Factors Affecting Project Alliances in the Australian Construction Industry - Research Proposal Example

Project proposal Factors Affecting Project Alliances in Australian Construction Industry Group number: Number: Proposed Supervisor: Date: Introduction Background The need for the collaboration between the various stakeholders in the construction industry has been on the rise. This is due to the recognized need for better service provision and satisfaction of all parties involved. In the past time, parties in the construction industry used to view themselves as independent on one another. There was little consultation and involvement of all stakeholders in any major construction project. This resulted in continuous conflicts and court battles designed to solve the perceived conflicts. To some point, these factors derailed the completion of the big infrastructural project. This was a source of losses to both the construction companies and the general public. It was also a blow to the government since it was not able to complete the planned development projects within the stipulated timeline. These are the factors which contributed to research and proposition of the Industry Alliance design in strategic operation and management of projects (Shayne, 2012: 382). Project alliance is strategic management proposition that works to integrate the objectives various stakeholders in the construction industry. This is a concept in relationship contracting that dates back to the 20th century. This concept entails sharing risks and benefits between those involved in the construction projects. This method was first used in streamlining operations in the UK oil and gas industry. It was then first applied in Australian in the 1990s. Since then, project alliance has been modified to suite various sectors. For instance, project alliance is now widely used as a procurement tool for public infrastructural projects (Mounir, 2011: 263). The initial procurement rules applied pricing tactics in tender allocation. This old process was flawed as it failed to address the key problems related to large cost construction projects. For instance, there were foreseen and undetermined project outcomes. In event of such, some stakeholders were forced to fully absorb the outcomes, a factor that was demoralizing. Project alliancing shifted from these traditional procurement procedures by creating new guidelines for procurement. These new procedures called for complete and thorough evaluation of bidders in objection to price bidding. This helped to ascertain the capabilities of the bidders to meet any unseen occurrences and their corporate social responsibility strategies (Diponio & Dixon, 2013: 167). During its inception, its major aim was to unify all those involved in the Australian construction industry. These included those involved in the construction, maintenance, funding and use of public infrastructure. It also aimed at unifying the stakeholders so that they could provide a platform to influence the direction of government policy. The general public (client) was deemed to have various objectives, which were at times conflicting with the project objectives of the private sector. Project alliance was introduced to harmonize these objectives so that they could be aligned. Through alliance, all the stakeholders in the construction projects could attain similar objects. Over years, project alliancing has proved viable in providing better value of money spent in construction projects and also in management of project outcomes. Project alliancing has also helped in aligning the public and private sector toward achievement of a common goal. This method has been adapted in other sectors of the economy due to its perceived benefits. For example, it has been utilized in the retail business by buyers and sellers. This is where the two parties partner for the better good of both of them, that is, for customer satisfaction and profit maximization on the supplier part. In the construction industry, project alliancing id majorly applied in the contraction process. It is deep rooted in the open book and no blame premises. There is a through selection process, as stated above, for the alliance partners. Australian Alliancing Association is a body mandated to keep track of all alliances in Australia. This body also works to provide a framework of alliance functioning and scope of transformation. Image showing a result of construction works under project alliancing: Horizon Alliance - Darra to Springfield Problem statement This concept has been adapted widely across many states in Austria since its inception. Nevertheless, this doesn`t imply that it has been efficient in its application. Project alliance has had its bad days, just like any project management strategy. Over the years, project alliance guidelines have been reviewed so as to accommodate the changing needs of the stakeholders. Some changes have been effective in addressing the perceived problems while others have been problematic. Over year, project alliancing has experienced hiccups, some of which have been detrimental to its rampant application. Some of the issues experienced are contextual while others are complex. Just like any other strategic plan, project alliancing has faced problems that have threatened its successful adaption in the Australian construction industry. For instance, there has been reluctance in the government to fully implement the alliance objectives as stated in the guidelines. Also, some parties to the project alliances fail to perform as stipulated in the alliance manual. This research seeks to establish the various issues in construction alliances in the Australian construction industry. Research question 1. What are the problems facing project alliancing in the Australian construction industry? 2. What are the courses of these problems? 3. What are the implication of the established problems to project alliancing and general delivery of construction projects? 4. What should be done to solve the identified problems? Objectives of study 1. This project seeks to establish the problems facing the Australian construction industry. 2. This research work seeks to establish the root courses of the problems identified. 3. To establish the nature of the problems identified. This will determine the urgency to be attached to the problem. Some problems may be significant while others can be less significant. 4. To establish the effects of the identified problems with regard to project alliancing. Some issues may impact project alliancing both positively and negatively. 5. This research seeks to come up with solutions, based on the finding and the general public opinion to be garnered from the research. These are solution to the identified problems to project alliancing. Study hypothesis The project alliancing problems experienced in the Australian construction industry are contextual and managerial rather than technical. Scope of study This research will be conducted within the Austrian construction industry. It will be seeking to address the key issues undermining project alliancing. The following will be done in accomplishing the identified objectives: Analysis of existing literature on project alliancing Evaluation and close analysis of failure cases in project alliancing Interview will be conducted involving senior project managers in project alliances to determine the issues they perceive to be derailing project alliancing. Limitation of study As stated earlier, the project alliancing strategy is applicable to various sectors, both the public and private sector. Corporate business entities have also adapted the alliancing technique in their operations. This research will only seek to investigate the problems facing project alliancing in the construction industry. This will take on one sector of the economy whereas project alliancing is used in various sectors. The approach on one sector may fail to capture the real image of project alliancing since it can be applied differently in different scenarios. Therefore, focus on a single sector to establish the problems facing project alliancing may not effectively cover the real problems in the field. The Australian construction industry represents a vast growing network of construction companies and partners. This study seeks to investigate the problems facing project alliancing in the whole of Australia. It will be tedious to sample all the stakeholders of the Australian construction industry since there are many players involved. Therefore, this study will just cover a representative sample of the population. This may hinder the expected outcome owing to the factor that some of the problems may be left out due to the shortcomings of sampling statistics (Dudley, 2004: 215). Assumptions of the study 1. This research holds that all the players in the Australian construction industry have since adapted project alliancing technique in their operation. 2. This research project also assumes that all the stakeholders in the construction industry have applied the project alliancing technique based on the same principles; that is, none has modified the premises of the project alliancing. Importance of study Scientifically, this research work will contribute to improved management of public and private projects in the Australian construction industry. Over the recent past years, organizations have increasing adapted scientific management in their strategic development goals. Scientific management entails application of scientific methods; for instance the lean process, in attaining organizational efficiency. When applied in management, the lean process is used to minimize wastes in systems by identifying areas of waste and suggesting solutions. Similarly, this project seeks to identify flaws in the project alliancing strategy and suggesting ways to solve the problems and how to improve on project alliancing as a project management scheme. Project alliancing calls for integration between the various stakeholders in the construction industry for the achievement of a similar goal. Through identifying the problems in project alliancing, the relationship between the various parties to the alliances will be enhanced. For instance, the relationship between the construction companies and the locals may be enhanced by solving the current problem in minimal inclusion of the general public in construction projects. Most construction project represents heavy expenditure, for instance, infrastructural development projects. These are major investments by the government that require transparency and proper accountability. Since most of them are public projects, the various stakeholders ought to be involved in project implementation. Their inclusion is not just passive, but should be in-depth. Lack of inclusion may derail the implementation of public projects. It may also raise disputes that may be costly to litigate. By identifying the problems in project alliancing and solving them, the unnecessary expenses to be incurred in these processes will be forgone. Southern Gateway Alliance (Perth to Bunbury Highway) is one of the expensive construction projects. Project alliancing represents diversification of benefits and risks throughout the stakeholders of the construction industry. Sometimes, the risks are directed to one party in the alliance due to various issues. Sometimes, implementation of the full alliance accord fails to materialize due to contextual and technical issues forcing one group to accumulate all the benefits while the other group takes all the risks associated with the project. This project seeks to solve such issues and foster for improved corporation between all the parties in risk and benefit sharing. Literature review Project alliancing has been successful in many instances since its inception and application. Despite the various problems experienced in project alliancing, many organizations and governments have widely applied project alliancing. Marcus, Graham, Steve, Fiona, and Aaron (2006) conducted a research on project alliancing in the water treatment project. They sought to establish the importance of project alliancing in public projects. Through this project, thy came up with success factors for a good project alliance. They identified various performance indicators that could be used to ensure success in project alliancing. These indicators can also be utilized as a basis of appraising project alliancing as applied in various sectors. According to their report, 90% of the Key Performance Indicators (KPIs) suggested accounted for project success. Some of the KPIs identified in their report include: best project attitude and adoption of a single entity name. This called for all stakeholders to put on the best attitude for the project and also adapting an alliance name that defines their objectives as a unit and not as separate parties to the alliance. Staffing was another KPI that called for scrutiny in selection of the project personnel. The alliance parties were also required to lead an open book relationship. This report indicated that relationship based approaches to procurement, for instance project alliancing work best to eliminate the various barriers and fostering contribution of all parties. These factors contribute to success of the projects. It also indicated that the adaption of project alliancing strategy is a globalization factor arising from the need to effectively manage risks. This project outlined the various success factors and KPIs in project alliance thus contributing greatly to project management using alliancing (Marcus, Graham, Steve, Fiona, and Aaron, 2006: 11). Liberty International Underwriters go ahead to define project alliancing as way of embracing risk. According to them, project alliancing is all about sharing risk, rather than transferring the risk to project participants. It is a way of embracing risk and managing risks effectively within a flexible environment of project delivery. This report purports the there are various alliances entered into depending on the industry involved. The success or failure of an alliance is attributed to the industry in questions. These researchers suggest that project alliances may not work in certain industries. Liberty International Underwriters attribute project alliancing to loss minimization and benefit maximization. Project alliancing works best for those projects that have complex and varied interfaces and risks. They have found project alliancing to work best in oil exploration and in government activities as it improved service delivery. Just like other organizational strategies, project alliancing was identifies with system flaws that undermine its credibility. It has a potential implication resources and management. Any project alliance should have a contractual for of relationship between the parties involved. Liberty International Underwriters attribute the success of any project alliance to the existence of a formal contract. This does not abolish the clause of good will and open book relationship. Instead, it works to outline the intentions of involvement between the alliance parties (Liberty International Underwriters , 2008). The project alliancing contract contains the objectives, obligations and principles of participation. Sakal Mathew conducted a study in the construction industry to establish the importance of project alliancing as a relational mechanism for dynamic projects. He acknowledged that construction projects can be tedious given the tight budget and completion schedule, uncertain occurrences and high expectations from various stakeholders. Sakal goes ahead to explain how traditional projects concentrated on profit protection forgetting about performance. According to him, project alliancing was introduced to overcome the issues experienced in the traditional projects. Alliancing, according to him, encompasses integration between the participants by tying the profit motives of all parties to project outcomes. Sakal acknowledges that projects, more so in the construction industry, have become more dynamic. Clients (the public) want to reduce construction costs and design a construction schedule that is time bound while having high expectations on the quality of the end products. He traces the roots of project alliancing in Australia to the Wandoo and the East Spar projects of 1994. These two projects formed a basis of adaption for the project alliancing technique in the civil engineering industry. These two project, from the oil and gas industry respectively, enjoyed success due to the application of this technique. In the defense department, Sakal writes that project alliancing can be used to improve the relationship between the defense department and the industry. Sakal writes that project alliancing is more than a relationship contract; it is a new way of conducting business that so efficient than the traditional approaches. It may be used to gain trust between the participants in cases where trust is in short supply. According to him, project alliancing introduces risk sharing rather than risk transfer portrayed in the traditional methods of project implementation (Sakal, 2005: 78). The pain-share “gain-share” structure presented in project alliancing forms a compensations structure. Whenever the core principles of project alliancing are held by the participants, then they have the compensation factor at heart. The principles include: open and honest communication, a no-blame culture and encouragement of innovative thinking. The compensation model holds that the project cost should be appraised by all the parties in the alliance. Corporate overheads and profits should also be reviewed by all the contracting parties. Finally, another benefit identified for review between the parties is the perceived gain-share and pain-share. The final project outcome should be determined and apportioned accordingly to the contracting parties (Sakal, 2005: 243). In conclusion, Sekal purports that we are living in a dynamic world where the simple projects no longer exist. Thus, he proposes change in the construction industry. He gives the example of the British Petroleum Corporation that was forced to change its operation due to a change in circumstances. Project alliancing, according to him, is a departure from traditional contracts to a modern way of integrating and managing a vast network of participant into construction projects (Sakal, 2005: 129). Success achieved by these alliances is overwhelming owing to the fact that barriers to collaboration are eliminated, giving room for risk diversification. He writes that it would be unfortunate and a disappointment if an alliance formed under the principles of project alliancing failed to succeed. The use of relationship contracting/project alliancing is increasing becoming a competitive advantage for various construction companies. Justification of the research While a lot has been done on project alliancing, most of the research works presented rest on the performance and success of project alliancing. So far, little has been done regarding the issues facing project alliance in any industry. Most of the literature reviewed talks about the advantages of project alliancing. None of them focuses on the negative aspects of project alliancing. These negative aspects are the basis of this research. It was acknowledged that the negative aspects of project alliancing stem from the various issues that make the process flawed. This research will contribute to this academic field by providing an insight into the issues faced in project alliancing, a field that has had little attention from previous researchers. Data This research seeks to collect information regarding the application of the project alliancing in the Australia construction industry. Data to be gathered will be both quantitative and qualitative in nature. Data collection will be focused on those entities that have used alliancing and failed. Investigation will be done to obtain information on how they applied project alliancing, what went wrong in the application, why they failed and the failure was recognized. Qualitative data from this analysis will include the strategies laid by these the failing institutions, decisions made and steps taken in trying to avert failure. The failure countering techniques will also be reviewed in depth. The analysis will also extend to entities that have successfully applied the project alliancing techniques. The information to be obtained from these entities will include: how they have adapted project alliancing, the difficulties they are facing in adapting and implementing project alliancing and the steps taken to overcome the experienced challenges. Data will also be obtained from the various stakeholders of the construction industry; those that have benefited from project alliancing and those who that feel project alliancing is out of place. Research design Due to the complexity of the Australian construction industry, it will be difficult to cover all the stakeholders of the construction industry in totality. Therefore, it will be necessary for this research to sample a representative sample from each group of the identified stakeholders. The sample size of each group will depend on the total population of the respective group. For instance, groups with a bigger population size will have a bigger sample size compared to the smaller population. Data collection As outlined earlier, the data expected from this research will be both qualitative and quantitative. For this reason, this research will follow the two methodologies in data collection and analysis. The following approaches will be used to find the data required for this research: Interviews: interviews involving the identified stakeholders in the Austrian construction industry. The interview questions will be random, but based on the success and failure of project alliancing. The interview question will also probe into the issues the interviewees deem to be stalling the adaptation and application of project alliancing. Data to be obtained from interviews will be qualitative in nature. Questionnaires: a set of questions will be used in determining specific responses from the sampled individuals. Most of the data to be obtained from these questionnaires will be quantitative in nature. Observations: researchers will also be involved in direct observations in areas where project alliancing is in operation. This will involve interaction with the research subject in the field and making direct observation. Secondary sources: data will also be obtained from existing research work and other written information regarding project alliancing. Focus will be directed to the articles talking about the failures and flaws of project alliancing. Statistical data will also be sourced on the effects of the failure associated with project alliancing. Data analysis As soon as we obtain the data, it we will subject it to qualitative and quantitative analysis so as to answer these research questions. Mathematical and statistical analysis will be used for the qualitative data to determine central tendencies, trends and graphical analysis of scenarios. Descriptive statistics shall be employed to analyze the obtained qualitative data. For instance, according to an article by Kwok and Hampson (1997), secondary data can be analyzed and summarized to depict the following information obtained from the questionnaire administered on the contractor to assess the factors that affect construction alliances such as on-site construction processes and their business performance. Table 2 summarizes the whole results. From this data analysis, we can deduce that tender success rate will generally remain unchanged even if construction alliances were to occur. This is evidenced by the mean of 3.04. The same can apply to the business turnover. The variations from the mean concerning these two sub-variables were a bit small, that is, a standard deviation of 0.99 and 0.81 respectively. As for the entire construction process, the response was above average as depicted by all the means of sub-variables which are above average. The variations from the means (or extreme values) were very few as all the standard deviations were below 0.5 except for the sub-variables of standard of workmanship and quality of subcontractors which were 0.66 and 0.52 respectively. In term of total opportunity cost of the construction alliances, the analysis will be done using cost probability distribution. For instance, the TOC can then be estimated by selecting a precise point along the distribution curve as shown in the example below. That is, a TOC of about $100M equates to 54.5 confidence level. The secondary data revealed some issues about the Museum Project that was constructed under project alliancing. Although the project was a success, various issues undermined its success. The following table shows how the project was rated following an evaluation. The researcher The researchers have to have the basic knowledge required to conduct a research. These include: ability to identify the research subject with ease and extract the required information without causing problems. The researchers should also be able to ascertain the relevant information regarding this research so as to avoid collecting distorted data. With this regard, the researcher should be people conversant with the public sector operations, more so the construction industry. Researchers should have a proper insight into the tendering processes for both the government institutions and private institutions. They should be able to know the requirements and outcomes for the various public and private construction projects. This will enable them to easily identify and collect the required data. The lead researcher should have a good insight into the construction industry with proper knowledge of the construction processes specifics, outcomes and legal frameworks. The lead researcher should have complete knowledge about project alliancing sot that he can offer guidance to the research assistants. The lead researcher should have a mastery of the various requirements of a research and the legal framework of conducting research works to avoid disputes. This calls for a proper knowledge of all the ethical issues of research and the rights of the participant. As a researcher, I have comprehensively studied the research process and I comprehend what it entails to conduct a research. I have a good insight into project alliancing so I will be able to clearly define the data to be obtained and guide the other researchers in obtaining the data required for this research. The civil engineering knowledge I have will be useful I this research in determining the specifics of the construction projects. Plan The first phase of this research shall be a preliminary analysis of the research environment. This will help me ascertain the research population and estimate the sample size. Then the researcher will proceed to seek the relevant authorization from the various participants. This will ensure that the research work is conducted smoothly. Intensified research will then be conducted based on the existing works related to this study. The following schedule will outline the other activities and their sequence. Table 1: project schedule Recommendation for advanced study Prior to the commencement of the research, through analysis of the construction industry is necessary. This will reveal some of the information deemed to be necessary for undertaking the research. There are various underlying issues that need to be addressed before the research is done. Such issues will only be identified with through pre-analysis of the construction industry. Due to ineffectiveness of the data obtained from primary sources, it is necessary to capitalize on secondary sources such as alliance projects reports. These are likely to give a better image on the issues and failures of project alliancing. References List DIPONIO, M. A., & DIXON, C. (2013). Rapid Excavation and Tunneling Conference 2013 Proceedings. DUDLEY, W. (2004). Issues in Adoption. San Diego, Greenhaven Press. Fitch, R. (1989). Commercial Arbitration in the Australian Construction Industry. Annandale, NSW, Federation Press. LIBERTY INTERNATIONAL UNDERWRITERS. (2008). Project Alliancing. Massachusetts: Liberty Mutual Insurance KWOK, T AND HAMPSON, K.(1997). Strategic alliances between contractors and subcontractors : a tender evaluation criterion for the public works sector. Gold Coast, Australia. MARCUS J., GRAHAM B., STEVE R., FIONA C., AND AARON S. (2006). Project Alliances in the Australian Construction Industry: A Case Study of a Water Treatment Project. MOUNIR E. (2011). Critical Success Factors Affecting the Performance of Project Alliances. Griffith University RAPID EXCAVATION AND TUNNELING CONFERENCE, TRAYLOR, M. T., & TOWNSEND, J. W. (2007). Rapid Excavation and Tunneling Conference: 2007 proceedings. Littleton, Colo, Society for Mining, Metallurgy, and Exploration Inc. SAKAL, M.W. (2005). Project Alliancing: Relational Contracting Mechanism for Dynamic Project. Lean Construction Journal SCOTT, B. (2001). Partnering in Europe: incentive based alliancing for projects. London, Thomas Telford. SHAYNE, N. (2012). 2012 Australian Construction Achievement Award (ACAA) Technical Paper. Origin Alliance STEVE R., FIONA Y.K. C, ROLAND S. AND ALANNAH R. (2007)..Alliancing in Australia – No Litigation Contracts; a Tautology? Read More