Lind, H and Borg, L (2010) Service-led construction: Is it really the future? Construction Management and Economics, 28(11), pp. 1145-1153. ISSN 1466433X
Abstract
In recent years it has been argued that bundling construction with operation/maintenance can increase profits in the construction sector. This idea is critically evaluated using different theoretical frameworks and the main points are: innovative organizational models only lead to higher profits in the short run, unless the firm can reduce long-run competition. Many firms should however be able to bundle construction and maintenance. Several arguments have been put forward for the proposition that bundling is more efficient, but none of them are very strong. Knowledge about the construction phase is difficult to transfer also within firms, and it is not clear how a construction firm can build up knowledge of the long-run effects of different construction alternatives. A long-run contract for certain services is-just as a construction contract-difficult to write in a way that does not lead to surprises and future problems, so the gain from this perspective is not clear. The initiative for bundling came from the public sector; it was not an innovation from the private sector looking for higher profits. The motives for the public sector seem more related to financing and risk for cost overruns and delays. Taking over risk leads to higher profits, but this is just compensation for the risk and nothing more, if it is a competitive market.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bundling; PFI; PPP; service-led construction |
| Index terms: | construction firm, profit, financing, construction sector, competition, bundling, public sector, motive, private sector, cost overrun, construction phase, compensation, construction contract |
| Subjects: | administrative law, industry analysis, market analysis, project delivery, financial and cost management, economic analysis, psychology, dispute resolution, contract type, organization |
| Topics: | Legal Issues, Human Resources, Procurement, Cost Management, Business Strategy, Project Management, Research Practice |
| Descriptive scope: | 3 PCT |
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