Collaborative Procurement in Construction Projects Performance Measures, Case Study: Partnering in Iranian Construction Industry

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Procedia - Social and Behavioral Sciences 119 ( 2014 ) 811 – 818

doi: 10.1016/j.sbspro.2014.03.091

ScienceDirect

27

th

IPMA World Congress

Collaborative procurement in construction projects performance

measures, Case Study: Partnering in Iranian construction industry

Sogand MohammadHasanzadeh

a*

, Mujtaba Hosseinalipour

b

, MohammadReza Hafezi

c

a_{M.S Student in Project and Construction Management, Shahid Beheshti University,Tehran , Iran}

b_{Ph.D.in Project and Construction Management (The Vice president of Iranian Project Management Association) , Shahid Beheshti University,} Tehran , Iran

c_{Ph.D.in Architecture , Shahid Beheshti University, Tehran , Iran}

Abstract

Studies in construction procurement methods show that there needs to be a change of culture and attitude in the construction industry, moving from traditional adversarial relationship into cooperative and collaborative relationship. Complexity, uncertainty and time pressure that characterize construction projects are increasing the need for this change.

Research in performance measures for construction partnering projects becomes vital because of the increasing interest of clients to use partnering approach in construction projects. Measures allow key participants to assess the status of partnering arrangement and identify its strengths and weaknesses. Partnering performance is affected by two factors: Project performance and Partner’s performance. One of the main criteria to assess is whether the motivations for entering into partnering has been achieved at the end or not. However, application and generalization of construction partnering in Iran is still in its inception. There are few comprehensive research studies focused on objective, reliable and practical partnering performance results in construction industry. This paper discusses six project partnering Case Studies of a recent Iran’s project partnering. The study is based on semi-structured interviews process involving senior project participants and a review of projects documentation which identifies satisfaction about time, cost, quality, client satisfaction and claim performance through partnering.

Selection and peer-review under responsibility of the IPMA.

Keywords: Case study, Collaborative procurement, Construction industry, Iran, Partnering, Performance measures.

*_{Corresponding author E-mail address:[email protected]}

[email protected]

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Introduction

The construction industry is competitive and risky business. It is faced with problems such as poor co-operation, limited trust, and ineffective communication often resulting in an adversarial working relationships among all project stakeholders. This type of adversarial relationship is likely to lead to construction delays, difficulty in resolving claims , cost overruns, litigation, and a win-lose climate (Chan et al., 2008). There has been growing use of relationship-based procurement approaches on construction projects worldwide with strategies such as Partnering, Joint Ventures and Alliancing all used (Jefferies et al., 2006).

Partnering, a concept which provides a governance framework for the establishment of collaboration, can be beneficial for all parties involved if implemented successfully (Naoum, 2003; Eriksson, P.E. and Nilsson, T., 2008). Partnering, particularly, has been cited as one dominant collaborative approach at work and has attracted some empirical investigation in the past decade (Barlow, 1996; Bresnen, M. and Marshall, N., 2002), It has been argued that such collaborative approaches e.g. partnering or alliancing have positive impacts on project performance (Bennet, 1998, Wu et al., 2008). construction partnering case studies in Hong Kong (Chan et al., 2003), Sweden (Eriksson, P.E. and Nilsson, T., 2008), the US (Naoum, 2003) and the UK (Bresnen, M. and Marshall, N., 2000) argue that partnering increases the possibility that projects are completed within budget, on time, with the least number of conflicts, claims and work defects, and with a good client-contractor relationship (Löfgren, P. and Eriksson, P.E., 2009). One quantitative study, conducted by Larson 1995, supports that partnering projects achieve superior results in controlling costs, technical performance, and in satisfying customers compared to non-partnering projects. Another more recent investigation conducted by Nyström 2007, did not however find any clear differences in project performance when comparing the performances of ten partnering projects with ten similar non-partnering projects. Hence, there is a comprehensible need for similar quantitative studies on how partnering and collaboration affect project performance today.

Over the past decade, partnering has been acknowledged in Iran as an innovative and non-confrontational relationship-based approach to the procurement of construction projects. The earliest formal partnering arrangements recorded within Iran’s construction industry were exclusively applied to Oil-refinery Construction Projects. In recent years, the application of the partnering principle has not been limited to refinery construction projects. In particular, there are some projects in the field of Thermal and Hydro-electric power plants construction used collaborative approach such as Joint-venture/Consortium. To investigate and examine the effectiveness and performance of project partnering as applied in the construction industry, a case study research has been conducted to compare project partnering practices in Iran. Six representative case studies from various sectors of construction were selected for in-depth investigation.

1.

Methodology

An extensive literature review on partnering was conducted using relevant books, journals, magazines, newsletters, conference proceedings, workshops, seminars, and other sources. The research methodology employed in this study included the use of semi-structured face-to-face interview with carefully selected project participants. All interviewees were chosen from those client, consultant and contractor organizations who have gained rich hands-on experience in procuring partnering projects. Each case study was collated to extract relevant project documented information and data from the interviewees on major perceived benefits, critical success factors, major potential difficulties and partnering performances.

2. Study

There is no project clearly labelled as partnering project; however, the key elements of partnering can be observed in many projects. Many of partnering projects are not officially called so, but instead they are called joint-ventures, joint-ownerships, consortiums, various forms of joint production and selling and so on (Vessal, 2009). The study is

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limited to six collaborative projects that three of them are in hydroelectric power plants construction and the others are in oil-refinery construction projects. Added information about related projects is presented in Table 1.

Table 1: Projects information

ƚƚƌŝďƵƚĞƐ WƌŽũĞĐƚϭ WƌŽũĞĐƚϮ WƌŽũĞĐƚϯ WƌŽũĞĐƚϰ WƌŽũĞĐƚϱ WƌŽũĞĐƚϲ ͲƵŝůĚŝŶŐdǇƉĞ ŚǇĚƌŽͲĞůĞĐƚƌŝĐ ƉŽǁĞƌƉůĂŶƚƐ ŚǇĚƌŽͲĞůĞĐƚƌŝĐ ƉŽǁĞƌƉůĂŶƚƐ ŚǇĚƌŽͲĞůĞĐƚƌŝĐ ƉŽǁĞƌƉůĂŶƚƐ ŽŝůͲƌĞĨŝŶĞƌǇ ŽŝůͲƌĞĨŝŶĞƌǇ ŽŝůͲƌĞĨŝŶĞƌǇ ͲĞůŝǀĞƌǇŵĞƚŚŽĚ W W W W W W ͲWĂƌƚŶĞƌŝŶŐƚǇƉĞ :ŽŝŶƚͲsĞŶƚƵƌĞ ĐŽŶƐŽƌƚŝƵŵ ĐŽŶƐŽƌƚŝƵŵ ĐŽŶƐŽƌƚŝƵŵ ĐŽŶƐŽƌƚŝƵŵ :ŽŝŶƚͲsĞŶƚƵƌĞ Ͳ^ĐŚĞĚƵůĞ ĚƵƌĂƚŝŽŶ ϯʹϱzĞĂƌƐ DŽƌĞƚŚĂŶϱzĞĂƌƐ DŽƌĞƚŚĂŶϱ zĞĂƌƐ ϮʹϯzĞĂƌƐ DŽƌĞƚŚĂŶϱ zĞĂƌƐ >ĞƐƐƚŚĂŶϯzĞĂƌƐ ͲŽŶƚƌĂĐƚWƌŝĐĞ ;ΨͿ ϯϬ͕ϬϬϬ͕ϬϬϬͲ ϳϬ͕ϬϬϬ͕ϬϬϬΨ DŽƌĞƚŚĂŶ ϳϬ͕ϬϬϬ͕ϬϬϬΨ DŽƌĞƚŚĂŶ ϳϬ͕ϬϬϬ͕ϬϬϬΨ DŽƌĞƚŚĂŶ ϳϬ͕ϬϬϬ͕ϬϬϬΨ DŽƌĞƚŚĂŶ ϳϬ͕ϬϬϬ͕ϬϬϬΨ DŽƌĞƚŚĂŶ ϳϬ͕ϬϬϬ͕ϬϬϬΨ ͲůŝĞŶƚ WƵďůŝĐ WƵďůŝĐ WƵďůŝĐ WƵďůŝĐͲWƌŝǀĂƚĞ WƌŝǀĂƚĞ WƵďůŝĐ 4. Analysis

The interviewees included the clients and consultants representatives and joint contractors representatives who had direct involvement in the partnering process and were able to provide a comprehensive picture of the partnering practices in this considered projects. Through interviews and studying documents of respective projects it was found out that partnering performance is affected by two factors: Project performance and Partner’s performance, as in Figure 1 shows. In collaboration approach partnering success or failure depends on the cooperation between partners. So, any partner mistakes will affect the other organization reputation and income. Generally, partner performance measure is directly affected by selecting a suitable partner for partnering. In case studies, all partners are relatively satisfied with other partner performance and since they became familiar with their partner’s organizational culture, and prefer to have long-term relationship and collaborate with current partner in prospective projects.

Figure 1: partnering performance measures

As shown in Figure 2, collaborative procurement as same as traditional procurement does not make any differences in project time performance improvement and most of the partnering projects in Iran have delay. Half of the cases saved budget and the other half had overrun more than planned budget-Figure 3. So, collaborative procurement has relatively positive effects on cost performance and as one of the senior managements mentioned “the improvement of cost performance depends on management capability of key elements of the projects and the ability to predict the future challenges in project planning.”

WĂƌƚŶĞƌŝŶŐ WĞƌĨŽƌŵĂŶĐĞ WĂƌƚŶĞƌ͛Ɛ WĞƌĨŽƌŵĂŶĐĞ WƌŽũĞĐƚ WĞƌĨŽƌŵĂŶĐĞ ůĂŝŵ KĐĐƵƌƌĞŶĐĞ YƵĂůŝƚǇ WĞƌĨŽƌŵĂŶĐĞ ŽƐƚ WĞƌĨŽƌŵĂŶĐĞ dŝŵĞ WĞƌĨŽƌŵĂŶĐĞ ůŝĞŶƚ͛Ɛ ^ĂƚŝƐĨĂĐƚŝŽŶ

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Figure 2: Time performance for respective partnering projects

Figure 3: Cost performance for respective partnering projects

^ĂǀŝŶŐƵƉ ƚŽϱй KŶďƵĚŐĞƚ ^ĂǀŝŶŐ ϲʹϭϬй ^ĂǀŝŶŐ ŵŽƌĞƚŚĂŶ ϭϬй KǀĞƌƌƵŶƵƉ ƚŽϭϬй KǀĞƌƌƵŶ ϱϬйʹϭϬй KǀĞƌƌƵŶ ŵŽƌĞƚŚĂŶ ϱϬй WZK:dϭ WZK:dϰ WZK:dϯ WZK:dϲ WZK:dϱ WZK:dϮ ŚĞĂĚƵƉ ƚŽϱй KŶ ^ĐŚĞĚƵůĞ ŚĞĂĚ ϲʹϭϬй ŚĞĂĚ ŵŽƌĞƚŚĂŶ ϭϬй ĞůĂǇƵƉ ƚŽϭϬй ĞůĂǇ ϱϬйʹϭϬй ĞůĂǇŵŽƌĞ ƚŚĂŶϱϬй WZK:dϭ WZK:d ϰ WZK:dϯ WZK:d ϲ WZK:dϱ WZK:dϮ

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Figure 4: Claim occurrence for respective partnering projects

Claim occurrence in collaborative projects are not only not improved, but also has increased in many cases considerably-Figure 4. Project managements noticed that the roots of these problems lie in lack of cooperation atmosphere in culture and lack of win-win attitude. There are several articles noticing that partnering has significant effects on claim occurrence (Fai Yip, 2007; Nyström, 2007; Cheung et al., 2003; Chan et al., 2006) but in contrast because of the team-working challenges in Iran increasing conflictions can be observed.

Due to implementing each part of projects by experts in that field and increasing the synergies of collaborative working, almost all clients and consultants are quite satisfied with the quality level of case projects. Finally, as mentioned in Table 3 most clients are satisfied with the overall performance measures of partnering projects in comparison with traditional procurement systems.

Table 2: Effect of partnering on the quality of projects

WƌŽũĞĐƚϭ WƌŽũĞĐƚϮ WƌŽũĞĐƚϯ WƌŽũĞĐƚϰ WƌŽũĞĐƚϱ WƌŽũĞĐƚϲ ĨĨĞĐƚŽĨ ƉĂƌƚŶĞƌŝŶŐ ŽŶƚŚĞ ƋƵĂůŝƚǇŽĨ ƉƌŽũĞĐƚƐ

WƌŽũĞĐƚ ƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂ ŐŽŽĚůĞǀĞů ;ďĞƚǁĞĞŶϱϬ ĂŶĚϳϱйͿ WƌŽũĞĐƚ ƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂ sĞƌǇŐŽŽĚ ůĞǀĞů ;ŽǀĞƌϳϱйͿ WƌŽũĞĐƚ ƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂ sĞƌǇŐƌĞĂƚ ůĞǀĞů

;ŽǀĞƌϵϬйͿ WƌŽũĞĐƚ ƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂ ŵŽĚĞƌĂƚĞƚŽ ůŽǁ ;ďĞůŽǁϱϬйͿ WƌŽũĞĐƚ ƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂ sĞƌǇŐŽŽĚ ůĞǀĞů ;ŽǀĞƌϳϱйͿ WƌŽũĞĐƚƋƵĂůŝƚǇŝƐ ůŽĐĂƚĞĚĂƚĂŐŽŽĚ ůĞǀĞů;ďĞƚǁĞĞŶϱϬ ĂŶĚϳϱйͿ ĞůŽǁ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚƵƉ ƚŽ ϱй /ŶĚŝĨĨĞƌĞŶƚ ƚŽ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽĐƵƌĞĚ ƉƌŽũĞĐƚ ĞůŽǁ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚƵƉ ƚŽ ϲʹ ϭϬй ĞůŽǁ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚ ŵŽƌĞ ƚŚĂŶϭϬй ďŽǀĞ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚƵƉ ƚŽ ϱй ďŽǀĞ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚƵƉ ƚŽ ϲʹ ϭϬй ďŽǀĞ ƚƌĂĚŝƚŝŽŶĂů ƉƌŽũĞĐƚ ŵŽƌĞ ƚŚĂŶϭϬй WZK:d ϭ WZK:dϰ WZK:d ϯ WZK:dϲ WZK:dϱ WZK:d Ϯ

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Table 3: Client satisfaction in each project

Client satisfaction in each project

Project 1 Due to the cooperative partnering with the mutual understanding of the parties, more than 50 percent of the _{client's consent was sought.} Project 2 A good and positive deal of partnering with client / consultants organizations is considerable. So, the client is very pleased with the partnering performance and wants to contribute the project operation to the partnering. Project 3

Interaction and effective cooperation of participants and good understanding of conditions by managements could facilitate possible barriers. The client is very pleased with the performance of the construction sector and also is relatively satisfied with the performance of the equipment sector, in general client is quite satisfied with the overall performance of partnering.

Project 4 Client is very dissatisfied with the consortium performance. Project 5 Client is quite satisfied with the consortium performance. Project 6 Client is relatively satisfied with the consortium performance.

• Perceived Major motivations of Adopting Partnering

Six major partnering motivations were identified from the interviewees. Those are: (1) improvement in construction quality; (2) cost reduction; (3) willingness to enter new markets and gain market advantages; (4) cover the weaknesses of the organization and enhance strengths and the knowledge of engineering; (5) risk sharing and (6) innovation.

• Perceived Major challenges against implementing Partnering

Partnering barriers and challenges could be categorized in six distinct perspectives (1) dealing with large bureaucratic organizations - slow down decision-making; (2) difference in partners’ cultures; (3) stakeholders not developing a ”win-win” attitude; (4) lack of training and guidance in the project partnering; (5) little experience with the partnering approach and (6) risks or rewards were not shared directly.

• Critical Success Factors for Adopting Partnering

The interviewees shared a common view on the major critical success factors for adopting partnering. These included (1)commitment to win-win attitude; (2)Selection of an appropriate Partner; (3)Top Management support; (4)Long-term perspective; (5)Regular monitoring and control of partnership performance through meeting and making use of information technologies; and (6)integrated team, agreements.

5. Recommendations for Performance Improvement

The following initiatives have been proposed by project managers of respective projects to improve the overall project performance for future projects. A movement toward a more effective partnering requires a change in concepts and tools. Concept changes involve changes in belief, attitude to openness, trust, commitment and compromise. Tools changes need implementation of novel and innovative tools (such as BIM), management techniques and frequent meetings to achieve better collaboration and cooperation. Managers also suggested frequent meetings of the partnering Committee to prepare a partnering agreement, choosing appropriate project delivery methods, developing the project organization chart, preparing clear definition and understanding of responsibilities and fair allocation of risk and benefits before the tender will helpfully improve performance.

On the other hand client’s initiative to adopt partnering approach may be a good beginning for implementing cooperative methods. According to common law system of competitive bidding, contractor and consultants do not

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have any prospective program to continuous collaboration and strategic partnering and only focus on short-term benefits of the project.

6. Conclusions

Research into performance measures for partnering projects in Iranian construction industry is becoming vital because an increasing trend of client organization has been observed to adopt collaborative procurement to construction projects over the last decade. Utilizing a collaborative approach enables the companies to share financial and human resources as well as managerial and technical skills that are critical for achieving a successful project, which they would not afford on their own (ÖZORHON B., 2007). It is generally accepted that a construction project is successfully completed and handed over to the client, if the project is delivered on time, within budget, with absence of any claims, with client’s satisfaction and is of the appropriate quality (Takim R. and Akintoye A., 2002).

This paper discusses six project partnering case studies of a recent Iran’s project partnering. The study is based on semi-structured interviews participants and a review of projects’ documentation to identify satisfaction about time, cost, quality, client satisfaction and claim performance through partnering. Partnering performance depends on two measures: Project performance and Partner’s performance. Firstly, companies should concentrate on finding compatible partners that could best complement them in terms of strategic, organizational and cultural assets. In this case studies, all companies are relatively satisfied with other partner’s performance and since they became familiar with their partner’s organizational culture, they preferred to have long-term relationship with them. Based on the case studies, it could be demonstrated that generally most of clients are satisfied with project quality level and overall partnering performance. Exceptions to the time performance and claim occurrence, the other performance measures such as cost performance, quality performance and client’s satisfaction- positive impact on project performance could be obviously observed. Afterward challenges and difficulties faced by partnering during its implementation are identified to present recommendation for increasing success and cooperation for future projects and improving project performance.

As a result of research findings and senior managements attributes in the clients, consultants and contractors organizations could be argued that using collaborative approach has significant effects on project performance in Iran. Most of the challenges in implementing partnering are summarized in cultural barriers and lack of training in partnering field. Managers also suggest that developing some macro-social policies are required to underpin collaboration culture in Iran. Also, frequent meetings of the partnering Committee to prepare a partnering agreement, choosing appropriate project delivery methods, developing the project organization chart, preparing clear definition and understanding of responsibilities, fair allocation of risk and benefits and setting program for training participant about the concept and tools of the partnering before the tender will helpfully improve performance.

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