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Article
Publication date: 16 March 2015

Mohammed Rajeh, John E. Tookey and James Olabode Bamidele Rotimi

Within construction procurement, transaction cost economics offers a mechanism to understand “unseen” costs associated with the pre- and post-contract work. Pre-contract…

Abstract

Purpose

Within construction procurement, transaction cost economics offers a mechanism to understand “unseen” costs associated with the pre- and post-contract work. Pre-contract, these include costs related to information gathering and procurement. Post-contract they include activities of contract administration and enforcement. The purpose of this paper is to estimate the magnitude of transaction costs (TCs) for different procurement systems used in construction projects in New Zealand. Specifically estimating the relative values of TCs for Traditional and Design-Build delivery systems for the purpose of comparison.

Design/methodology/approach

This study develops a conceptual model for the relationship between procurement systems and TC. The model was operationalized and developed into a questionnaire. A cross-sectional sample approach was deployed, involving pilot and survey questionnaires, and results verification through “real world” cases. Data were sought from construction professionals in management, design and operations (i.e. project managers, architects, engineers, quantity surveyors, and procurement officers). TCs were measured using time-spent conducting procurement-related activities as a surrogate for cost. Professionals evaluate their time-spent in procurement activities using a Likert scale 1-5, comparing the Traditional and Design-Build delivery systems. Data were triangulated with “real world” cases to test and explain the developed model. The test included validity and reliability, path analysis, regression analysis, factor analysis, and structural equation modelling (SEM). The primary analytical technique used was SEM to yield information on goodness-of-fit, model development and comparison, and confirmatory strategies. SPSS Amos 21 statistical software was used for data analysis and model development.

Findings

The results suggest that procurement systems have indirect impact on TCs. The relationship between procurement system and TCs is fully mediated by costs of information, procurement, administration, and enforcement. Applying the developed models (the Traditional and Design-Build) to “real world” cases, it was found that TCs in the Traditional system amounts to 18.5 percent of the annual salary cost of a project manager (as an indicator quantum), while in the Design-Build system, it amounts to 14.5 percent of the annual salary cost of a project manager. TCs were calculated using regression equations based on factor loadings in the Traditional and Design-Build models.

Practical implications

This study applies new theoretical model for the link between procurement system and TCs, investigating and empirically demonstrating the influence of procurement system on TCs in construction. It also offers a new plausible explanation for the factors influencing TCs in procurement. The study emphasizes “in-house” TCs from the perspective of the professionals. The findings have practical implications on construction business practice due to their robust empirical nature and theoretical framework, which might enhance the performance of the construction industry.

Originality/value

This study contributes to the procurement selection in construction, by introducing a new conceptual model for the link between procurement system and TCs. It has extended the current practices for procurement selection by estimating TCs for the Traditional and Design-Build systems for comparison.

Details

Engineering, Construction and Architectural Management, vol. 22 no. 2
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 26 June 2019

Titus Ebenezer Kwofie, Clinton Ohis Aigbavboa and Seja Olgah Machethe

Non-traditional procurement is thought to offer enhanced benefits over traditional contracts. However, several factors significantly impacting the optimization of the…

Abstract

Purpose

Non-traditional procurement is thought to offer enhanced benefits over traditional contracts. However, several factors significantly impacting the optimization of the benefits have been suggested. Even though effective communication is ranked high among these factors, not enough empirical insights have been given to the nature of communication performance in non-traditional procurements in construction project delivery. The purpose of this paper is to focus on understanding the taxonomy of communication performance in non-traditional procurements in the South African Construction Industry, given the centrality of communication to team effectiveness, performance, project success and managerial efficiency.

Design/methodology/approach

Adopting a deductive research approach, an empirical questionnaire survey was conducted drawing on the practical communication experience of project teams engaged in projects using non-traditional procurement systems.

Findings

Using aggregated mean scores and inter-rater agreement index and Mann‒Whitney tests, the results revealed inaccuracies, barriers and procedural challenges as frequently occurring in the interpersonal and organizational communication in the adopted non-traditional procurement systems. Additionally, untimeliness and distorted information were noted to be occurring occasionally, whereas incomplete communication, misunderstood information and gatekeeping rarely occurred. Lastly, protocol-related communication challenges were deemed to have never occurred in their interpersonal and organizational communication in their project delivery. In the assessment of communication performance, the less frequently occurring assessment indicator is a testament to good communication performance, whereas the frequently occurring indicator represents a poor performance in the communication.

Originality/value

This systematic approach toward understanding the taxonomy of the interpersonal and organizational communication performance in non-traditional procurement is very significant toward communication performance improvement in the industry. The insight given by the findings may help construction project practitioners to focus their attention on the necessary aspects of communication in non-traditional procurements to optimize their benefits over traditional procurement models.

Details

Engineering, Construction and Architectural Management, vol. 26 no. 10
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 16 September 2021

Abimbola Windapo, Abdulrauf Adediran, James Olabode Bamidele Rotimi and Nnedinma Umeokafor

This study aims to investigate whether clients’ knowledge about construction procurement systems influence project performance objectives and the role of procurement

Abstract

Purpose

This study aims to investigate whether clients’ knowledge about construction procurement systems influence project performance objectives and the role of procurement systems on project performance objectives in South Africa.

Design/methodology/approach

Using a two-round survey, 90 usable questionnaires from construction professionals in South Africa plus 3 expert clients were collected. The data were analysed using descriptive statistics – means, percentages and the analytical hierarchy process to determine the rank of client project performance criteria, while inferential statistics – Pearson product-moment correlation was used in establishing the relationship between the level of clients’ knowledge and project performance.

Findings

It was found that the common procurement systems used are traditional, followed by management-oriented and integrated procurement systems. In addition, it emerged that client’s knowledge of procurement systems shows a positive relationship with the achievement of project performance objectives. Based on these findings, it is concluded that some procurement systems being selected by clients in South Africa are inappropriately selected. This is despite the emergence of more efficient procurement systems. If procurement systems are selected based on the knowledge of the client, it will give better chances of a successful project outcome.

Practical implications

The research suggests the need for clients to seek ways to improve their understanding or increase their knowledge of procurement systems in construction. Policymakers’ responsibilities in driving policies that will place responsibilities on clients to seek a reasonable way to improve their knowledge where possible is implied in the study.

Originality/value

It contributes to improving project performance by examining whether the level of knowledge possessed by a client influences project performance.

Details

Journal of Engineering, Design and Technology , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1726-0531

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Article
Publication date: 1 April 2017

Baynesagn Asfaw Ambaw and Jan Telgen

Performance-Based Contracting (PBC) is widely accepted as a useful tool. It is believed that the use of PBC can assist the efficient utilization of the public resources…

Abstract

Performance-Based Contracting (PBC) is widely accepted as a useful tool. It is believed that the use of PBC can assist the efficient utilization of the public resources. The objective of this research is to assess the extent of PBC application and the obstacles to applying it in the public procurement systems of developing countries. Interviews and factual analysis of procurement guidelines and contracts are used to collect data for this research. The analysis results indicate that the majority of public organizations have not yet used PBC even though it is allowed by the law. This is due partly to lack of clarity in the procurement laws and lack of capacity to use PBC.

Details

Journal of Public Procurement, vol. 17 no. 3
Type: Research Article
ISSN: 1535-0118

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Article
Publication date: 3 October 2008

Peter E.D. Love, Peter R. Davis, David J. Edwards and David Baccarini

Choosing the appropriate procurement system for construction projects is a complex and challenging task for clients particularly when professional advice has not been…

Abstract

Purpose

Choosing the appropriate procurement system for construction projects is a complex and challenging task for clients particularly when professional advice has not been sought. To assist with the decision‐making process, a range of procurement selection tools and techniques have been developed by both academic and industry bodies. Public sector clients in Western Australia (WA) remain uncertain about the pairing of procurement method to bespoke construction project and how this decision will ultimately impact upon project success. This paper seeks to examine “how and why” a public sector agency selected particular procurement methods.

Design/methodology/approach

An analysis of two focus group workshops (with 18 senior project and policy managers involved with procurement selection) is reported upon.

Findings

The traditional lump sum (TLS) method is still the preferred procurement path even though alternative forms such as design and construct, public‐private‐partnerships could optimize the project outcome. Paradoxically, workshop participants agreed that alternative procurement forms should be considered, but an embedded culture of uncertainty avoidance invariably meant that TLS methods were selected. Senior managers felt that only a limited number of contractors have the resources and experience to deliver projects using the non‐traditional methods considered.

Practical implications

The research identifies a need to develop a framework that public sector clients can use to select an appropriate procurement method. Learning from previous experiences with regard to procurement selection will further provide public sector clients with knowledge about how to best deliver their projects.

Originality/value

The paper adds insight as to how public sector agencies select particular procurement methods.

Details

International Journal of Public Sector Management, vol. 21 no. 7
Type: Research Article
ISSN: 0951-3558

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Article
Publication date: 1 April 2002

Susan A. MacManus

Government’s e-procurement system has not caught on as rapidly as has e-Bay! This article examines the slow implementation rate of public e-procurement systems. It…

Abstract

Government’s e-procurement system has not caught on as rapidly as has e-Bay! This article examines the slow implementation rate of public e-procurement systems. It challenges the notion that efficiency gains alone can entice governments to leave traditional procurement systems and principles behind. Four traditional procurement principles are reexamined to see whether they are deterrents to e-commerce: (1) low bid wins and that’s a must; (2) separation between the vendor and user is desirable to avoid claims of favoritism; (3) fixed price and fixed term contracts are best for government; and (4) open access is absolutely imperative in all situations. The jury is still out as to whether the new commerce is contingent upon a reformulation of these principles.

Details

Journal of Public Procurement, vol. 2 no. 1
Type: Research Article
ISSN: 1535-0118

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Article
Publication date: 11 November 2013

Lu Weisheng, Anita M.M. Liu, Wang Hongdi and Wu Zhongbing

The purpose of this paper is to attempt to shed light on procurement innovation by examining two state-of-the-art procurement systems in China – an agent-construction…

Abstract

Purpose

The purpose of this paper is to attempt to shed light on procurement innovation by examining two state-of-the-art procurement systems in China – an agent-construction system (ACS or in Chinese Dai Jian Zhi) and public-private partnership (PPP), with special consideration given to the systems’ particular political, economic, social, technological, environmental, and legal (PESTEL) background.

Design/methodology/approach

The paper does so by using content analyses, semi-structured interviews, and a “PESTEL-Procurement Innovation” framework.

Findings

It is found that PPP has not been as popular as expected, while the ACS, which is little known to the international construction management community, is widespread in China. The study of ACS and PPP further reveals that congruence between a procurement system and its external PESTEL conditions is essential for procurement innovation.

Research limitations/implications

The “PESTEL-Procurement Innovation” framework could be a useful tool for devising procurement innovation; although there are many questions yet to be answered by further research.

Practical implications

The paper provides useful insights into procurement innovation, particularly when governments worldwide are searching for innovative procurement systems to help deliver public projects and services.

Originality/value

The paper possesses originality in that it tackles procurement innovation, an area that is under researched in construction management. It exhorts the re-connection between a procurement system and its external PESTEL conditions for devising bona fide procurement innovations.

Details

Engineering, Construction and Architectural Management, vol. 20 no. 6
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 6 July 2012

Z. Ren, P. Kwaw and F. Yang

The purpose of this paper is to examine the performance of the traditional procurement approach (TPA) under Ghana's procurement reform and explore if other possible…

Abstract

Purpose

The purpose of this paper is to examine the performance of the traditional procurement approach (TPA) under Ghana's procurement reform and explore if other possible procurement strategies could help to improve value for money in the Ghanaian public sectors. The fundamental questions to be addressed are: “Is the procurement reform addressing the deficiencies in the public sector procurement?”; “Are clients and professionals satisfied with the present procurement system?”; “What are the possible alternatives?”; and “What procurement selection criteria should be adopted?”.

Design/methodology/approach

To answer the above questions, an extensive literature review was conducted which provides the background to public procurement reform and reveals the status of the TPA in the public sector. Based on the outcomes of the literature review, three rounds of questionnaire surveys and face‐to‐face discussions were undertaken. The targeted population was carefully selected from different sectors of the industry and regions of the country.

Findings

The results of the study reveal the deficiencies in contractors’ performance arising from the use of TPA with a focus on time, budget, buildability and relationships among participants. It also ranks the criteria for procurement selection and suggests the D & B method as the most favourable alternative procurement strategy. Suggestions were made in the area of tendering processes, collaborative working, contractors’ competence, government's work efficiency, and whole‐life performance criteria.

Practical implications

This study evaluates the TPA performance after Ghana's procurement reform in 2003 and provides guidelines to the industry and government for further procurement reform aimed at improving value for money.

Originality/value

This research provides a systematic study on the public procurement reform and the TPA adopted in Ghana's public sector. The essential problems associated with the TPA in the industry are identified and analyzed, the procurement selection criteria are examined and an alternative procurement approach is postulated.

Details

Built Environment Project and Asset Management, vol. 2 no. 1
Type: Research Article
ISSN: 2044-124X

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Article
Publication date: 19 June 2009

Adekunle S. Oyegoke, Michael Dickinson, Malik M.A. Khalfan, Peter McDermott and Steve Rowlinson

The purpose of this paper is to examine different categories of building project procurement routes based on organisational, contractual, financial and technical issues.

Abstract

Purpose

The purpose of this paper is to examine different categories of building project procurement routes based on organisational, contractual, financial and technical issues.

Design/methodology/approach

The paper is based on review of literature and conditions of contracts. The UK construction industry serves as a general frame of reference. The Royal Institution of Chartered Surveyors survey of Contracts in Use from 1985 to 2004 is used to probe the share and value of contracts along different procurement routes and across different conditions of contracts in the UK. The logic is that the value and the share of contracts will indicate the behaviour of different procurement routes in the UK construction market while the in‐depth analysis of conditions of contracts will show the gaps and relationships between the general definition/categorisation and contractual context (conditions of contracts) of each of the procurement routes.

Findings

The preliminary result of the analysis shows that traditional routes remain the main type of procurement route for the construction project industry sector, within which different management and incentivisation systems are applied for greater efficiency. The conditions of contracts in the UK support this assertion by aligning different procurement routes to different conditions of contracts and additionally specifying different forms of agreements, special provisions and incentivisation in order to increase performance, reduce risks and improve compensation methods.

Research limitations/implications

The study can serve as a learning opportunity for construction project stakeholders internationally, and clients in particular, to differentiate between procurement routes, management‐oriented systems, relational contracting and incentivisation.

Originality/value

The research provides an original assessment of construction procurement which can be used as intervening tool in different levels of private and public procurement strategies.

Details

International Journal of Managing Projects in Business, vol. 2 no. 3
Type: Research Article
ISSN: 1753-8378

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Article
Publication date: 1 April 1999

P.D. RWELAMILA, A.A. TALUKHABA and A.B. NGOWI

The lack of ‘ubuntu’ (African group solidarity) between project stakeholders in the Southern Africa Development Community (SADC) public building sector has been surrounded…

Abstract

The lack of ‘ubuntu’ (African group solidarity) between project stakeholders in the Southern Africa Development Community (SADC) public building sector has been surrounded by controversy and strongly held opinions. The work reported in this paper attempts to indicate some salient issues affecting the relationships between project stakeholders. The Botswana public building sector is used as a main case study and follow‐up studies are carried out involving another eight SADC countries. The paper addresses two propositions. First, that the lack of ‘ubuntu’ between project stakeholders is primarily due to an inappropriate project organizational structure. Second, that a default traditional construction procurement system (TCPS), provides a poor relationship management system. Information is obtained on the research areas through questionnaires to construction firm executives, contract managers, site managers, trade foremen and skilled tradespersons on the dominant procurement system used in Botswana. Furthermore, senior technical officers of Public Works Ministries of another eight SADC countries are interviewed as a follow‐up to the Botswana study. The primary conclusion to be drawn is that the building procurement system purported to be in use in the SADC public building sector differs significantly from that recommended in the theory, resulting in poor relationships between project stakeholders. This is primarily due to the use of inappropriate building procurement systems. In general, the TCPS in the SADC public building sector is used as a ‘default system’. This has led to a situation where project management is a ‘fire fighting’ activity, where group solidarity between project stakeholders is out of reach. Salient steps are proposed with a proviso that the SADC public building sector should establish appropriate methods of selecting building procurement systems as a prerequisite in formulating appropriate project organizational structures which will bring the spirit of real co‐operation between project stakeholders towards project success.

Details

Engineering, Construction and Architectural Management, vol. 6 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

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