The relationship between project funding and construction systems

In construction projects, funding has very often been considered to be isolated from construction systems by construction professionals. Yet there is evidence that project funding is vital to project success. This research treats funding as a sub-system of a project and examines the relationship between project funding and construction systems. The main focus of the research is to analyse the association or mismatch of the two systems. It also studies how such association or mismatch affects project funding performance and the effects of systems' synergy on project funding. The systems concept that has been successfully employed by researchers in studying project management and organisation over the past decades is adopted throughout this study. A “combined case study and survey" research approach involving triangulation of quantitative and qualitative analyses was then used for the study. Three main hypotheses are tested in the research: (i) There is a correlation of systems' objectives and risk perceptions between the construction and funding systems in construction projects. (ii) There is a positive correlation between the extent of mismatch between the construction and funding systems and problems in project funding. (iii) There is a negative correlation between the degree of synergy of the construction and funding systems and problems in project funding. Quantitative lateral studies of construction projects involving project loans over the past 5 years in Hong Kong were undertaken. Data was extracted from the prime representatives of both the construction and funding systems of 23 construction projects which involved syndicated project lending. Detailed case studies involving longitudinal research on three recently completed major projects in Hong Kong were carried out in parallel. Better understanding was reached through triangulation of the quantitative (the lateral survey studies) and qualitative (mainly the case studies) analyses. The main results of the study are as follows: (i) From the quantitative study,there is a significant correlation between the perceived objectives and risks of the construction and funding systems in projects. This was confirmed by two of the main cases studied. Mismatch of the systems was identified in one of the cases and from the statistical correlation of some of the research variables. (ii) Hypothesis testing through data analysis does not provide conclusive results to suggest that the existence of mismatch of the funding and construction systems is associated with project funding problems. The sign test is however generally positive,which indicated a positive correlation trend. Case study results,on the other hand, support the proposition. (iii) Hypothesis testing shows indicative causal relationship between the degree of systems' synergy and fewer problems in project funding. Not all funding problems variables show the same degree of correlation though. Funding problems like default, re-structuring and draw-downs overclaims which very often involve the funding system participants directly generally benefit from synergy of the two systems. On the other hand, for funding problems where the funding party normally can have minimal influence on the construction system. the correlation is relatively low. Both the quantitative and qualitative analyses reached the same results. The research methodology adopted allows a combination of exploratory appreciation of the phenomena together with attempts at causative/ quasi-causative explanations. Quantitative and qualitative analyses are shown to complement each other. It is concluded that construction and funding systems generally share common project objectives and risks perceptions. It is in cases where systems mismatch exist or where synergy of the two systems are low that there are higher chances of project funding problems which may jeopardise the success of a project. The main implications of the research results to construction project management are that synergy of the funding and construction systems should be encouraged and explored and that mismatch of the two systems should also be identified and resolved at the initial stages of projects. The study points to future areas of research in construction project funding.