Journal of Financial Management of Property and Construction

N.N. Hlaing; D. Singh; R.L.K. Tiong; M. Ehrlich

2008 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380810898104

Purpose – Recent changes in corporate environment coupled with emerging challenges as a result of turbulent economy have exposed participants in the construction industry to more and more surprises in project management. As a result, the construction industry has witnessed significant changes particularly in procurement methods with clients allocating greater risks to contractors, making risk management a necessity, with organizations needing to look across the whole life of a project from inception to occupancy. To minimize or optimize all these risks, formulating an effective risk management system is a crucial challenge faced by any construction contractor. This paper aims to investigate contractors' perceptions of risk. Design/methodology/approach – The perception of risks at estimating and tendering stage was investigated through a survey among construction contractors operating in the Singapore construction industry. The preferences of risk identification procedures and techniques are observed. Factors which are dominating constraints for the implementation of risk management elements are assessed. The process of risk identification from the standpoints of contractors and their preference of various risk response strategies to reduce the likelihood of occurrence of the identified risks and their impact were evaluated. Findings – The findings from the study highlight that risk factors having great impact on the financial aspect of the project, namely lack of financial resources of the contractor, financial stability of the client and cost overruns due to delay are considered most important by contractors and that risk response methods are favored in the order of risk reduction, risk transfer, risk avoidance and risk retention. Originality/value – The findings may help construction contractors in reviewing decision factors they consider when making bidding decision at estimating and tendering stage, and also be useful for improving their risk management plan in line with important risk factors considered by the construction industry.

David J. Edwards; Gary D. Holt

2008 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380810898113

Purpose – Plant and equipment theft (PET) is inherent throughout the construction sector. Its effect places direct financial burden on those who have invested in such assets, but additionally, induces “indirect” costs for many other stakeholders including project owners, plant hirers and construction managers. The paper's objective is to take and discuss a snapshot of PET, the overriding aim being to aid greater understanding of it and in particular, the application of (post‐theft) recovery technologies. Design/methodology/approach – Descriptive case study data are considered along with informal, anecdotal evidence provided by practitioners. These data are qualitatively considered; observations are discussed; a model representation of PET and recovery is developed; and conclusions are drawn. Findings – Plant and equipment thieves are shown to be audacious and determined, but it is identified that in addressing these characteristics, recent advances in plant security and recovery technologies (PSRT) have been significant. Arguably, PSRT are not being adopted as broadly as they should be to offset the PET problem. Research limitations/implications – The formal model of PET might help inform future academic endeavour in the subject of plant and equipment management generally and PET specifically. Practical implications – The model suggests that more widespread use of PSRT may not only help defeat plant thieves, but additionally help recover stolen assets and identify organised criminal networks. Originality/value – The work is novel in setting and will be of interest to both academics and practitioners in the field.

Sai On Cheung; Peter S.P. Wong; Ada Y.S. Fung; W.V. Coffey

2008 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380810898122

Purpose – The purpose of this paper is to examine the use of bid information, including both price and non‐price factors in predicting the bidder's performance. Design/methodology/approach – The practice of the industry was first reviewed. Data on bid evaluation and performance records of the successful bids were then obtained from the Hong Kong Housing Department, the largest housing provider in Hong Kong. This was followed by the development of a radial basis function (RBF) neural network based performance prediction model. Findings – It is found that public clients are more conscientious and include non‐price factors in their bid evaluation equations. With the input variables used the information is available at the time of the bid and the output variable is the project performance score recorded during work in progress achieved by the successful bidder. It was found that past project performance score is the most sensitive input variable in predicting future performance. Research limitations/implications – The paper shows the inadequacy of using price alone for bid award criterion. The need for a systemic performance evaluation is also highlighted, as this information is highly instrumental for subsequent bid evaluations. The caveat for this study is that the prediction model was developed based on data obtained from one single source. Originality/value – The value of the paper is in the use of an RBF neural network as the prediction tool because it can model non‐linear function. This capability avoids tedious “trial and error” in deciding the number of hidden layers to be used in the network model.

Patrick X.W. Zou; Shouqing Wang; Dongping Fang

2008 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380810898131

Purpose – The purpose of this paper is to develop a life cycle risk management framework for public private partnership (PPP) infrastructure projects that lead to the realization of value for money and balance of interests between different partners including the public and end users. Design/methodology/approach – This paper draws on extensive theoretical research and literature reviews, coupled with case study methodologies. A comprehensive review of current literature in the field was first carried out. Then three PPP infrastructure projects, two from Australia and one from China, are studied to scrutinize reasons leading to their dilemma and articulate the valuable lessons learnt in relation to risk analysis and mitigation. Findings – The paper found that properly assessing risks (financial, government's political and public's acceptance/rejection risks), ensuring value for money and protecting the public (and end users') interests are essential in PPP infrastructure projects and this can only be achieved through optimal risk identification, assessment, allocation and management from a life cycle perspective and balanced interests between the Government/public and private partners as well as product end users. Research limitations/implications – The paper was limited to proposing the framework; therefore the next step should be testing the framework. Practical implications – The framework proposed in this paper should be practical and useful for professionals in managing the risks associated with the procurement of PPP infrastructure projects. Originality/value – The PPP method has been increasingly used to procure large‐scale infrastructures such as freeways, railways, tunnels and bridges worldwide. While there have been many successful PPP projects, unsuccessful cases abound and studying them can help people better manage the risks in future PPP infrastructure projects. To ensure the success of PPP infrastructure projects, it is important for all partners to manage the risks from a project life cycle perspective, in which risks are identified and assessed in the earliest possible project stage and are allocated to the parties who are in the best position to control them. Furthermore, it is also important to continuous monitor the risks and develop proactive risk respond strategies throughout the project life cycle. To this end, this paper provides a life‐cycle risk management framework for PPP infrastructure projects.

Ibrahim Motawa; Ammar Kaka; Chee Hong Wong

2008 Journal of Financial Management of Property and Construction

doi: 10.1108/13664380810898140

Purpose – Several types of pricing and payment systems are used in the construction industry. However, the current practice is failing to utilise the potential of a link between project performance and clients' satisfaction on one hand and stakeholders' cash flow on the other. Therefore, a paradigm shift in cash flow research is both timely and necessary. The purpose of this paper is to promote and facilitate the use of appropriate payment systems that satisfy all project members. Design/methodology/approach – The research first investigates how payment systems are being selected, and the drivers for selecting innovative payment systems. A simulation and selection IT system is then developed that can be used to facilitate project stakeholders' satisfaction by selecting the most appropriate payment system for each project member. The proposed system considers alternative payment terms and conditions across the supply chain and in a transparent and negotiated manner. Findings – The outcome should result in planning cash flows that satisfy all team members. The planned cash flow profiles are then used to monitor the implementation of the agreed payment system. Originality/value – The main conclusion of the paper is that appropriate payment systems can act as a performance enabler and the provision of the simulation tool would result in project teams taking a more conscious and rational decision in selecting or designing these systems.