Construction Management & Economics

Stewart, Rodney A.; Spencer, Clinton A.

doi: 10.1080/01446190500521082pmid: N/A

Significant expenditures of time, money and resources, both human and material, are wasted each year as a result of inefficient or non‐existent quality management procedures. In an attempt to improve their market competitiveness, by limiting the extent of non‐value‐adding activities, some organizations are beginning to monitor the performance of internal and external engineering and construction processes. To achieve these bold aims, these organizations are looking to other industries such as manufacturing to examine the effectiveness of measuring and monitoring tools such as six‐sigma. Only in recent years has the six‐sigma method been utilized by some of the major players in the construction sector. To familiarize both researchers and practitioners on how to implement the six‐sigma method and its potential benefits, the paper describes the outcomes of a six‐sigma process improvement project (PIP) conducted for the construction of concrete longitudinal beams on the St Pancras raised railway station in London, UK. The outcome of the six‐sigma PIP was the improved productivity of beam construction, enhanced interaction between project teams and reduced project delays. Moreover, interviews with key project participants were conducted to determine the success factors, barriers, suitability and advantages of the six‐sigma approach compared with other TQM techniqes. In summary, the six‐sigma approach provided the PIP team with a structured process improvement strategy to reduce waste and other non‐value adding activities from the construction process.

Tang, C. M.; Wong, C. W. Y.; Leung, A. Y. T.; Lam, K. C.

doi: 10.1080/01446190500434906pmid: N/A

In financial decision‐making, a number of mathematical models have been developed for financial management in construction. However, optimizing both qualitative and quantitative factors and the semi‐structured nature of construction finance optimization problems are key challenges in solving construction finance decisions. The selection of funding schemes by a modified construction loan acquisition model is solved by an adaptive genetic algorithm (AGA) approach. The basic objectives of the model are to optimize the loan and to minimize the interest payments for all projects. Multiple projects being undertaken by a medium‐size construction firm in Hong Kong were used as a real case study to demonstrate the application of the model to the borrowing decision problems. A compromise monthly borrowing schedule was finally achieved. The results indicate that Small and Medium Enterprise (SME) Loan Guarantee Scheme (SGS) was first identified as the source of external financing. Selection of sources of funding can then be made to avoid the possibility of financial problems in the firm by classifying qualitative factors into external, interactive and internal types and taking additional qualitative factors including sovereignty, credit ability and networking into consideration. Thus a more accurate, objective and reliable borrowing decision can be provided for the decision‐maker to analyse the financial options.

Johnson, Cassidy; Lizarralde, Gonzalo; Davidson, Colin H.

doi: 10.1080/01446190600567977pmid: N/A

Natural cataclysms (earthquakes, hurricanes and so forth) become natural disasters when they coincide with vulnerabilities; unfortunately, informal settlements in developing countries are only too often highly vulnerable – a reality amply and unhappily confirmed by available statistics. In this context, reconstruction projects are sandwiched between the short‐term necessity to act promptly and the long‐term requirements of sustainable community development – a situation that is currently reflected in alternative and conflicting paradigms at the policy level. Adopting a case‐study approach, we explore the use of temporary housing within two post‐disaster environments, where the impact of different organizational designs leads to fundamentally different solutions to the short‐term housing problem. Our research adopts a dynamic systems approach, associating strategic organizational team design with the development of tactical technical proposals. Two case studies from Turkey and Colombia show that a coherent approach to the sequential stages of providing immediate shelter, temporary housing and permanent reconstruction is not always obtained. The research results emphasize that the performance of reconstruction projects is directly linked to the design and management of the project team.

Huang, Yu‐Lin; Chou, Shih‐Pei

doi: 10.1080/01446190500434997pmid: N/A

The real option approach is used to value the minimum revenue guarantee (MRG) and the option to abandon in Build‐Operate‐Transfer infrastructure projects. The option to abandon is formulated under an investment option held by the concessionaire at contract signing and to expire before construction commencement. MRG is formulated as a series of European style put options in a single option pricing model. When combined with the option to abandon in the pre‐construction phase, MRG is reconstructed as a series of European style call options to develop a compound option pricing formula. The Taiwan High‐Speed Rail Project is chosen as a numerical case to apply the formulas. The results show both MRG and the option to abandon can create values. When MRG and the option to abandon are combined, they will counteract each other and their values will thus be reduced. Increasing the MRG level will decrease the value of the option to abandon, and, at a certain MRG level, the option to abandon will be rendered worthless.

Cheung, Franco K. T.; Skitmore, Martin

doi: 10.1080/01446190500435093pmid: N/A

James' Storey Enclosure Method (JSEM), developed in 1954, is considered by many to be the most sophisticated single‐rate method ever devised for early‐design‐stage tender price forecasts. However, the method is seldom used in practice partly because it has been superseded by multi‐rate methods (such as the elemental method) and partly due to the arbitrary nature of the weightings prescribed for its use. The approach has been further developed and empirical values of the weightings are derived by multivariate regression analysis. A set of 50 completed Hong Kong private housing projects is used to demonstrate the use of the technique. This involves, firstly, the modification of the variables used in the original JSEM to incorporate the special characteristics of Hong Kong multi‐storey residential buildings. This results in what is termed here as a Modified James' Storey Enclosure Model (MJSEM). Next, the optimal number of variables for inclusion in the model is identified by means of a dual stepwise cross validation regression procedure – resulting in a Regressed Modified Model for James' Storey Enclosure Method (RMJSEM). In addition, using an amended version of MJSEM, the dual stepwise cross validation regression is used to produce a Regressed Modified Model for Amended Storey Enclosure Method (RMASEM). The forecasting accuracy of RMJSEM and RMASEM is then compared with that of MJSEM together with the floor area and cube method to provide an indication of the improvement achieved. It is shown that the RMASEM provides significantly more consistent forecasts than the MJSEM and floor area models, leading to the conclusion that RMASEM may be the best model.

Thomas, A. V.; Kalidindi, Satyanarayana N.; Ganesh, L. S.

doi: 10.1080/01446190500435275pmid: N/A

Over the years, many private sector participation (PSP) models have been evolved for infrastructure procurement and the Build‐Operate‐Transfer (BOT) model is one of the most common approaches used for the same. Private infrastructure projects under BOT arrangement have a complex risk profile and to a considerable extent, the success of any BOT project is influenced by the degree to which various project risks are managed. The major steps involved in risk management of a project are risk identification, risk assessment and the processes of prioritization and response to the risks. The conventional risk assessment approaches may not be effective in privatized infrastructure projects because of the fact that, they have very long project lifecycle with many country and sector specific risk factors. The assessment of complex risks is often a difficult task when past data on similar risks are not available. In this research, a risk probability and impact assessment framework based on fuzzy‐fault tree and the Delphi method is proposed. The framework includes extensive scenario modelling of critical risks in projects and systematic processing of professional judgement (subjective knowledge) of experts and is developed and demonstrated in the context of critical risks in Indian BOT road projects. Detailed scenario modelling of most critical risks such as traffic revenue risk, delay in land acquisition, demand risk and delay in financial closure are also presented. The proposed risk assessment framework is generic and can be applied with appropriate modifications to suit any complex developmental project where past data is inadequate for risk assessment.

Wong, Joe T. Y.; Hui, Eddie C. M.

doi: 10.1080/01446190600601602pmid: N/A

Construction project risks affect contractors' tender price. A host of factors influencing tender prices were identified and the importance of these factors evaluated by making use of the data collected in a postal questionnaire survey conducted to the ‘Buildings’ contractors in Hong Kong. Out of 60 factors identified, the availability of required cash, uncertainty in costs estimates, urgent need for work, past experience in similar projects and contract size are considered most important. The need for work and the amount of experience are similar to those factors affecting bidding decisions of top UK contractors. The findings suggest that in the upward adjustment of tender prices, the large‐size contractors are more concerned with the uncertainty in costs estimates while the medium‐ and small‐size contractors care more about no past experience. In the downward adjustment of prices, the large size of the contract is the main factor affecting the pricing of the large‐ and medium‐size contractors while the urgent need for work is the main drive for the small‐size ones. There are significant differences between the contractors' perceptions of the importance of the risk factors. This is consistent with differing attitudes towards bid mark‐up decisions of the large‐ and medium‐size contractors in Singapore.

Best, Rick; Langston, Craig

doi: 10.1080/01446190500435457pmid: N/A

International comparisons of construction industry performance are notoriously difficult. A recent comparative study, extensive in scope and using an innovative approach, is reviewed and questions raised regarding various aspects of the methodology adopted, the validity of the conclusions drawn and manner in which outcomes were reported. Particular areas of concern include the unequivocal statement of conclusions that are based on a small sample, and the use of data from that sample that are, in fact, no more than estimates of project performance. Attention is drawn to the limitations of the research reported and the reliability of the methods used, and the data gathered is examined.