Lahdenperä, P and Koppinen, T (2009) Financial analysis of road project delivery systems. Journal of Financial Management of Property and Construction, 14(1), pp. 61-78. ISSN 1366-4387
Abstract
Purpose – A project delivery system (PDS) refers to the organizational framework of a project that defines the control mechanisms and the relationships between actors and their incentives. It is of major importance to the project owner as it, for instance, contributes to the project's level of efficiency. This paper aims to define indicative, relative cost performances of different PDSs in a road management context to support the road owner's strategy development. Design/methodology/approach This study compares the costs of designbidbuild, construction management atfee, designbuild, designbuildoperate and designbuildfinanceoperate based on an international data capture focusing on the operational performance of these PDSs. A financial analysis was made to determine the systems' present costs to a road authority based on relevant market estimates. Moreover, a step towards understanding their overall efficiency was taken by focusing also on differences in speed of delivery which result in expenses or savings to the user community. Findings Although the applicability of a PDS depends on project properties and constraints, the study concludes that, in general, the broader the scope of services supplied by a single contract, the lower the system's present cost to the owner. The inclusion of private finance and early commissioning advantage, however, change the ranking so that universal conclusions cannot be drawn. DBFO seems to be commonly in the middle category. Research limitations/implications Here, PDSs are applied to a relatively large project, minimum size €3060m, in wellknown conditions and involving no factors of uncertainty due to third parties. The results are not valid in smaller and/or more constrained projects. Originality/value The study provided new knowledge of the owner's and society's average comparable cost performances in the case of five different PDSs. Since a singlevalue, exclusive solution hardly exists, the study on the sensitivity of different PDSs to key financial parameters is also valuable.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | financial analysis; Finland; project finance; project management; roads |
| Index terms: | savings, private finance, owner, Finland, efficiency, project delivery, road project, project management, estimate, financial analysis, strategy, society, cost performance, project finance, commissioning, methodology |
| Subjects: | contractual arrangements, design economy, economic analysis, financial and cost management, project delivery, Geography, infrastructure engineering, project management theory and practice, financial management, management, economics, performance management, research methods, communities and social development, completion, sociology |
| Topics: | Engineering Principles, Research Practice, Geographical Context, Project Management, Business Strategy, Cost Management, Procurement, Stakeholder Management, Quality Management, Design Practice |
| Descriptive scope: | 3 PCT |
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