Ancell, D J (2007) Performance-based contracting in construction: innovation for the brave? PhD thesis, University of Reading, UK.
Abstract
The construction sector is innovating to ensure building procurement transactions mirror the simplicity of mass-produced consumer and capital (CaC) goods transactions with their complete contracts. One of the potential construction innovations - the performance-based contract (PBC) - is a hybrid of complete and incomplete contracts focused on building output (performance) rather than input works and materials. A PBC is a complete contract for building price and output (event certainty because, like the CaC goods sectors, design and performance are frozen at contract execution) but an incomplete contract for rewards to be earned during the performance-life of the building. The PBC construction teams (the equivalent of producers in the CaC goods industries) comprise historically successful, trustworthy experts (including manufacturers and suppliers) - not consultants. The greatest risk on current construction projects is client-driven changes which are avoidable if a PBC is used because the PBC is executed on the basis of the client's performance-based design - and therefore no contract renegotiation is necessary. The innovation risks are borne by the constructor-producers who are able to innovate as they see fit. Producer rewards flow once the building "performs" and outputs meet the agreed targets but producers must have control over future building operation in order to be assured of receiving their rewards. The literature search identified PBC characteristics including full information, no renegotiation, fully committed parties, asset specificity with uncertain ownership, and output and innovations unknown at the time of contracting. By using these characteristics as a basis for research it was possible to determine which of the PBC innovation and risk management requirements are present in current non-PBC projects. Two different case studies were conducted and results showed that acceptance of PBC would require a risk-tolerant, open-minded culture; that PBC innovations and incentives would be the same as traditional construction innovations and incentives, and innovation risk management strategies for PBC-type projects would be the same as traditionally contracted risk management strategies. Results also showed that innovation occurs throughout the construction process (not just at design stage) and contracts are regarded as renegotiable. A PBC is a non-renegotiable service contract with on-going performance targets - which undermines the aspiration to make construction transactions as simple as discrete, complete-contracted CaC goods transactions.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Hughes, W |
| Uncontrolled Keywords: | construction project; construction sector; construction team; negotiation; building procurement; innovation; performance-based contract; risk management; client; consultant; owner; supplier; culture; ownership; trust; case studies |
| Index terms: | asset specificity, construction team, owner, traditional construction, case study, negotiation, performance-based contract, risk management, ownership, building procurement, strategy, manufacturer, construction innovation, performance-based, construction sector, building operation, design stage, construction project, construction process |
| Subjects: | heritage and conservation, industry analysis, building construction, sociology, conflict resolution, production management, economic concepts, economics, management, performance measurement, project delivery, professional practice, contractual arrangements, practitioner, data collection methods, risk assessment |
| Topics: | Quality Management, Engineering Principles, Project Management, Procurement, Risk Management, Design Practice, Site Management, Organizational Design, Research Practice, Business Strategy, Roles and Professions, Stakeholder Management |
| Descriptive scope: | 4 PCTE |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here