Search results

1 – 10 of over 5000
Article
Publication date: 1 December 2007

Daniel M Chan, Albert P C Chan, Patrick T I Lam, Edward W M Lam and James M W Wong

Guaranteed maximum price (GMP) and target cost contracting (TCC) with a pain‐share/gain‐share arrangement have been adopted to integrate the construction delivery process and…

1230

Abstract

Guaranteed maximum price (GMP) and target cost contracting (TCC) with a pain‐share/gain‐share arrangement have been adopted to integrate the construction delivery process and motivate service providers to seek continuous improvements in project outcomes. However, there is still a lack of research evidence to evaluate the levels of success and lessons learned from these innovative procurement strategies. Based on the analysis of a series of in‐depth interviews on the perceptions of various relevant experienced industrial practitioners, this paper aims to explore the key attributes of GMP/TCC including the underlying motives, perceived benefits, potential difficulties, critical success factors, key risk factors involved and optimal project conditions for adopting GMP/TCC. The research findings are useful in assisting key project stakeholders in minimising the detriments brought about by potential difficulties in and maximising the benefits derived from implementing GMP/TCC concepts. The study is also significant in contributing to new knowledge and practical information of GMP/TCC applications and implementation, in both a national and international context.

Details

Journal of Financial Management of Property and Construction, vol. 12 no. 3
Type: Research Article
ISSN: 1366-4387

Keywords

Article
Publication date: 1 March 2011

Daniel W.M. Chan, Patrick T.I. Lam, Albert P.C. Chan and James M.W. Wong

This paper aims to investigate the operational mechanism, project performance, motives behind, benefits, difficulties and success factors of adopting the guaranteed maximum price

2099

Abstract

Purpose

This paper aims to investigate the operational mechanism, project performance, motives behind, benefits, difficulties and success factors of adopting the guaranteed maximum price (GMP) scheme based on a real‐life case study of Chater House, an international Grade A private office project in Hong Kong.

Design/methodology/approach

The case project was analysed by means of the related project documentation and a series of face‐to‐face interviews with the relevant senior project representatives.

Findings

All the interviewed key project stakeholders perceived that the GMP contract helped achieve competitive price, value for money and superior quality of products as well as provided stronger incentives to innovation and cost saving. The case study revealed that the overall success of this GMP project was underpinned by several key attributes.

Originality/value

The paper provides solid groundwork for client bodies and contracting organisations to develop a best practice framework for implementing successful GMP schemes in future construction.

Details

Engineering, Construction and Architectural Management, vol. 18 no. 2
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 4 August 2014

Daniel W.M. Chan, Joseph H.L. Chan and Tony Ma

This paper aims to develop a fuzzy risk assessment model for construction projects procured with target cost contracts and guaranteed maximum price contracts (TCC/GMP) using the…

Abstract

Purpose

This paper aims to develop a fuzzy risk assessment model for construction projects procured with target cost contracts and guaranteed maximum price contracts (TCC/GMP) using the fuzzy synthetic evaluation method, based on an empirical questionnaire survey with relevant industrial practitioners in South Australia.

Design/methodology/approach

A total of 34 major risk factors inherent with TCC/GMP contracts were identified through an extensive literature review and a series of structured interviews. A questionnaire survey was then launched to solicit the opinions of industrial practitioners on risk assessment of such risk factors.

Findings

The most important 14 key risk factors after the computation of normalised values were selected for undertaking fuzzy evaluation analysis. Five key risk groups (KRGs) were then generated in descending order of importance as: physical risks, lack of experience of contracting parties throughout TCC/GMP procurement process, design risks, contractual risks and delayed payment on contracts. These survey findings also revealed that physical risks may be the major hurdle to the success of TCC/GMP projects in South Australia.

Practical implications

Although the fuzzy risk assessment model was developed for those new-build construction projects procured by TCC/GMP contracts in this paper, the same research methodology may be applied to other contracts within the wide spectrum of facilities management or building maintenance services under the target cost-based model. Therefore, the contribution from this paper could be extended to the discipline of facilities management as well.

Originality/value

An overall risk index associated with TCC/GMP construction projects and the risk indices of individual KRGs can be generated from the model for reference. An objective and a holistic assessment can be achieved. The model has provided a solid platform to measure, evaluate and reduce the risk levels of TCC/GMP projects based on objective evidence instead of subjective judgements. The research methodology could be replicated in other countries or regions to produce similar models for international comparisons, and the assessment of risk levels for different types of TCC/GMP projects (including new-build or maintenance) worldwide.

Article
Publication date: 31 January 2022

Asha Dulanjalie Palihakkara and B.A.K.S. Perera

Guaranteed maximum price (GMP) contracts are becoming an increasingly popular contract solution; however, many projects experience higher levels of risk and exceed predetermined…

Abstract

Purpose

Guaranteed maximum price (GMP) contracts are becoming an increasingly popular contract solution; however, many projects experience higher levels of risk and exceed predetermined GMPs, failing to accomplish the main motive behind the concept. Thus, the study identified a risk management process for GMP projects.

Design/methodology/approach

The study adopted a quantitative approach consisting of three Delphi rounds. The collected data were analysed using statistical data analysis tools.

Findings

The study identified 17 highly significant risk factors in GMP projects and determined their levels of severity. Subsequently, risk allocation amongst the client, contractor and consultant and strategies to handle the most significant risk factors were determined. The study identified poorly defined scope and design changes as the most critical risks in GMP projects. Moreover, strategies such as clearly defining the project scope, preparing precise documentation, early involvement of the contractor and using a partnering approach can be deployed to reduce the risk in GMP projects. Each risk has to be assigned to the party who can best manage it, depending on its nature.

Originality/value

The study addresses the literature gap pertaining to risk management of GMP contracts by identifying its overall process, including the identification of significant risks based on the severity levels; risk allocation amongst the client, contractor and consultant; and identification of risk handling techniques suitable for each significant risk factor. The study contributes to the industry by identifying a systematic risk management process to implement GMP projects successfully within the stipulated time, cost and quality.

Details

Smart and Sustainable Built Environment, vol. 11 no. 2
Type: Research Article
ISSN: 2046-6099

Keywords

Article
Publication date: 17 February 2012

Joseph H.L. Chan, Daniel W.M. Chan, Albert P.C. Chan and Patrick T.I. Lam

There is a lack of empirical research on risk mitigation strategies for those construction projects procured by guaranteed maximum price contracts (GMP) and target cost contracts

2856

Abstract

Purpose

There is a lack of empirical research on risk mitigation strategies for those construction projects procured by guaranteed maximum price contracts (GMP) and target cost contracts (TCC). The paper aims to identify and analyse the risk mitigation strategies for GMP/TCC construction projects from the Hong Kong perspective.

Design/methodology/approach

A total of 94 industrial practitioners with both sound knowledge and abundant hands‐on experience of the GMP/TCC methodology participated in an industry‐wide empirical questionnaire survey to indicate their levels of agreement on those 18 risk mitigation strategies identified from reported literature and in‐depth interviews which were later analysed by factor analysis.

Findings

The results of factor analysis revealed that the 18 individual risk mitigation strategies can be consolidated into seven underlying grouped factors: relational contracting and mutual trust; clear contract provisions and well‐defined scope of works; involvement of contractor in decision making process; right selection of project team; third party review of project design at tender stage; standard contract clauses for GMP/TCC schemes; and fair treatment of contractor.

Research limitations/implications

Although both GMP/TCC contracts have been increasingly popular in the construction market of Hong Kong, not all of these projects have been equally successful and some of them have been exposed to very high risks or uneven allocation of risks. A detailed analysis and an implementation of recommended effective risk mitigation strategies are essential to the success of GMP/TCC schemes.

Originality/value

The research findings of this study are expected to help the decision makers to generate useful insights into risk mitigation strategies when administering GMP/TCC contracts at an early stage of project delivery and lay a solid foundation for further research on GMP/TCC in both local and international contexts.

Article
Publication date: 22 February 2011

Joseph H.L. Chan, Daniel W.M. Chan, Albert P.C. Chan, Patrick T.I. Lam and John F.Y. Yeung

The purpose of this paper is to develop a fuzzy risk assessment model for construction projects procured with target cost contracts (TCC) and guaranteed maximum price (GMP…

1734

Abstract

Purpose

The purpose of this paper is to develop a fuzzy risk assessment model for construction projects procured with target cost contracts (TCC) and guaranteed maximum price (GMP) contracts using factor analysis (FA) and fuzzy synthetic evaluation method, based on an empirical questionnaire survey with relevant industrial practitioners in Hong Kong.

Design/methodology/approach

A total of 34 key risk factors (RFs) inherent with TCC/GMP contracts were identified through an extensive literature review and a series of structured interviews. A questionnaire survey was then launched to solicit the opinions of industrial practitioners on risk assessment of such RFs.

Findings

The most important 17 principal RFs after the calculation of normalised values were selected for undertaking FA. Five principal risk groups (PRGs) were then generated in descending order of importance as: design risks, pre‐contract risks, economic and financial risks, lack of experience in TCC/GMP procurement process and post‐contract risks. These survey findings also reveal that design risks may be the major hurdle to the success of TCC/GMP projects in Hong Kong.

Originality/value

An overall risk index (ORI) associated with TCC/GMP construction projects and the risk indices of individual PRGs can be generated from the model for reference. An objective and reliable assessment can be achieved. The model provides a solid platform to measure, evaluate and reduce the risk levels of TCC/GMP projects based on objective evidence instead of subjective judgments. The research methodology could be replicated in other countries or regions to produce similar models for international comparisons and the assessment of risk levels for different types of TCC/GMP projects worldwide.

Details

Journal of Facilities Management, vol. 9 no. 1
Type: Research Article
ISSN: 1472-5967

Keywords

Article
Publication date: 13 July 2010

Daniel W.M. Chan, Albert P.C. Chan, Patrick T.I. Lam and James M.W. Wong

The paper aims to present a succinct review of guaranteed maximum price (GMP) and target cost contracting (TCC) concepts and features in general, and to identify the critical…

2790

Abstract

Purpose

The paper aims to present a succinct review of guaranteed maximum price (GMP) and target cost contracting (TCC) concepts and features in general, and to identify the critical success factors for procuring GMP/TCC contracts from the Hong Kong perspective in particular.

Design/methodology/approach

By means of an empirical questionnaire survey geared towards industrial practitioners with direct hands‐on GMP/TCC experience, the opinions of various contracting parties including clients, consultants and contractors were solicited, analysed and compared in relation to GMP/TCC success factors.

Findings

Experienced practitioners shared the unanimous perception that: reasonable share of cost saving and fair risk allocation; partnering spirit from all contracting parties; right selection of project team; well‐defined scope of work in client's project brief and early involvement of contractor in design development, are the most essential ingredients for the successful implementation of GMP/TCC scheme.

Research limitations/implications

Although the research study is based in Hong Kong with a limited sample size, the survey findings and hands‐on experience of the relevant industrial practitioners may be cross‐referenced to other similar investigations in other parts of the world for international comparisons.

Originality/value

The research study has provided some useful insights into assisting key project stakeholders in determining important successful ingredients when launching GMP/TCC scheme. Such an identification of critical success factors would be valuable in formulating effective practical strategies to improve overall project performance, create win‐win opportunities for contracting parties and mitigate the occurrence of construction disputes/claims. It also attempts to seek more research evidence to capture the levels of success and lessons learned from previous GMP/TCC construction projects for generating best practice recommendations for future implementation.

Details

Journal of Facilities Management, vol. 8 no. 3
Type: Research Article
ISSN: 1472-5967

Keywords

Article
Publication date: 18 October 2011

Joseph H.L. Chan, Daniel W.M. Chan, Patrick T.I. Lam and Albert P.C. Chan

The purpose of this paper is to identify the party most preferred to take the risks associated with the target cost contracts and guaranteed maximum price contracts (TCC/GMP) in…

3673

Abstract

Purpose

The purpose of this paper is to identify the party most preferred to take the risks associated with the target cost contracts and guaranteed maximum price contracts (TCC/GMP) in the Hong Kong context.

Design/methodology/approach

An empirical questionnaire survey was conducted with the relevant industrial practitioners to solicit their preferences of risk allocation in TCC/GMP construction projects in Hong Kong.

Findings

The survey findings indicated that risks on tender documentation and project design are better borne by clients, while construction related risks are perceived to be taken by contractors. The research findings are consistent with other similar studies on risk allocation in construction projects in general.

Practical implications

This paper has developed a preferred risk allocation scheme for the delivery of future TCC/GMP projects, taking Hong Kong as an example. It can serve as a useful guide for decision makers to determine an optimal risk allocation at the planning stage of a TCC/GMP scheme.

Originality/value

The paper can benefit both academic researchers and industrial practitioners in generating an equitable risk sharing mechanism for TCC/GMP projects. It provides sufficient empirical evidence, added to the growing body of knowledge and lays a solid foundation for further research such as an international comparison of various risk allocation schemes associated with this kind of contractual arrangement.

Article
Publication date: 1 March 1996

Margaret C. Bowden and William Earle Klay

Contracting practice and theory is based upon a legal framework which impedes the attainment of value, defined as quality and cost containment. The manufacture of complex, highly…

Abstract

Contracting practice and theory is based upon a legal framework which impedes the attainment of value, defined as quality and cost containment. The manufacture of complex, highly technical infrastructure is especially impeded. Constraints of the legal framework are being overcome through innovative infrastructure contracting practices which maintain competitiveness and accountability, and simultaneously foster collaboration among the participants. Some of these innovations are discussed along with five projects which utilized one or more of them. A management framework for contracting based on a competitive/collaborative model is offered which emphasizes value, cooperation, long-term relationships, accountability and stewardship.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 8 no. 4
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 3 August 2015

David G. Carmichael and John P. Karantonis

The purpose of this paper is to explore the role and viability of changing contract terms as a project progresses and to offer an original analysis in this respect. Commonly…

Abstract

Purpose

The purpose of this paper is to explore the role and viability of changing contract terms as a project progresses and to offer an original analysis in this respect. Commonly, projects start out with broadly defined information, and this gets refined as the project progresses. This suggests that a prudent approach would be to tailor the contract between the project owner and the project contractor to the project stage, with conversions along the way. Information asymmetry between owner and contractor also suggests the need to tailor a contract to a project ' s situation.

Design/methodology/approach

An original method of analysis of the conversion of contract terms within projects is given, along with discussion on the risk transfer between owner and contractor, the common law issues associated with implementing such conversions, any compensation that the owner might need to pay, the timing of the conversion and associated practical implementation issues. The paper, for definiteness, concentrates on construction contracts with conversion between payment types, but the paper’s approach applies to all contracts and all terms within contracts.

Findings

The paper provides a readily usable method for analysing the value of having a convertible contract, couched within acceptable common law practice.

Practical implications

The paper offers a novel method and framework usable by practitioners for establishing the value of convertibility within a contract. Having convertibility within a contract can be shown to offer benefits to both contracting parties.

Originality/value

The idea of having flexible contracts is not new, but, hitherto, a rational method of analysing their value has been missing. This paper gives an original analysis of contracts with conversion capabilities. Current literature does not deal directly with the matter addressed in the paper.

Details

Journal of Financial Management of Property and Construction, vol. 20 no. 2
Type: Research Article
ISSN: 1366-4387

Keywords

1 – 10 of over 5000