Selection Criteria for Delivery Methods for Infrastructure Projects

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Procedia - Social and Behavioral Sciences 226 ( 2016 ) 260 – 268

Peer-review under responsibility of the organizing committee of IPMA WC 2015. doi: 10.1016/j.sbspro.2016.06.187

ScienceDirect

29th World Congress International Project Management Association (IPMA) 2015, IPMA WC

2015, 28-30 September – 1 October 2015, Westin Playa Bonita, Panama

Selection criteria for delivery methods for infrastructure projects

Ali Hosseini

a

_{*, Ola Lædre}

b

_{, Bjørn Andersen}

c

_{, Olav Torp}

d

_{, Nils Olsson}

e

_{, Jardar Lohne}

f

a,b,c,d,e,f_{Norwegian University of Science and Technology (NTNU), 7491 Trondheim, Norway}

Abstract

The project delivery method (PDM) greatly influences the project outcome. Design-Build, Construction Management and Design-Bid-Build represent the three main methods. Each PDM comes up with its own advantages and disadvantages which suit different projects in different circumstances. A general literature review and a case specific document study were carried out. Firstly, this paper identifies general criteria for selecting PDM. Secondly, it comes up with specific criteria for selecting the PDM for a large infrastructure project. Due to the project characteristics, the identified specific selection criteria differ from the general selection criteria. The Norwegian Public Roads Administration (NPRA) plans a coastal highway route (E39) along the western coast of Norway covering a total of 1100 km, substituting seven ferry connections, with an estimated cost of 268 billion Norwegian kroner. This project is used as an exemplary case of a large infrastructure project. The paper contributes to the body of knowledge with a list of selection criteria for PDMs aggregated from literature, and points out that this list should be adapted to case specific characteristics before being used to select a PDM

Peer-review under responsibility of the organizing committee of IPMA WC 2015.

Keywords: Project delivery method, infrastructure, selection criteria, mega project;

1. Introduction

The choice of project delivery method (PDM) greatly influences the project outcome and is one of the most important factors that determines a project’s success (Al Khalil, 2002, Chan et al., 2001, Kumaraswamy and Dissanayaka, 2001). A Project delivery method is a system for organizing and financing design, construction, operations and maintenance activities and facilitates the delivery of a good or service (Miller et al., 2000).

PDM’s effect on a project’s cost, schedule, efficiency and success make it a challenging issue for stakeholders and decision makers (Chan et al., 2001, Al Khalil, 2002, Kumaraswamy and Dissanayaka, 2001). The suitability of the selected PDM can improve the project performance to a great extent (Kumaraswamy and Dissanayaka, 2001, Al Khalil, 2002, Oyetunji and Anderson, 2006, HanǦKuk et al., 2008, Udechukwu et al., 2008). There are a large number of different project delivery systems available in the construction industry which aim to overcome the

*_{Corresponding author. Tel.: +47 913 09 166; fax: +47 73 59 70 21.}

E-mail address: [email protected]

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shortcomings of traditional procurement (Alhazmi and McCaffer, 2000), Figure 1 classifies some of most common PDMs based on two characteristics: the source of finance, and integration of delivery. The source of finance represents the degree of financial risk that the owner assumes while undertaking the project, while the integration of delivery is the degree to which the different project elements, such as planning, design, construction, and operation, are separated or combined during the production cycle (Miller et al., 2000).

Figure 1 Operational framework for project delivery system (Miller et al., 2000)

In many cases, the PDM is chosen simply on basis of the knowledge and experiences of in-house experts and/or guidance from external consultants (Masterrman and Duff, 1994) without a deep exploration of the strengths and weaknesses of each method, or any regard to the influencing success factors and characteristics of each project.

There are many PDMs listed in literature, but Construction Industry Institute (CII) maintains that all PDMs can be placed into three fundamental PDM categories: Design-Bid-Build (DBB), Design-Build (DB) and Construction Management (CM) (Sanvido and Konchar, 1998). Although discussing the suitability of these models and other procurement arrangements in different circumstances is out of this study’s scope, findings can be used to choose a suitable PDM.

With projects becoming more complex and with a large number of project success factors, there is a need to select suitable PDMs with a more systematic approach. Already much research has been done in the area of identifying the criteria that influences PDM selection, however they have focused on proposing a selection method rather than focusing on the criteria themselves. What sets this study apart is that, firstly, it gathers a comprehensive list of

criteria from a literature study and secondly, determines a list of specific criteria to be used for selecting PDM in an infrastructure project.

2. Method

A general literature review and a document study were carried out. The literature review was conducted according to the guidelines prescribed by Blumberg et al. (2014). The reviewed literature concentrates on PDMs and selection criteria. The tactic was to search for keywords (see Table 1) in databases as ABI/Inform, Science Direct, Scopus, Web of Science and to use search engines as Google Scholar, Compendex and Bibsys ASK.

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Table 1. Keywords used in literature search

Keywords Combination used Narrowed by

PSC Procurement Infrastructure

Project delivery Contract strategies

Selection criteria Contract type

The research was carried out by using one specific case. According to Flyvbjerg (2006, p228) “one can often generalize on the basis of a single case, and the case study may be central to scientific development via generalization as supplement or alternative to other methods”. As an example of a large infrastructure project, the E39 coastal highway was selected as the case due to the complexity that the project represented in a number of different aspects, as well as the participation of the authors as members of a research group involved in the study phase and contract development of the project.

The ferry-less E39 project aims to upgrade the existing E39 that runs along the western coast of Norway between Kristiansand and Trondheim by removing the seven fjord crossings currently operated by ferries. The program covers a total of 1100 km and has an estimated cost of almost 270 billion Norwegian kroner. A program of this scale will consist of a number of projects that will vary in size and characteristics. Thus, it will be beneficial to the NPRA to have a list of selection criteria that affect the selection of a suitable PDM.

The studied documentation mainly included the reports from the Norwegian public road authority (NPRA) and other documents provided by NPRA regarding the E39 project. These documents were chosen due to the need for the understanding of the basics of the project and NPRA’s objectives as the owner, in addition to the market and society/social demands*_.

3. Theoretical background

3.1. PDM

A Project delivery method is a system for organizing and financing design, construction, operation and maintenance activities and facilitates the delivery of a good or service (Miller et al. 2000). There are many PDMs listed in different literature (see for example Table 2), however the construction industry institute (CII) has maintained that all the different PDMs can be placed into three fundamental PDM categories: Design-Bid-Build (DBB), Design-Build (DB) and Construction Management (CM) (Sanvido and Konchar 1998). The three PDMs are described in the following. In Design-Bid-Build (DBB), also known as the traditional method, the owner will engage a design firm to complete the preliminary and detailed design for the project. Once completed the owner will announce a call for tenders after which a number of contractors will submit bids based on this design. The owner then selects a contractor, typically based on the lowest price, to undertake the project. In this method, the owner will sign separate contracts with designer and builder with the design contract being completed prior to awarding the construction contract. Construction Management (CM) is where an owner engages a competent firm to act as an agent who will provide and manage all necessary jobs during construction phase in addition to provide input to the designers during the design phase. In Design-Build (DB), one entity is contractually responsible to produce both the design and undertake the construction activities.

Findings show that most infrastructure projects are traditionally implemented as DBB contracts (Rizk and Fouad 2007), however there has been a trend toward using DB rather than the traditional strategy (Molenaar et al. 1999). This change of strategy is due to the complexity of the projects as well as the clients’ desire to influence decisions (Herbsman 1995). It is essential to list the selection criteria for each project individually in order to address the strengths and weaknesses of each method and to choose the best-fitting implementation strategy.

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3.2. PDM Selection Criteria

The selection of an appropriate PDM is the basis of success in every construction project and has never been an easy job due to the characteristics of procurement systems. Besides having several PDMs available to choose from, each one varies in several aspects. A PDM that can lead a project to success in some aspects may lead a project to failure under different circumstances, thus one PDM will not fit for all projects. The PDM selection process requires consideration and analysis of different, complex and dynamic factors which can be categorized under three groups: client objectives, project characteristics and external environment (Alhazmi and McCaffer 2000; Luu et al. 2003a).

As mentioned earlier researchers have pointed out that the suitability of the selected PDM influences the project success and is a driving force for developing several PDM selection approaches. Examples of PDM selection models are shown in Table 2:

Table 2. PDM selection model

PDM selection approach Reference PDM selection approach Reference

Multivariate analysis (Chan et al. 2001) Decision-support system (Kumaraswamy and Dissanayaka 2001) Selection matrix (Tran et al. 2013) Fuzzy multiattribuite decision

making

(Mostafavi and Karamouz 2010)

Multicriteria/multiscreening (Alhazmi and McCaffer 2000)

Analytical hierarchy process (Al Khalil 2002; Mahdi and Alreshaid 2005)

DEA-bound variable (BND) (Chen et al. 2011) Artificial neural network (ANN) (Ling and Liu 2004)

While these approaches mostly meet their planned point of selection as a procurement selection decision, generally they suffer from a lack of consideration of the implicit interrelationships between the various procurement selection criteria (PSC).

A structured review of relevant literature reveals that the first step in PDM selection methods is to establish the procurement selection criteria (PSC) and interrelationship between them. The PSC should mirror the clients’ requirements, project characteristics and external environment (M. M. Kumaraswamy and Dissanayaka 2001). As M. M. Kumaraswamy and Dissanayaka (1998) stated, PSC can be used preliminary as a guide to assist decision-makers with understanding the attributes of particular PDMs. However, it cannot be a single basis for selecting one PDM due to the intricacy of matching one PDM with the clients’ requirements, project characteristics and external environment. The National Economic Development Organization (NEDO 1985) listed nine generic criteria for the public sector to priorities their projects: time, certainty of time, certainty of cost, price competition, flexibility,

complexity, quality, responsibility and risk. In last few decades, several studies have used NEDO criteria, or

modified version of that, in-order to develop a PDM selection model. However, Duc Thanh Luu et al. (2003b) believe that the use of a limited version of PSC, like those identified by NEDO (1985), may cause weaknesses for selection models to choose the most appropriate PDM for projects.

This study has aimed to address one of the main client’s challenges and to fill a gap in current literature by providing a comprehensive list of criteria that can be used to develop the E39’s PSC list and to assist the NPRA’s decision–makers.

4. Findings

Table 6 demonstrates 22 of the most used criteria that have been identified from the literature review, and have been used by others in order to either select the most relevant PDM, use in decision making methods or to assess the performance of the selected PDM. There is the fact that projects are unique in nature and their characteristics are affected by constant change in their needs due to internal and external demands. So, would the same list be valid for all projects?

As illustrated in Table 6, some elements are repeated more than others in the literature, but the question is, are these elements more important that the others? One of the requirements for a choice of PDM for the E39 project is innovation, however innovation is only mentioned in just two articles (See Table 6). Therefore is essential to adapt Table 6 to each individual project after reviewing the project’s characteristics, project objectives and client objectives. It is obvious that characteristics vary from project-to-project and depends on the project owner and

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stakeholders.

To be explicit about this idea, this study points to the findings of the E39 project. After a comprehensive document study, the PSC for the E39 project are listed in Table 3 as the focus area to compare against the selection criteria obtained from the literature. Since some of the indicators have the same or similar meaning, but different expressions, a short definition is provided in the table.

5. Discussion

It can be said that each project may find one PDM that, in some sense, is more appropriate than others. Though, no PDM is likely to be better than the others for all projects. Selecting the appropriate PDM for a project may improve the probability of project success (Luu et al. 2005). Before the evaluation of PDM options, there is a need to determine the project requirements, client’s needs and nature of the external environment. Decision makers may experience difficulties when deciding the suitability of different PDMs, confused as they may be by a diverse continuum of PDM options, project characteristics, client characteristics and external environments.

Table 3. Identified selection criteria for E39

Selection criteria Defined as

Innovation A need and demand for innovations during design and construction Owner’s available resources Owner’s capability to use their own resources in this particular project Owner can take risk (Risk allocation) Client’s willingness to take certain risks in hope to improve project performance Technology availability Availability of technology to carry out certain construction techniques required Flexibility Potential for design changes during construction

Contractor’s capability and availability Availability of contractors/subcontractors with expertise to fulfill project requirements Quality performance Level of quality demanded by clients or different standards

Life cycle cost Client’s requirement for Life cycle efficiency as well as low operational and maintenance costs

Experienced clients can select a PDM which has worked for them before, or they can use a two-step process to achieve the best result (D. Luu et al. 2005; Mortledge et al. 2006). The first step is to Identify and priorities the

project/client characteristic, project/client objectives and environment impact, and the second step is Evaluating the possible options against aforementioned findings and selection of the most appropriate one. The most important

PSC based on the findings from the literature are listed in Table 4. Table 4. Most important PSC based on literature

Selection criteria Count Selection criteria Count

Schedule delay 19 Market competitiveness 11

Quality performance 14 Owner willingness to be involved 8

Complexity 13 Project type 6

Flexibility 13 Scope definability 6

Risk allocation 12

The literature count in Table 4 shows that the most important criteria in literature is “schedule delay” which is the most frequently used indicator for project timing and represents the project schedule. However, this has not captured much interest in an infrastructure project like E39 project. The information provided by the literature review and case document study reveals that each PSC may have a different influence in different projects and under different circumstances. In other words, Table 6 needs to be adapted to each specific project and its need, before being used as fundamental data for helping decision makers select an appropriate PDM. Therefore, the major challenges for clients are identifying the project criteria for each individual project.

Practically, a combination of PSC such as quality, innovation, flexibility, delivery speed etc. could be considered to encase the client objectives and project characteristics. Due to the diverse nature of projects, it would be

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impossible to illustrate the interconnections of PSCs for every individual project and circumstance. On the other hand, these PSCs are not independent from each other, this means not only the identified criteria should be taken into consideration but those with an interrelationship with the founded PSCs also need to be included to assess and establish a priority list. Table 5 demonstrates these connections for the important PSCs for the E39.

6. Conclusion

Using an appropriate PDM is one of the key factors leading to project success. Deciding which PDM to adapt is a challenging task due to variety of available options and diversity of project/client needs and objectives. Findings expose that the selection of a suitable PDM entails two main steps: identification and formulation of the project selection criteria, and the evaluation of the different PDM strengths and weaknesses against the PSC, thus leading to the selection of the most appropriate PDM. Key selection criteria listed from the literature, categorized in three groups in this study, will assist decision-makers to come up with an adapted list to their project. Investigation of E39 Project reveals that some criteria may capture less interest in literature while being considered as main criteria in a specific projects. This highlights that there is a need to adapt the selection criteria for each individual project based on project characteristics, client characteristics and external environments. In addition, it is important to explore the interrelationship between selection criteria, since one criteria may exert on the others.

Table 5. Factors influence Procurement Selection Criteria (PSC) in E39

Selection criteria Influenced by

Innovation Flexibility, technology availability, risk allocation, market competitiveness Contractor’s capability Cost and time certainty, risk allocation, quality performance

Owner willingness to take risk(Risk allocation) Owner want to be involved

Technology availability Cost and time certainty, risk allocation, quality

Flexibility Contractor’s capability, complexity

Owner’s available resources Owner willingness to take risk

Quality performance Contractor’s capability, technology availability, complexity, innovation Life cycle cost Quality performance, risk allocation, contractor’s capability, innovation Political impact

While infrastructure projects are traditionally implemented as DBB contracts, the NPRA will be influenced by significant changes in the near future when the E39 starts the execution phase. One of the major changes will be the way in which the NPRA is going to procure roads. Based on the capacity of the NPRA, project delivery methods that guarantee smooth and appropriate project delivery by allocating more responsibilities to the contractor will be the main interest of the authority. In this direction, the implication is that the list adapted to project need, NPRA characteristics, and external environment in Norway, may assist the NPRA in the later decision-making process. The NPRA needs to choose the best procurement procedure in the early phase of the project lifecycle based on project characteristics, client objectives and the external environment. These three groups include the general selection criteria in Table 6, which should come into consideration when selecting the most suitable procurement method. Table 6. General selection criteria

Selection criteria References

Project characteristics

Delivery speed Alhazmi and McCaffer 2000; Konchar and Sanvido 1998

Schedule delay Al Khalil 2002; Alhazmi and McCaffer 2000; Cheung et al. 2001; Gransberg et al. 1999; Konchar and Sanvido 1998; Kumaraswamy and Dissanayaka 1996; Kumaraswamy and Dissanayaka 2001; Ling and Liu 2004; Love 2002; Luu et al. 2003a; Luu et al. 2003b; Luu et al. 2005; Mafakheri et al. 2007; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; Mostafavi and Karamouz 2010; NAO 2003; Ng et al. 2002; Oyetunji and Anderson 2006; Ratnasabapathy and Rameezdeen 2007

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Cost growth Alhazmi and McCaffer 2000; D. D. Gransberg, W.; Reynolds, L.; Boyd, J. 1999; Konchar and Sanvido 1998; Ling and Liu 2004; Love 2002; D. T. Luu et al. 2003a; Duc Thanh Luu et al. 2003b; D. Luu et al. 2005; Mafakheri et al. 2007; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; Mostafavi and Karamouz 2010; Oyetunji and Anderson 2006; Ratnasabapathy and Rameezdeen 2007

Cost Certainty Cheung et al. 2001; M. Kumaraswamy and Dissanayaka 1996; M. M. Kumaraswamy and Dissanayaka 2001; Mahdi and Alreshaid 2005; Ng et al. 2002

Quality performance Alhazmi and McCaffer 2000; Ardani et al. 1999; Arditi and Lee 2003; Cheung et al. 2001; Konchar and Sanvido 1998; M. Kumaraswamy and Dissanayaka 1996; M. M. Kumaraswamy and Dissanayaka 2001; Ling and Liu 2004; Love 2002; D. Luu et al. 2005; Mahdi and Alreshaid 2005; NAO 2003; Ng et al. 2002; Ratnasabapathy and Rameezdeen 2007

Project type Alhazmi and McCaffer 2000; Konchar and Sanvido 1998; Ling and Liu 2004; D. T. Luu et al. 2003a; Duc Thanh Luu et al. 2003b; D. Luu et al. 2005; Ratnasabapathy and Rameezdeen 2007

Project scale Ling and Liu 2004; D. T. Luu et al. 2003a; Duc Thanh Luu et al. 2003b; D. Luu et al. 2005; Mafakheri et al. 2007; Ratnasabapathy and Rameezdeen 2007

Project cost Ardani et al. 1999; Love 2002; NAO 2003; Ratnasabapathy and Rameezdeen 2007

Complexity Al Khalil 2002; Alhazmi and McCaffer 2000; Cheung et al. 2001; Kumaraswamy and Dissanayaka 1996; Ling and Liu 2004; Luu et al. 2003a; Luu et al. 2003b; Mafakheri et al. 2007; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; Mostafavi and Karamouz 2010; Ng et al. 2002; Oyetunji and Anderson 2006; Ratnasabapathy and Rameezdeen 2007

Scope definability Al Khalil 2002; Ling and Liu 2004; D. Luu et al. 2005; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; Oyetunji and Anderson 2006

Flexibility Alhazmi and McCaffer 2000; Arditi and Lee 2003; Cheung et al. 2001; Gransberg et al. 1999; Kumaraswamy and Dissanayaka 1996; Ling and Liu 2004; Mafakheri et al. 2007; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; Mostafavi and Karamouz 2010; Ng et al. 2002; Oyetunji and Anderson 2006; Ratnasabapathy and Rameezdeen 2007

Change orders Ardani et al. 1999; Mostafavi and Karamouz 2010; NAO 2003 Innovation Mostafavi and Karamouz 2010; NAO 2003

Owner characteristics

Dispute Gransberg et al. 1999; Kumaraswamy and Dissanayaka 2001; Ling and Liu 2004; Mahdi and Alreshaid 2005; Ng et al. 2002

Owner willingness to be involved

Al Khalil 2002; Alhazmi and McCaffer 2000; Cheung et al. 2001; Kumaraswamy and Dissanayaka 2001; Ling and Liu 2004; Luu et al. 2003a; Luu et al. 2003b; Mahdi and Alreshaid 2005; Ng et al. 2002; Oyetunji and Anderson 2006

Owner willingness to take risk (Risk allocation)

Al Khalil 2002; Alhazmi and McCaffer 2000; Cheung et al. 2001; Kumaraswamy and Dissanayaka 1996; Luu et al. 2003a; Luu et al. 2003b; Mafakheri et al. 2007; Mahdi and Alreshaid 2005; Mostafavi and Karamouz 2010; NAO 2003; Ng et al. 2002; Oyetunji and Anderson 2006; Ratnasabapathy and Rameezdeen 2007

Owners available HR Alhazmi and McCaffer 2000; Ling and Liu 2004; Mafakheri et al. 2007; Molenaar and Songer 1998

External environment

Contractor’s capability and availability

Ling and Liu 2004; D. Luu et al. 2005; Mahdi and Alreshaid 2005

Market competitiveness

Alhazmi and McCaffer 2000; Cheung et al. 2001; Kumaraswamy and Dissanayaka 1996; Ling and Liu 2004; Luu et al. 2003a; Luu et al. 2003b; Luu et al. 2005; Mahdi and Alreshaid 2005; Molenaar and Songer 1998; NAO 2003; Ng et al. 2002; Ratnasabapathy and Rameezdeen 2007

Regulatory feasibility Luu et al. 2003a; Luu et al. 2003b; Luu et al. 2005; Mahdi and Alreshaid 2005

Technology availability Luu et al. 2003a; Luu et al. 2003b; Luu et al. 2005; Ratnasabapathy and Rameezdeen 2007 Political impact Luu et al. 2003a

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