Journal of Financial Management of Property and Construction

D J Lowe; R Leiringer

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001060

The term commercial management has been used for some time, similarly the job title commercial manager. However, as of yet, little emphasis has been placed on defining. This paper presents the findings from a two‐year research initiative that has compared and contrasted the role of commercial managers from a range of organisations and across industry sectors, as a first step in developing a body of knowledge for commercial. It is argued that there are compelling arguments for considering commercial management, not solely as atask undertaken by commercial managers, but as a discipline in itself: a discipline that, arguably, bridges traditional project management and organisational theories. While the study has established differences in approach and application both between and within industry sectors, it has established sufficient similarity and synergy in practice to identify a specific role of commercial management in project‐based organisations. These similarities encompass contract management and dispute resolution; the divergences include a greater involvement in financial and value management in construction and in bid management in defence/aerospace.

P McDermott; M Khalfan; W Swan

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001061

Trust is described as an elusive concept (Gambetta 1988), difficult to describe, understand and, therefore, manage. The Trust in Construction project undertook 6 exploratory case studies, of which 4 are presented in this paper, in order to understand how trust is formed, and the impact this has on project performance. The authors propose a model of the different forms of trust and the drivers and barriers to its development, derived through the case studies conducted. Through this model different approaches are identified that can either manage trust directly, or mitigate the factors that may cause its breakdown within project teams. The research focuses on the role of the commercial manger, the role of procurement mechanisms and the tools that are available to manage issues of project, commercial and relationship uncertainty, such as open book arrangements or partnering workshops, and sees how they can drive the level of trust within the project team. Based on both literature and experience of the case studies, the model identifies the risks to the development of trust and how they may be addressed. The paper also presents the trust inventory, developed during the case studies.

H Smyth

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001062

The agenda for supply management practices on construction projects originated from clients. It is largely procurement driven, the dominant strategy of contractors being to emulate the client approach, and hence push the procurement model along the chain. This procurement push along the supply chain translates the intrinsic client interest in value into a contractor interest in repeat business from the same client or through referral markets, the consequence being: (i) loss of interest in adding further value along the chain, (ii) continuous improvement prematurely reaches the law of diminishing returns through a primary cost reduction focus, (iii) supply chains may be rationalised in terms of the number of suppliers for each link in the chain, yet the procurement push increases chain length in order to squeeze the lowest costs possible, hence those doing the work at the bottom of the chain will not have the resources to add value nor necessarily be aware of the strategic principles at the top of the chain. Marketing is the other side of the same “procurement coin” relationship marketing (RM) soliciting a pull in the supply chain, potentially adding value for continuous improvement. Finally, the RM approach will be related to the theoretical and actual decoupling point for construction, with the potential to move the point towards the start of the chain, hence increasing the potential for agile manufacturing

A Francis; M Skitmore

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001063

The electrical distribution industry in South‐East Queensland is currently experiencing a period of rapid change as growth in the region far exceeds what could have been reasonably forecasted 10 years ago. It is due to this growth and the capacity requirements of customers that all distribution entities are significantly building up their program of works to meet this demand. Whilst this increased work is providing supply to the public, there is some uncertainty over the effects of this on the quality of the associated management involved due to the correspondingly increased amount of time and attention needed. Of especial concern is the extent to which effective project risk management is currently conducted or even possible under these circumstances. The research reported in this paper aimed to shed some light in this situation by capturing the ‘real world’ experiences, with respect to the risk management skills and application of those managers involved, and identify any deficiencies in current practice. This involved a questionnaire survey in 2004 of a sample of forty‐six project managers, representing a thirty‐one percent response rate, within the electrical distribution industry in South‐East Queensland. Surprisingly, in view of the supposed unusual local circumstances involved, the results agree substantially with previous studies of actual risk management practices generally in that there is an underutilisation of risk management due to manager’s concerns about the time and resources needed, together with a desire for a more thorough assessment of risks by means of a formal risk management process.

C Y J Cheah; J Liu

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001064

Development of large‐scale infrastructure projects that solicits the support of private capital is no longer a new phenomenon. This is commonly implemented using governance arrangements such as Build‐Operate‐Transfer and other technical variations of public‐private partnerships. Frequently, concessions and guarantees are included in the contract in order to protect the interests of some project stakeholders. Flexibilities may also be built into the terms and conditions, thus allowing participants to react to changes that could occur during the implementation stage. All these features essentially reallocate risks and rewards within the contract, the effects of which may not be quantified by conventional evaluation methods such as the Net Present Value method. Real option (RO) modelling has been identified as a superior approach, although the method is more complicated and cases of application to complex infrastructure projects remain to be limited. In this paper, discrete‐time RO models are used to evaluate several options found in the Dabhol Power Project in India. Limitations and challenges in modelling these options are also discussed. Overall, the RO approach demonstrates a great promise in capturing and evaluating flexibilities. The case study however shows that some implementation issues need to be overcome before RO can be commonly and practically applied to the infrastructural context.

M Emsley

2005 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380580001065

Partnering, which involves all members of the project team working together to improve performance through agreeing mutual objectives, is a construct; on procurement strategy encouraged by the UK Government, as it believed that such a strategy will provide best value, which is an aspect especially critical for public clients. Partnering may be strategic or applied to a specific project only. A regionally based main contractor (MC) constructed the Community Primary School (CPS) for a Metropolitan Borough Council (MBC) using a project partnering arrangement; such an arrangement was also in place between the main contractor and its key sub‐contractors. The overall conclusion, derived from the analysis of a case study carried out on the project, is that the CPS project has been a very successful project. Broadly, it was completed ahead of schedule, an achievement which undoubtedly would not have been possible without the use of partnering which allowed an overlap of the design and construction activities, there was a slight overspend above budget, the health and safety of people involved in its construction was not compromised and the finished product is of a high quality, fit for purpose.