala, Edum-Fotwe, Ruikar, Doughty, & Peters, 2014).

In contrast, project control can be exercised innovatively (Matinheikki, Artto, Peltokorpi, & Rajala, 2015; Prahalad & Ramaswamy, 2004). Innovating refers to implementing operation methods that are different from the normally established processes of operation carried out in similar circumstances to achieve the desired outcomes (Jean, Kim, &

Sinkovics, 2012). For example, in a design and construction (D&C) project, there is little incentive for the contractor to give priority to benefits from the operating phase; however, in a public private partnership (PPP) project, there are significant incentives for integrating the design and construction phases with the operating phase to increase efficiency and add value (Ahola et al., 2008; Caldwell et al., 2009).

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