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Nasruddin H.F. (1992) Satu Kajian Ke Atas Kondominium Di Lembah Kelang. BSc. Dissertasi, ITM, Malaysia. ABSTRACT Perumahan jenis kondominium masih baru di Malaysia. Konsep ini hanya mula diperkenalkan di sekitar awal tahun 1970an dan hanya mendapat sambutan yang begitu menggalakan akhir-akhir ini. Kondominium merupakan istilah yang bermaksud “suatu bentuk hakmilik/kepunyaan sah”. Ini bermakna pemilik sesuatu unit kondominium akan mempunyai hak milik terhadap unit kondominiumnya dan dalam masa yang sama akan mempunyai hakmilik bersama terhadap kepentingan yang tidak dipecah-pecahkan seperti tanah, bangunan, peralatan dan kemudahan-kemudahan yang terdapat di dalam pembangunan keseluruhan kondominium tersebut. Kepentingan yang tidak dipecahpecahkan itu bermaksud setiap pemilik mempunyai hak perkongsian terhadap keseluruhannya. Ini merujuk kepada perumahan yang menyediakan kemudahan dan perkhidmatan sepenuhnya seperti kolam renang, gimnasium, gelanggang squash, kawasan permainan kanak-kanak, kemudahan sosial, kemudahan “housekeeping”, pengurusan dan kawalan keselamatan. Objektif kajian ini ialah untuk mengkaji penawaran dan permintaan kondominium, faktor-faktor bertambahnya penawaran dan permintaan,dan pasaran kondominium di Lembah Kelang. Hasil kajian di Lembah Kelang untuk tempoh 1976 – 1982 mendapati lebihan himpunan permintaan sebanyak 2007 unit berbanding himpunan penawaran sebanyak 693 unit. Untuk tempoh 1983 – 1991 didapati penawaran telah melebihi permintaan. dan kajian kes di Kuala Lumpur sahaja sehingga Mei 1991 menunjukkan terdapat penawaran sebanyak 46, 295 unit kondominium sedia ada, dalam pembinaan dan telah diluluskan untuk pembinaan. Faktor-faktor yang mempengaruhi penawaran dan permintaan ialah, peningkatan kemasukan pelabur asing, Akta Penggalakan Pelaburan 1986, pelonggaran penyertaan ekuiti asing di sektor perkilangan, pelonggaran Akta Penyelarasan Perindustrian (ICA) 1975, pertumbuhan ekonomi, galakan kerajaan, kekurangan tanah untuk perumahan,pertambahan penduduk, insentif pembangunan di kawasan perancangan pusat, keuntungan pelaburan lebih tinggi, pertambahan pendapatan penduduk, pindaan Kanun Tanah Negara, lokasi yang baik, kemudahan & perkhidmatan,dan kemudahan pinjaman bank. Hasil kajian juga mendapati pasaran kondominium kos sederhana tinggi adalah lebih tinggi berbanding kos paling mewah. Soal selidik terhadap 23 pemilik kondominium (46% saiz sample) di Kuala Lumpur pula mendapati faktor keselamatan, tiada gangguan dan kemudahan rekreasi menjadi sebab utama pemilihan penghidupan di kondominium.Sample ini juga menunjukkan 52.2% adalah warga asing dan 47.8% adalah warganegara Malaysia, 52.2% merupakan pegawai eksekutif dan 68.2% adalah mereka yang berpendapatan melebihi $5,000 sebulan dan 60.8 % hanya akan tinggal di situ kurang dari 2 tahun.


1.1

Introduction

The trend of Design and Build (D&B) has grown consistently since the introduction of The UK Joint Contracts Tribunal (JCT) With Contractor’s Design form in 1981 which has provide a standard form of contract for a design-build situation. Numerous surveys as well as studies have been carried out on D&B, but a series of biennial surveys which was started in 1984 by the Royal Institution of Chartered Surveyors (RICS) on the ‘Contracts In Use’ in the UK was more representative of the trend of D & B in the sense that the series of studies has covered wide samples that really represent the industry as a whole. In these studies, it was discovered that the D&B procurement method grew from a base of 5 per cent of the total value of work in 1984 to 12 per cent in 1987. For the next four years, D&B output continued at approximately 12 per cent until, in 1991, the system increased in popularity and, in 1993, approximately 36 per cent of the total value of work was carried out using one of

the variations of D&B systems.

This increase was gained from the

traditional system’s share of the market, but during the period 1993-1995 the traditional system appears to have regained much of the ground it had lost (Franks, 1998). The results from these studies have been repeated by a study that was carried out by the Centre for Strategic Studies in Construction at Reading University in 1996 that has proved a similar trend. It was reported that in the early 1990s

1


D&B peaked as a procurement method, with around 23 per cent of new-build work by value, but is likely to decline in market shares, unless it evolves to meet client needs (Chevin, 1996).

1.2

Reason For Study

Since 1981, D&B has attracted many people from the construction industries to use it as an alternative procurement method, showing a tremendous increase in its trend until the early 1990s. However, the Reading University report in 1996 warned that the D&B process faced stagnation because it had “reached the top of its current life cycle” (Clark, 1997). This is because the expected growth of D&B has failed to materialise, with its market shares remaining at 23 per cent. The report accused the industry of having no clear direction and that it is in need of new leadership if it is to capture the imagination of today’s clients. The ‘Contract In Use’ that was published in November 1996 proved this trend when D&B which in 1993 stood at 36 per cent, of the value of works, declined to 30 per cent in 1995, while the traditional system started increasing again from 54 per cent in 1993 to 58 per cent in 1995 (RICS, 1996). In contrast, according to RICS report, the trend of the traditional procurement route had been declining since 1984 and only started to increase in 1993. Therefore, this study attempts to investigate and evaluate the possible factors that contribute to the increasing trend and the causes that lead to its decrease by

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exploring the perceptions of contractors, quantity surveyors and architects towards this trend.

1.3

Aim/Objectives

1.3.1 Aim To study the factors influencing the trend of design and build method. 1.3.2 Objectives This study has two objectives, namely:•

To review the factors influencing the trend of the Design and Build procurement method.

•

To survey the views of architects, quantity surveyors and contractors towards the present and future trend and the degree of influence the above factors have on this trend.

1.4

Methodology

Large quantities of information has been collected through various sources as well as adopting a variety of methods as follows:-

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1.4.1 Sources and Methods of Collecting the Data

1.4.1.1 Primary Data a)

Questionnaire

The information was obtained by designing a structured questionnaire containing a list of factors influencing the trend in Design and Build (D & B). These questionnaires were sent to 100 UK contractors, 75 quantity surveyor firms and 75 architect firms. The contractors were randomly selected from the New Civil Engineer Contractors File while the quantity surveyors firms were obtained from the top 75 out of 100 in the Ranking of Quantity Surveying Firms (by the number of chartered surveyors) which was published in the Tuckers’ Directory of The Surveyors 500 1996/97 Edition.

As for the

architect firms, 50 firms were obtained from the Architect’s Section from the same publication. Another 25 architect firms were chosen from Top Architect by Total Value of Yearly Work (1 March 1997 - 28 February 1998) published in Building, 20 March 1998.

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b)

Interviews

Interviews have

been

carried

out

via electronic and

conventional mail with the following individuals:i) Mr. Marcus Ormerod, The Deputy Director of Postgraduate Research, BuHu Research Centre, TIME Research Institute, University of Salford. ii) Mr. Paul R Moore, The Head of Cost Research, EcHarris The Chartered Quantity Surveyor. iii) Mr. Gerard C. Fagan, The Managing Partner, McBains Cooper, The Chartered Quantity Surveyor. iv)

Mr. A.D.R. McKendrick, The Director of Pre-Contract

Services, HBG GA Construction Ltd. v) Mr. D.C. Haythorn, The Manager of Design Division, Dew Construction Ltd.

1.4.1.2 Secondary data A vast selection of literature on this study was mainly obtained from:a) Statistics data published by RICS

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b) Any relevant published data from libraries around Glasgow as well as reports and studies from other universities and organisations.

1.4.2 Methods of Analysing the Data

First, the main statistics from RICS which were employed in order to produce the trends of D&B using the Microsoft Excel trend analysis. Based on literature review the factors that have affected the increasing and declining trends were identified, which formed the basis for the designing of a questionnaire for the study . The contractors’, quantity surveyors’ and the archite cts’ response to the questionnaire were analysed using the Statistical Package for the Social Sciences (SPSS) in order to isolate the most important factors and to compare the views of these categories of respondents on the factors. Statistical analysis undertaken included Analysis of Variance (ANOVA) which tests the null hypothesis that the views of the contractors, quantity surveyors and architects on these factors are the same. Finally, the views from the contractors, quantity surveyors and architects on the factors influencing the trend were compared with the factors

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discovered from the literature in order to come up with a final conclusion on the actual factors that influence the trend.

1.5

Scope and Limitations

The statistics that are employed for the study are obtained from RICS and the data are only available in the form of percentages by value of contracts and by number of contracts. There were no statistics on the actual value of the contract.

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An Evaluation of Factors Influencing Trend In Design and Build Procurement Method

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CHAPTER 1 1.0

Introduction 1.1

Introduction

1

1.2

Reason For Study

2

1.3

Aim/Objectives

3

1.3.1 Aim

3

1.3.2 Objectives

3

Methodology

3

1.4.1 Sources and methods of collecting the data

4

1.4

1.4.1.1 Primary data 1.4.1.2 Secondary data

1.5

4 5

1.4.2 Methods of analysing the data

5

Scope and Limitations

6

9


1.0 INTRODUCTION

10


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2.1 Introduction

Many authors claimed that the Design and Build procurement method had been used in the UK construction industry for many years (Janssens, 1991; Masterman, 1992; MBD, 1998). Some argued that D&B projects were first utilised in the 1920s, but the popularity of the concept remained weak until the mid 1970s when a number of industrial estates were built using this form of procurement. The introduction of the JCT 81 contract had laid the real foundation for the development of D&B. This established a standard contract which could be widely used for D&B and the formation of the procurement method permitted wider expansion in the late 1980s and early 1990s.

2.2 Definition Design and Build (D&B) is a form of building procurement whereby the Contractor will construct the project and design the work. In other words, the D&B contractor is supplying the procurement option of ‘buying’ a finished building (Turner, 1990; Janssens, 1991). While according to Masterman (1992) the term ‘D&B’ has almost been unanimously interpreted and defined as being an arrangement where one contracting organisation takes sole responsibility, normally on a lump sum fixed price basis, for the bespoke design and construction of a client’s project. This contains three main elements: the responsibility for design and construction is the contractor’s, reimbursement is

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generally by means of a fixed price lump sum and the project is designed and built specifically to meet the needs of the client.

2.3 Types of Design and Build There are several types of Design and Build procurement techniques found from the literature which are as follows:

2.3.1 Pure/Traditional Design and Build Basically the contractor will be appointed without competition and accepts the total responsibility for both the design and construction to meet the requirement of the client. However, Janssens (1991) differentiates pure D&B into two categories; single-stage tender and two-stage tender. Pure/traditional D&B, also known as Contractor-led D&B, is shown in Figure 2.1. Figure 2.2 illustrates the typical sequence of events in D&B.

Client

Supervisory and/or cost consultants

D & B Contractor

Quantity Surveyor

Architect

Engineer

Subcontractors

Figure 2.1: Pure/Traditional Design and Build: Contractual relationships Adapted from Mosley (1990)

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KEY ACTOR(S)

ACTIVITY

OUTPUT

Client

Project Conception

Client

Initial Appointments

Designer(s)

Designer(s)

Design Preparation

Outline Design (Basis of tenders)

Client Designer(s)

Tender Invitation

D&B Contractors Client Designer(s)

D&B Contractor

Tender Preparation (& Design Development)

Tender

Tender Appraisal and Appointments

D & B Contractor

Clarifications & Further Design Development

Detailed Design

D&B Contractor

Construction Work

All Parties

Project Completion

Figure 2.2: Traditional design and build process Adapted from Anumba and Evbuomwan (1997)

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Required Facility


2.3.2 Novation Design and Build

Novation may be defined as a form of Design and Construct agreement, in which the client initially employs the consultant team to carry out design and documentation to the extent that the client’s needs and intent are clearly identified and documented. On the basis of these documents, tenders are called and a building contractor is selected. The client then novates the consultant agreements to the contractor who takes responsibility for the project to completion (Siddiqui, 1996).

Client

Project Manager

Quantity Surveyor

Design Consultants

Figure 2.3: Pre-novation contractual arrangements Adapted from Siddiqui (1996)

Siddiqui noted that the client initiates the project by commissioning a design consultant to develop the project brief and to commence design work. The terms of the engagement of the consultant are specified by an agreement between client and consultant. The

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contractual arrangements before novation are shown in Figure 2.3. Figure 2.4 shows the post-novation contractual arrangements where the contract between the client and the design consultants is novated to the contractor after the award of the building contract. After novation the consultants are paid by the contractor and their first point of loyalty is to the contractor. The contractor, who then becomes the designer, is now completely responsible for all the design work as well as construction. The contractor is required to keep the client informed on design matters, while still maintaining prime responsibility for meeting the performance criteria set down in the design brief (Siddiqui, 1996). Client Project Manager

Quantity Surveyor

D & B Contractor

Design Consultants

Subcontractors

Figure 2.4: Post-novation contractual arrangements Adapted from Siddiqui (1996)

According to Swindall (1993) novation can be carried out in three different ways:

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the employer simply asks the contractor to substitute himself for the employer in the consultant’s original appointment.

an architect or engineer will have signed up with an employer on a full-service basis, in which context his responsibilities include inspection and certification. These duties are not appropriate after novation, so renegotiation is called for between the contractor, as the new employer, and the consultant.

terminate the original contract of appointment between employer and consultant and then have the contractor and consultant sign a new contract.

It is reckoned that the third procedure is the best in carrying out a novation because it allows all the parties to know in advance where they stand and to scale their fees accordingly (Swindall, 1993).

2.3.3 Develop and Construct Develop and Construct is shorthand for ‘develop the detail from the employer’s design, and construct the works’. Consultants design the building required to a partial stage, often called a ‘scope design’, then the contractor will develop, complete the design and construct the building. The amount of consultant design can vary from little more than stipulation over the area of the space required, going on perhaps to giving broad indications of external appearance or material required or, at other end of the scale, with the consultant preparing a scheme design that specifies all the major components, materials and outline, thus leaving the contractor little more than to prepare the working

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details to enable the building to be erected (Turner, 1990). Janssens (1991) states that Develop and Construct is very effectively used in various circumstances such as follows: •

when a client decides to adopt a D&B approach even though he has the design already substantially complete.

when the client requires a series of new buildings to be built on a repetitive basis to a standard design, such as a hotel, chainstore or homes.

when the client himself is a designer.

Figure 2.5 shows the relationships between the client, D&B contractors and other professionals involved in Develop and Construct contracts.

Principle adviser

Client

Scope designer

Employer’s agent

Develop & Construct Contractor

Design Consultants

Subcontractors

Figure 2.5: Develop and Construct: Contractual Relationships Adapted from Turner (1990)

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2.3.4 Design and Manage Normally the contractor gets a fee for managing all aspects of planning and design and supervising the subcontractor, which means the contractor has design responsibility (Akintoye, 1994). The client may also select a contractor at an early date and employ the firm to undertake the majority, if not all, of the design of the project. According to Janssens (1991) Design and Manage is appropriate in various circumstances including: •

where time permits little other choice

• where the contractor has specific expertise. Chappell (1991) has, however, argued that Design and Manage is not strictly D & B at all, but is an architect-led version of the contractor-led construction management. Figure 2.6 shows the relationships involved in a Design and Manage contract.

Client Supervisory and/or cost consultants Contractor managing, designing and constructing bespoke project to meet client’s need s

Consultant managing, designing and constructing or bespoke project to meet client’s needs

Construction contractors carrying out work packages Figure 2.6: Design and Manage: Contractual Relationships Adapted from Masterman (1992)

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2.3.5 Architect/Designer-led Design and Build Architect/Designer-led D&B is a system whereby the architect/designer takes the reins as a way of allowing the client direct access to the design team throughout the construction process, while retaining the fixed price and contractual simplicity of D&B (Macneil, 1993). At the outset of the project the architect signs a contract with the client giving a guaranteed maximum price. The architect employs the consultants directly and, once the design is complete, puts the construction contract out to tender, to gain the advantages of competition between contractors. On paper the lines of communication look similar to those under a fixed price right from the beginning. The important advantage for clients is the direct access they have to the design team throughout the project. Figure 2.7 shows the relationships in this procurement method.

Financier

Client

Architect

Contractor

Client’s agent

Quantity Surveyor

Engineer

Figure 2.7: Architect-led Design and Build: Contractual Relationships Adapted from Thomas (1990)

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2.4 Private Finance Initiative

The Private Finance Initiative (PFI) was launched in 1992 with the aim to increase the flow of capital projects against a background of restraint on public expenditure (RICS, 1996). Under this scheme, the public sector is encouraged to bring the private sector more centrally into the operation of capital assets. It is aimed at harnessing private sector management skills, and at a transfer of risk away from the public sector, onto the private sector and essentially has two fundamental requirements: •

the private sector must genuinely assume risk

•

value for money must be demonstrated for any expenditure by the public sector.

Bolton (1995) states that almost all PFI schemes are based around teams of investors, designers and contractors, and with the complexities of some of the deals needed to get projects off the ground, short lines of communication are essentials. Transference of risk from the public sectors is also the key. Loading design risk onto the contractor can be an important factor that would convince the Government that it has transferred sufficient risk onto the project team. Figure 2.8 shows the typical PFI contract arrangements.

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Advisors

Direct Agreement

Public Sector

Project Agreement

Advisors

Special Purpose Company

Design & Construct

Funder

Advisors

Operate

Figure 2.8: Typical PFI Contract Arrangements Adapted from Evans and Hockaday (1998)

As Bedelian (1996) noted, PFI projects require cash up front for project development, subsequent equity injections to launch the projects, and the strength to offer the necesssary guarantees for completion and performance. They require larger and stronger contractors. PFI is a part of the government policy of privatization which was designed to take services which are not directly concerned with government, outside the

19


public sector. In a privatized service the private sector takes complete control subject to a system of regulation laid down by statute. Almost all risk is taken by the private sector (Franks, 1998).

Franks (1998) added that PFI is one of several similar approaches in a family which includes Design, Build, Finance and Operate (DBFO), Build, Own, and Operate (BOO) and Build, Own, Operate and Transfer (BOOT). The transfer in the last-named version refers to the transfer of the completed project to the client.

2.4.1 Design, Build, Finance, Operate (DBFO)

Design, Build, Finance, Operate (DBFO) was announced by the Government in November 1992 (as cited in Hudgson, 1995) as a possible transition to motorway charging, Private sector companies might be invited to bid for Department of Transport contracts under which they would design, build, finance and operate (DBFO) roads. Hudgson added that the principles of DBFO were set out in the Government Green Paper Paying For Better Motorways issues in 1993. DBFO concessions are designed to encourage the development of road operating industry with a view to increasing the

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scope for private sector involvement in road provision and operation. The DBFO concessionaire will have to assume substantial risk, the intention being that the Department will be buying a road service and not just a new road. Concessionaires will have to be capable of long-term commitment and, as a result, will need to be both robust and committed to quality of performance in this market. To encourage this high quality service, the structure for the concessions will incorporate a payment system that includes both incentives and penalties.

Evans and Hockaday (1998) claimed that the four key ingredients in DBFO i.e. design, build, finance and operate consist of two short-term and two long-term elements. The short-term elements are the process of design and building compared to finance and operate which are consuming longer time. Finance is considered as long-term element because it starts right at the beginning with assumptions on the funding and the viability. There are a variety of different forms of finance and among them are two major types of funding known as debt and equity. Debt is associated with less risk due to fixed rate over a longer period, giving greater certainty but limiting the potential upside of any refinancing. Equity, which is the shareholders’ stake in the project, is n ormally associated with a higher level of risk and therefore the returns are often higher compared to debt. As for operation, typically, the operation and maintenance element is extended to generate sufficient revenue to service the debt on the financial investment and to ensure sufficient profit over the concession period.

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Franks (1998) underlined the characteristics of DBFO as follow:

•

DBFO systems require fundamental changes in the approach of client and the parties which comprise the promoter. The change is from the procurement of a building to the provision of accommodation and/or facilities to predetermined standards for a period of time.

•

The change in approach shifts the emphasis from the initial cost of procuring a building to the lifecycle cost of providing accomodation together with all services during the contract period.

•

The DBFO system requires the parties which comprise the promoter to know the cost of running and maintaining systems in addition to the initial cost of procurement.

For the client, DBFO transfers expenditure from capital to revenue, and risk is transferred from the client (purchaser) to the promoter. If the client is government, the risk is transferred from the public to the private sector

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Client with need for accommodation Prospective promoters invited to pre-qualify Client prepares concession agreement Client invites promoters to tender

Promoter consults and seeks tenders from: Services providers

Suppliers

Procurement team members

Lenders Investors

Operators

Promoters submit tenders Client evaluates tenders and enters contract

Promoter constructs, finances and operates Figure 2.9: Design, Build, Finance and Operate (DBFO) Process Adapted from Franks (1998)

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2 5 The Characteristics of Design and Build

2.5.1 Responsibility The prominent feature of D&B is that it provides a single point of responsibility, which means it should be carried out without any mediating consultants and the central contractual position must be between the client and the contractor (see Figure 2.10). This is achieved by allocating all design responsibility and liability to the contractor alone. In the event of a building failure, the contractor is solely responsible(Clamp & Cox, 1989). This has been explained in JCT 1981, a standard form of contract for D&B which lays down the contractor’s obligation to carry out and complete the Works referred to in the Employer’s Requirements and the Contractor’s Proposals. The balance of how much a ‘scope design’ is detailed in the Employer’s Requirement could reduce reliance on the contractor for design and performance.

A client retains a responsibility during the

contract through his employer’s representative.

Client

Client

DesignTeam Design & Build Contractor

Contractor

(a)

(b)

Figure 2.10: (a) Single point responsibility - D&B contract (b) Fragmented responsibility - traditional contract. (Source: Bennett and Grice, 1992)

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2.5.2 Price and Time Certainty In D&B, there is a guaranteed cost and completion date. This means the client knows his total financial commitment in the early stage of the project, provided he does not introduce any changes throughout the project. Because there is no provision for a bill of quantities, adequate arrangements for evaluating any changes on the price or on a cost basis can be carried out earlier by including it in the contract. In terms of certainty in time, D&B can provide complete contractual certainty on completion for clients from the very earliest stages of their projects provided that there are not many changes made by the client (Bennett and Grice, 1992)..

2.5.3 Speed On the matter of speed, it may be reasonable to expect that the overall project duration is shorter on Design Build projects or that can it be completed on time due to the overlapping of design and construction phases. In other words, construction time is reduced because design and building proceed in parallel. Therefore, the integration of design and construction should produce more effective programming. However, the client’s consultant should be given time to prepare an adequate set of Client’s/Employer’s Requirements as well as comparing and evaluating the offers and schemes from competing tenders.

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The NEDO (1983) Report, Faster Building for Industry, shows that D&B can produce better performance in construction for site time and total times compared to traditional procurement method.

According to Masterman (1992), many studies have proved that D&B projects were associated with shorter overall project times than conventional system.

It is also

reckoned that the reduction of the overall project period is attributed to the system’s ability to overlap the design and construction phases, improved communications between the various members of the project team, the integration of the two basic functions of design and construction and the improvement in buildability and the use of contractor’s resources.

2.5.4 Cost On the question of cost, real cost savings can also be made in D&B. According to Masterman (1992), when using this system, the initial and final costs are lower than when using other methods of procurement basically as a result of diminished design costs, the integration of the design and construction elements and in-built buildability of the detailed design. Cost savings may also result in time savings. The overall effect is reduction in the employer’s financing charges, lesser effect of inflation and faster building operation which, in a commercial context, produces an earlier return on the capital invested (Franks, 1998).

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2.5.5 Quality In considering quality, the client has no direct control over the contractor’s performance. Therefore, the standard of quality must be properly selected at the tender stage to ensure that the contractor’s proposals do meet his requirements. This also means that the client has little say in the choice of specialist subcontractors (Clamp & Cox, 1989).

2.5.6 Improved Communication Direct contact between the client and the contractor as provided by a D&B system improves lines of communication and enables the contractor to respond and to adapt more promptly to the client’s needs. Integration and interchange is thereby encouraged inherently within the system (Griffith, 1989).

2.5.7 Complexity D&B provides a simpler and more efficient sub-contract arrangement integrating design and construction expertise within one accountable organisation. This is because there are no nominated subcontractors or nominated suppliers. Therefore, the contractor can take full advantage of his own judgement and expertise in procuring only those subcontractors and suppliers with whom he expects to have a successful working relationship and the client is not involved in this relationship at all (Griffith, 1989).

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2.5.8 Risk The D&B contract transfers more risks to the contractor than any other construction contract (see Fig. 2.11). Among a variety of risks, a contractor usually takes on many speculative risks; risks that can vary in incidence between the parties as they wish. Speculative risk can be within or outwith the control of a contractor (Turner, 1990). However, the suitability of a project to the D&B approach must be carefully undertaken by ensuring that the contractor is able, willing and has relevant experiences to control the risks satisfactorily, otherwise they may pass these back to the client (Hogg & Morledge, 1995).

Contract Type

Risk Employer

Design and build

Traditional Contract

Management Contract

Figure 2.11: Allocation of Risk Adapted from Clamp and Cox, 1989.

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Contractor


2.6

A Review of The Trend in Design and Build.

Numerous surveys on the trends of D&B as well as traditional methods have been carried out by RICS since 1984 until 1993. As shown in Table 2.1 and Figure 2.12 it is apparent that the trend in the use of the D&B procurement method has been increasing throughout the period of 1984 to 1993. It was increasing slowly at the start of 1984 when 5.1% of building work was procured on a D&B basis. This was followed by 8.0% in 1985 and 12.2% in 1987, which shows an increase by 2.9% in 1985 and 4.2% in 1987. However, there was a slight decrease in 1989 when the percentage dropped by 1.3% to 10.9%. Then it started to rise again by 3.9% in 1991 to 14.8% and took off steeply to the highest point in 1993 when 35.7%. of building projects were procured using D&B. However, the percentage dropped down to 30.1% in 1995. It is noted that the slight decrease was only shown in the percentage by value of contract, but in terms of percentage by numbers of contract, it increased from 3.6% in 1987 to 5.2% in 1989 (see Table, 2.2 and Figure 2.13).

Table 2.1: Trends in Methods of Procurement - by Value of Contracts Procurement Methods

D&B(%)

Traditional (%)

Others (%)

Total (%)

1984 1985 1987 1989 1991 1993 1995

5.1 8.0 12.2 10.9 14.8 35.7 30.1

78.4 74.9 73.2 66.1 57.8 54.0 58.3

16.5 17.1 14.6 23.0 27.4 10.3 11.6

100 100 100 100 100 100 100

Source: Contract in Use - RICS (Nov. 1996)

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On the other hand, statistical data provided by RICS shows that in 1984, 78.4% of building work was procured based on the traditional system. The percentage decreased to 74.9% in 1985 followed by 73.2% in 1987, 66.1% in 1989, 57.8% in 1991 and 54.0% in 1993.

Trends in Design and Build and Traditional Methods of Procurement (percentage by value of work)

% of contracts by value

80.0 70.0 60.0 50.0

Traditional

40.0

Design & Build

30.0 20.0 10.0 1984

1985

1987

1989

1991

1993

1995

Years

Figure 2.12: Trends in Design and Build and Traditional Methods of Procurement (percentage by value of work) Source: Contract in Use - RICS (Nov. 1996)

However, from 1993 onwards, the traditional system trend started to show an increase. The same pattern of D&B trend was found by a study conducted by the Centre for Strategic Studies in Construction at Reading University (Chevin,1996). The study was based on a survey of 500 clients and 332 projects. Based on this data they were able to project the trend in D&B procurement from the period 1970 to 2001. According to the

30


Table 2.2: Trends in Methods of Procurement - by numbers of contracts Procurement

D&B

Traditional

Others

Total

Methods

(%)

(%)

(%)

(%)

1984 1985 1987 1989 1991 1993 1995

2.4 3.6 3.6 5.2 9.1 16.0 11.8

93.5 92.6 92.9 92.3 89.7 82.4 85.0

4.1 3.8 3.5 2.5 1.2 1.6 3.2

100 100 100 100 100 100 100

Source: Contract in Use - RICS (Nov. 1996)

%

Trends in Design and Build and Traditional Methods of Procurement (percentage by numbers of contracts) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 1984

Traditional Design & Build

1985

1987

1989

1991

1993

1995

Years

Figure 2.13: Trends in Design and Build and Traditional Methods of Procurement (percentage by number of contracts) Source: Contract in Use - RICS (Nov. 1996)

31


report, the market share of D&B showed a rapid growth in the decade between the early 1980s and early 1990s, but has failed to keep this pace. Included in the report was a prediction that over the next five years its share is likely to remain static. Some of the findings of the study include: •

D&B’s market shares has settled at 23% (Table 2.3)

The total D&B market is worth £7.025 billion at 1990 prices. Of this, £6.475 billion is in construction work and £550 million in repair and maintenance.

Construction Management and Management Contracting will increase market shares by as much as 15%.

Traditional contracting will continue to decline below 55%.

Build-own-operate-transfer and private finance initiative projects will account for 5%.

Novation D&B now accounts for 50% of all new D&B projects, accounting for £3.250 billion.

Table 2.3: Segmentation of Design and Build Market 1995, by sector (£Million) Sector

D&B output

Construction output

% of D&B

Private Commercial

1,852

6,861

27 %

Private Industrial

1,350

3,139

43 %

Public Non-Housing

1,118

5,322

21 %

Public Housing

1,075

1,654

65 %

Infrastructure

844

6,026

14 %

Private Housing

215

5,376

4%

TOTAL

6,475

28,378

23 %

Source: Chevin, (1996)

32


However, the MSI Report in 1997 has highlighted a different pattern which shows an upward trend from 1992 to 1996, although the rate of the upward pattern is not constant (see Table 2.4). In 1992 the D&B output grew by 2 per cent to a total value of ÂŁ5.7 billion but the growth rate increased in 1993 by 14 per cent to ÂŁ6.5 billion. The report stated that in 1994 and 1995, the growth rate began to slow and the D&B market was believed to have peaked. However, during 1996 the value of the D&B market is believed to have increased by as much as 11 per cent. The strong increase in the market in 1996 can be attributed to the significant increase in the self-financing procurement/PFI methods of D&B, particularly in the civil engineering sector (MSI, 1997).

Table 2.4: Design and Build Market Development 1992 - 1996 (by output)

Year

ÂŁBillion

Changes (%)

1992

5.7

+ 2%

1993

6.5

+ 14%

1994

7.1

+ 9%

1995

7.5

+ 6%

1996

8.3

+ 11%

Source: MSI Report (1997)

Apart from the MSI Report, Market & Business Development (MBD) has also come up with a similar result in February 1998. The period from 1992 to 1995 marked a constant

33


growth rate. This is associated with an increase of 8% to £5.5 billion in 1992, 7% to £5.9 billion in 1993, 8% to £6.38 billion in 1994 and 10% to £7.035 billion in 1995. The peak was seen in 1995 when it shot up by an increase of 26% in 1996 to £8.853 billion. (see Table 2.5 and Figure 2.14). The latest upsurge reflects a change in the definition of D&B to include projects undertaken through the PFI which has brought civil engineering into the D&B market in a meaningful way.

Table 2.5: Trend in Design and Build 1991 - 1997 (by output)

Year

£Million

Changes (%)

1991

5100

1992

5500

+ 8%

1993

5900

+ 7%

1994

6380

+ 8%

1995

7035

+ 10%

1996

8853

+ 26%

1997

9766

+ 10%

Source: MBD Report (1998)

The trend provided by RICS (1984 - 1995) was based on D&B new orders which excluded overseas work, civil engineering, heavy engineering, term contracts, maintenance and repair and sub-contract work while the statistics employed for both the

34


MSI (1992 - 1996) and MBD (1991 - 1997) reports were based on D&B output which includes civil engineering and repair works. A study carried out by Rowlinson (1986) found that between 1960 to 1989, D&B procurement method, in most circumtances, became an alternative to the traditional method. Masterman (1989), based on a survey, found a similar result which shows that D&B procurement method was the second most popular alternative to the traditional method. Also the Ndekugri and Turner (1994) study shows that most clients, architects and contractors are of the opinion that D&B procurement will increase in popularity.

Trend in Design and Build Output, 1991 - 1997 10.0 9.0

(GBP Billion)

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1991

1992

1993

1994

1995

1996

1997

Figure 2.14: Trend in Design and Build Procurement Method (by output ) Source: (MBD, 1998)

35


2.6.1 The Trend in Design and Build by Procurement Type

Within the overall growth of the D&B market, a lot of changes have occured in the market of procurement type especially in the aspect of popularity of each procurement method annually and the changes in the value of each procurement method. Among the various types of procurement method in D&B, the value of pure D&B output has fluctuated throughout the period 1993 to 1997. From Table 2.6, it can be seen that the highest growth recorded was in 1997 i.e. ÂŁ2.2 billion. But, if we were to look at the percentage of annual value compared to annual total D & B, it is apparent that pure D&B captured the interest of contractors in 1991, in which it covered almost half (49%) of the total D & B output in that particular year. In 1997, although pure D&B has shown a strong growth, in terms of popularity and utilisation of the method compared to the total Table 2.6: Trend in Design and Build by output, 1991 - 1997 (ÂŁBillion)

1991

1992

1993

1994

1995

1996

1997

Traditional D & B

2.5

2.2

1.9

1.8

2.0

1.9

2.2

Novated D & B

1.0

1.5

2.0

2.4

2.7

3.0

2.9

Develop & Construct

1.3

1.5

1.7

1.9

2.0

2.1

2.0

Design & Manage

0.3

0.3

0.3

0.3

0.3

0.3

0.3

DBFO/PFI

-

-

-

-

-

1.6

2.4

TOTAL

5.1

5.5

5.9

6.4

7.0

8.9

9.8

Source: MBD (1998)

36


D&B, pure D&B has gone down by 27% to 22% in 1997 (Table 2.7).

In contrast, the development of the novated D&B sector appears to have peaked in 1996 at £3 billion representing a growth of 200% when compared with the 1991 figure. In terms of popularity, it gained its peak in 1995 when novated D&B constituted 38% of the total D&B for that year. In 1997, it fell by 7% to 31% of the total D&B output, but still marked the highest market in that year.

The Develop and Construct sector shows a similar pattern with Novated D&B and demonstrated a consistent growth between 1991 and 1996, with a growth of almost 62% (i.e. from £1.3 billion in 1991 to £2.1 billion in 1996). The market of Design and Construct equals that of the novated D&B in 1992 with 27% (£1.5 billion). However, in terms of popularity, Develop and Construct started with a market share of 25%, which grew constantly at a rate of 1% to 2% and peaked at £1.9 billion (30%) in 1994.

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Table 2.7: Trends in Design and Build Output, by Percentage of Procurement Type, 1991-1997 1991

1992

1993

1994

1995

1996

1997

(%)

(%)

(%)

(%)

(%)

(%)

(%)

Pure D&B

49

41

32

28

29

21

22

Novated D&B

20

27

34

37

38

34

31

Develop & Construct

25

27

29

30

29

24

20

Design & Manage

6

5

5

5

4

3

3

DBFO/PFI

-

-

-

-

-

18

24

TOTAL

100

100

100

100

100

100

100

Source: MBD (1998)

However, in 1995, the market for Develop and Construct started to decline and reached 20% in 1997.

By far the smallest sector of the total D&B market is that of Design and Manage, which effectively has remained below 6% of the total D&B market.

1996 witnessed the emergence of a new form of D&B, a self financed type, arising from the PFI and the DBFO initiatives. It has been estimated that this sector accounted for an output of almost ÂŁ1.6 billion in 1996, equivalent to a market share of 18% (MBD, 1998) of total D&B in the same year. It has shown a tremendous performance although, prior

38


to 1996 the sector had effectively not existed. The self financed forms of D&B are reported to account for some 24% of the total D&B market in 1997.

2.6.2 Trend in Design and Build Output by Sector

The D&B procurement method is analysed by using total D&B output by sector as this is used in most major areas of the construction markets (see Table 2.8). In private commercial sector, the values of D&B output increased by 74% between 1993 and 1997. The fastest rate of growth is between 1994 and 1995 with an increase of 22% and between 1996 and 1997 with an increase of 23%. The greatest increase was in 1994 when the private commercial construction market covered 25% of the estimated output and was the highest of the total D&B activity in that year (see Table 2.9).

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Table 2.8: Trends in Design and Build Output, by Sector, 1991 - 1997 (ÂŁMillion)

1993

1994

1995

1996

1997

Private Commercial

1500

1580

1925

2125

2612

Private Industrial

1140

1315

1610

1776

1957

Non-residental Public

1000

1045

1230

1649

1672

Public Housing

780

900

710

603

524

Civil Engineering

780

770

800

1931

2128

Repair

390

420

400

430

456

Private Housing

310

350

360

339

417

TOTAL

5900

6380

7035

8853

9766

Source: MBD (1998)

D&B output in the private industrial sector had the same pattern, but, at a constant annual rate i.e. between 10% and 15% annually except between 1994 and 1995 when the growth rate was 22%. The private industrial sector was also the second most important area of activity for contractors involved D&B in 1994. However, the highest market penetration for the private industrial sector was 23%, which was in 1995 and was the second most important activity in that same year. The overall growth rate between 1993 and 1997 was almost similar to that of private commercial. The third most important area of activity for D&B contractors in 1994 was nonresidential public expenditure where the D&B output was estimated at 16% of the total D&B market. The annual growth rate was significant, going from 5% to 34%.

40


Table 2.9: Trends in Design and Build Output, by Percentage of Sector, 1991 - 1997

Sector

1993

1994

1995

1996

1997

(%)

(%)

(%)

(%)

(%)

Private Commercial

26

25

28

23

27

Private Industrial

19

21

23

20

20

Non-residental Public

17

16

17

19

17

Public Housing

13

14

10

7

5

Civil Engineering

13

12

11

22

22

Repair

7

7

6

5

5

Private Housing

5

5

5

4

4

TOTAL

100

100

100

100

100

Source: MBD (1998)

However, it slowed down in 1997 with an increase of only 1%, which represents a small decline in real terms. The highest portion for non-residential public sector was in 1996 which constituted 19% of the total D&B activity

For public housing output, there was a total decline of 32% between 1993 and 1997. This declined in 1994 by 21% followed by 15% in 1995 and 13% in 1996. These declines reflected further cuts in the government’s allocated capital expenditure grant to the Housing Corporation’s programme. In terms of D&B output by percentage of sector, the highest portion was in 1994 which was 14% of the total D&B in that year.

41


The most significant changes in the civil engineering sector occurred in 1996, when the value of D&B output shot up by 141% from ÂŁ800 million in 1995 to ÂŁ1931 million in 1996. This tremendous growth was mainly due to construction activities worked by PFI projects in D&B which started in 1996. The growth rate has started slowing down since 1997 with a decline of 10%. In 1996 the market share which constituted the highest for the civil engineering sector was 22%, which coincided with a decline in market share for public housing.

In the repair sector, the annual values of D&B output were at constant growth rate of between 6% and 8% except for in 1995 when the rate appeared to decline by 5% to ÂŁ400 million. The market covered was highest in 1993 and 1994 with 7% market share which then reduced to 6% and 5% in 1996 and 1997 respectively.

2.7

Summary

In conclusion, it is essential that a firm who really want to procure D&B method need a thorough understanding on the types, characteristics, procedures, advantages and disadvantages so that benefits of D&B can be exploited.Given the various trends of D&B produced by many studies, there is a possibility for D&B to grow further. However, the trends in D&B (percentage by value of work and percentage by number of contracts) produced by RICS have put the prospect of D&B in question when it shows a slight decrease between 1993 and 1995, which is not found in any other studies. Therefore,

42


various factors responsible for the trend, advantages and disadvantages in certain major aspects need to be studies which will be explored in the following chapter.

43


44


3.1 Introduction

The choice of a procurement route for construction work is one of the many important decisions that construction clients have to make. A project may be regarded as successful if the building is delivered at the right time, at the appropriate price and quality standards, and provides the client with a high level of satisfaction. Therefore, the decision should be made based on several factors apart from evaluating the advantages and disadvantages of the alternatives (Skitmore and Marsden, 1988; Bennett and Grice, 1990; Love et al., 1998). At the same time the construction industry keeps changing as a result of clients who are themselves becoming more sophisticated and are now the driving force for improvements in the construction process (Pearce, 1992). One of the changes which is the most far-reaching is the procurement method (Yisa et. al, 1996).

An increasing trend in any procurement route means the client utilises it. The higher the utilisation of that particular procurement, the higher will be the trend or vice versa. This means that to identify the factors responsible for any increasing or decreasing trend is actually to identify the factors responsible for the client’s choice of that particular procurement system. Apart from these clients’ factors, there are many other factors that contribute to the pattern of the trend such as technological factors, economic, marketing etc. Design and Build is one of the procurement systems that has captured the attention of the industry since the beginning of the introduction of JCT81, which provides a standard form of contract for Design and Build. It is a product/service produced by the

45


contractors/consortium that has managed to gain wider acceptance throughout the construction industry by showing a significant increase from 5.1% of total procurements in 1984 to 35.7% in 1993 and then decreasing to 30.1% in 1995, while the use of predominant traditional method has decreased from 78.4% in 1984 to 54% in 1993 and increased to 58.3% in 1995 (RICS, 1996). However, in terms of comparison between D & B and the traditional system, the data shows that overall the percentage of projects in which the traditional procurement is used is still higher than that of the D & B. This shows that the traditional method is still widely used.

As has been concluded in the previous chapter, the trend in the use of design and build has shown an increasing pattern for the period throughout 1984 until 1993 except between 1993 to 1995 which has shown a decreasing trend. Various reasons and factors that have contributed to such trends is explored in this chapter. These factors are categorised as clients’ factors, marketing factors, economic factors and technological factors.

46


3.2 Factors Influencing the Trend of Design and Build Procurement Method

Based on literature review various factors have been identified as responsible for the trends in D&B which are categorised and described as follows:

3.2.1 Clients’ Factors On the part of the clients, various factors have contributed to their decisions in choosing D & B as their procurement method.

3.2.1.1 Price Certainty It was claimed that D & B is able to offer a certain price which is convenient to a client. According to a client survey by Chevin (1993), 40% of the respondents claimed that they thought Design and Build was the most appropriate form of contract when guaranteed price is crucial to the success of a project.

One of the most important advantage

acclaimed to D & B is that there is a greater price certainty because of a shorter lead-in and construction timetable (Chappell, 1991; Akintoye, 1994).

3.2.1.2

Single Point of Responsibility

D & B provides a single point of responsibility compared to the multiple reponsibility points in the traditional system. The client has only one person to deal with, which means if technological or contractual difficulties arise, the contractor is ‘solely’ responsible (Turner, 1986; Griffith, 1989; Chappell,1991). Turner (1986) asserts that the client must

47


remain liable for expressing in his brief what he requires, but the contractor is responsible for satisfying this requirement once his offer to do so is accepted.

Hutchison and

Spencely (1991) agreed that D & B was invented to save the building owner from having to contract with anyone other than a builder.

This makes the client’s job much more

easier. Chevin (1993) found, 60% of the client’s surveyed think that single -point responsibility is likely to reduce points of conflict on a project through single-point responsibility offered by D & B. Frank (1993) points out that the single responsibility that D&B offers not only an advantage in normal situation but also in the event of a building failure. Frank (1993) also highlights that this is a feature which commends itself to clients frustrated by the traditional system where they have encountered difficulties in attaching responsibility to either architect or contractor because each blames the other for the failure. A study by Ndekugri and Turner (1994) has shown a similar finding; that the client has only one party to deal with, that is, the contractor. Compared to a traditional system, the client is often in contract with designers (architects, structural engineers, electrical and mechanical services), quantity surveyors and nominated subcontractors, all of which are quite complicated to deal with. The same goes for McLean’s (1995) view that the contractor is responsible for all aspects of the project. Any claims or pre-claims that arise are much simpler in that they are between the contractor and his subcontractors and suppliers. However, single-point responsibility is affected when smaller and less experienced D & B contractors, most of whom started in traditional contracting, do not have an adequate understanding of the design liability situation and insurance implications of the D & B approach (Ngekugri & Turner, 1994).

48


In a study by Preece and Tarawneh (1997) it was found that, at the pre-construction phase, all the respondents were deterred by incompetent or claims-conscious contractors and poor references and recommendations.

3.2.1.3

One-stop-shopping Approach

Chevin (1993) found that 46% of clients like D&B because of the one-stop-shopping approach, in which there is no opportunity for the contractor to go back to the client for further information or money (New Builder, 1994).

Under a traditional system there is an obligation on the client’s architect to provide additional information where necessary. But in D&B there is no such obligation, so the contractor has to create his own proposals and these should tie up with the client’s requirement.

49


3.2.1.4

Shorter Project Duration Time

D & B results in a shorter total project duration compared with the traditional approach. The procurement method is associated with shorter overall project times due to the system’s ability to overlap the design and construction phases, improved communications between the various members of the project team, the integration of the two basic functions of design and construction and the improvement in buildability and the use of contractor’s resources (Masterman, 1992). A survey by Contractor Journal in 1993 identified that 45% of contractors reported that building times had been reduced, while a further 44% reported no change. In 1994, 46% of contractors reported that building times were reduced. The speed of construction is one of the major marketing features of D & B, and forms one important element of the sales proportion. It is a major factor leading to the growth of the procurement method, and this has been exacerbated by the recession. Speed of completion becomes of the essence when buyers look to gain the quickest possible return on their investment, a feature of business which is emphasised in difficult economic conditions. From a client survey (Chevin, 1993), 54% of the clients thought that D & B offered savings in construction time. The majority of the respondents (44%) estimated that the average time saved was between 1 and 15%. In the survey of construction contractors (Akintoye,1994), 54% of the respondents claim that the use of Design and Build can save 20% of overall project time compared to the traditional procurement system. New Builder (1994) reported that the use of D&B on an office building project cost £ 17.5 million and described how the construction period was shortened to 18 months due to a more efficient management although the pre-

50


construction period was longer on the traditional system.

Factors that contractors

considered contributed to the shorter timescale compared to traditional system (JCT 80) based on Akintoye’s (1994) survey were as follows: •

Incorporation of design process into construction programme

Overlap of design and construction

Speed of response to alteration

Buildability

Pre-contract planning is more detailed

Opportunity to choose construction methods with shorter lead-in site times

One route decision

Motivational benefit of the design and construction teams being the same side

Fewer reason for extension of time

Contractors in best position to reconcile time with materials /specification/method of construction

Design development and pricing run in paralell

Overall scheme (design and specification) agreed with client at start of contract

Better rationalization of design detailing

Better and right solution prior to activity on site minimizes abortive work

Short cuts available to designer/builder - less parties involved in the design

51


Ndekugri and Turner (1994) found that there were two reasons that contributed to this advantage. Firstly, buying and appointment of subcontractors and construction could overlap design. Secondly, the drawing up of specifications, where, the contractor had a superior knowledge of the state of the industry in terms of lead times of key items of materials and components, and would usually arrange his affairs to minimize delay in their procurement. McLean (1995) agreed that D & B has led to quicker procurement of a building due to less up front work required as the contractor takes over management of the project much earlier. Furthermore, a survey of architect’s views (Akintoye & Fitzgerald, 1995) shows that a majority of the respondents agree that D & B can save construction time.

3.2.1.5

Reduction In Costs

It is believed that D & B to lead a massive saving in costs as Kenworthy (1992) stated that the cost of building can be reduced by 15% by using D&B as compared to JCT 80. In Chevin’s (1993) survey, 60% of the respondents (client) thought that D&B could save money on projects compared with other procurement routes, with 48% estimating average savings between 6% and 15%. The factors responsible to the reduction of the overall cost (Akintoye, 1994) are as follows: •

Simplified design solution

Working to an accurate fixed cost

Early ordering

In-house ability to buy in materials of equal quality at lower prices

52


Reduced design fees

Better knowledge of construction solutions

Contractor buildability input

Limited variation opportunity

Contractor’s expertise in developing the solution first time

Reduced construction time

Contractor’s experience of construction market

Ndekugri & Turner (1994) survey shows that over 50% of respondents, including architects believe that the D & B approach can lead to a high reduction in costs through improved constructability of design. Furthermore, professional fees paid to consultants in respect of their services on D & B contracts were much lower than those involved with the traditional approach. For a client with an overriding concern on costs, the D & B approach provides better protection than the traditional approach.

According to

Akintoye (1994) the boom in the construction industry in the 1980s had witnessed the urgency of clients for early procurement of their building to secure an economic windfall. The clients were much more interested in a guaranteed lower construction cost.and D&B had fulfilled the client’s requirements.

However, many contractors fail to insure against their design liability. This is because the insurance industry has very limited experience in providing coverage to contractors

53


against liability for design. This has meant that the pool of underwriters is very small, leading to high premiums. Coverage against liability for fitness for purpose is virtually unavailable (Ndekugri & Turner, 1994).

3.2.1.6

Transfer of Risks

In terms of risk, almost all risks are transferred to the contractor. According to Hogg and Morledge (1995), the D & B procurement route transfers more risks to the contractor than any other construction contract . It is reckoned that great care must be taken to ensure that the project is suitable for a D & B approach and that the contractor is willing and able to accept the risks, and has the relevant experience to control the risks satisfactorily, otherwise they may pass back to the client. This can occur when the contractor becomes insolvent or goes into liquidation .

In one aspect, D & B construction involves less risk of litigation or arbitration proceedings because the contractor is responsible for all matters of D & B construction, including matters regarding fitness for purpose (Ndekugri & Turner, 1994).

Macneil (1995), has shown that clients have become increasingly dissatisfied with the end-product that D & B contractors provide. This is because the contractors believe client attitudes are undermining the process that enabled them to influence design in return for shouldering all project’s construction risks.

54


3.2.1.7

Quality Achievement

Quality in D & B is the most arguable factor discussed in the literature. The result of the CCMI survey in 1986, or indeed of any other published examination of the D & B system, do not recognise high levels of functionality or quality as a benefit when using this method of procurement. These results reflect the prevailing attitude among most clients especially architects , that D & B is most suitable for simple projects and lower quality achievement in the aesthetics and finished product (cited in Masterman, 1992).

In terms of the measurement of quality, it could be argued that the client’s view of success is the correct measure to use. This is because of their own generally very limited experience of the building process. The client’s view of success will also be affected to some undefinable degree by how successfully the architect or the contractor convinces them that the project has been successful (Pain & Bennett, 1988).

Masterman (1992) claimed that current experience does not agree with the CCMI’s opinion as many large, complex and prestigious projects have been, and are presently being, constructed using this method, seemingly confirming that quality is not a benefit only if the employer’s requirements are inadequate and the selection of the bidding contractors not carried out correctly. A growing, and expert, body of opinion contends that the system is suitable for the implementation of most types of building provided that the employer’s requirements are carefully and accurately specified.

55


On the other hand, some have argued that comparison of costs and quality in absolute terms is not practicable and that a more appropriate approach is to compare the client’s satisfaction with cost and quality at the end of the project. It was proven from the study that most clients (89%) are satisfied with the quality of design in D & B. However, the knowledge of quality among the respondents is varied and still in question (Ndekugri & Turner, 1994).

Architects often criticise that D & B gives the contractor too much control over projects which results in a lack of quality control (New Builder, 1995). A report produced by the University of Reading, “Designing and Building a World Class Industry”, mentioned that the best performance in meeting clients’ quality expectations is achieved where employers’ requirements have few definition and where contractors’ own in -house designers undertake design from an early stage. On the other hand, the worst outcome in meeting clients’ quality requirements are when novation is used. It was found in the above survey that only 50% of D & B projects meet clients’ expectations on quality, compared with a 60% satisfaction rate for traditional projects. The final outcome was that D & B performs consistently better in meeting standards for complex or innovative buildings than for simple, standard, traditional buildings. The Secretary of State for Culture, Media and Sport, Chris Smith, in 1997 called on more architects to make D & B work by injecting design quality into D & B projects. If a building does not achieve that seal of approval, then it is flawed architecture. Not only that, Smith reiterated the government’s intention to make architecture and design quality

56


a fundamental consideration in all government policy by saying that, “There has been a regrettable tendency for architects to stand aside from the mainstream, then complain that they are being left out� (Building, 1997).

However, some clients claim that under a traditional system, the client has better control over design and quality standard both through specification and supervision, whilst part of this control is lost with D&B.

A study by Preece and Tarawneh (1997) of senior managers working for client organisations proved that a gap exist between what clients actually want and what the contractors think they want due to less control over quality of service. The study shows that during the construction period, the respondents are all dissatisfied by contractors who fail to fulfill their promises, such as being unable to meet agreed costs and time targets. Besides, dissatisfaction also occurs because of contractors’ failure to control quality and costs on site. At the same time the respondents are unhappy with contractors who are lacking in interest and understanding. Most are dissatisfied by poor quality proposals and specifications and a lack of detailed programming to carry out the project.

57


3.2.1.8

Better Buildability

The other factor that is still important is that D&B can offer creative solutions for buildability, cost-off effectiveness and speed of construction.

According to Griffith

(1989), the concept of buildability means any aspect which makes the project easier to undertake or makes the construction more buildable. The buildability functional aims are to simplify contractual arrangement, integrate design and construction, improve communication, increase operational efficiency, reduce project duration, reduce costs, increase performance and minimize project changes. Griffith (1989) claimed that the D&B procurement method has the functional ability to fulfill these aims.

3.2.1.9 Avoidance of Conflicts and Claims D&B contracts provide for the client and contractor more interaction directly. It improves lines of communication and enables the contractor to respond and adapt more promptly to the client’s needs. This allows problems to be s olved quickly and reduces conflicts and claims, while While the separation of design and construction under the traditional system has created an environment in which the parties defend and uphold their respective rights and concentrate upon apportioning blame for project deficiencies rather than encouraging teamwork (Griffith, 1989).

58


3.2.2 Government Policies Government policies can either encourage or discourage production. Grants encourage building and works in certain regions, or inner cities. Elsewhere, planning constraints and public objections to motorways and out-of-town shopping centres reduce demand for construction. Interest rate policy, and decisions to invest in infrastructure projects, have direct implications for construction work, in particular because the public sector remains a major component of construction demand. Therefore, it is one of the vital factors that has a great influence in affecting the trend of D&B. The effects come from various sources such as follows:

3.2.2.1 Introduction of Private Finance Initiative (PFI) The introduction of the Private Finance Initiative (PFI) in 1992 which was to encourage private sector investment in traditionally publicly procured projects increased the use of D&B procurement method (RICS, 1996). PFI had increasingly been used not only in infrastructure project such as roads and bridges but also in hospital, school and prison projects. All PFI projects employ the concept of D&B and they are differentiated only by varieties of terms i.e. Design, Build, Finance, Operate (DBFO), Design, Construct, Manage, Finance (DCMF), Build, Own, Operate (BOO), Build, Own, Operate, Transfer (BOOT), etc which has been dealt in Chapter Two. In PFI, the government seeks private sector involvement in the belief that private sector enterprise and disciplines can bring gains in efficiency and reductions in cost. This is not surprising given the government’s

59


policy of withdrawal from investment in public assets ( Building, 1997).

3.2.2.2 Cut in Government Expenditure Two main reasons why D&B has often been favoured among the public sector. First, the provision of necessary cost certainty and second, allows a large degree of risk to be transferred to the contractor. This is because in the public sector, the total cost of a construction project is required to be determined at the outset due to restrictive budgetary controls. In both 1996 and 1997, there was a decline in output due to the reduction of expenditure at the beginning of the scheme. However, it is expected that the impact of large PFI projects boosting activity will occur in 1998. The PFI has been targeted at the education sector only since the end of 1995. The Treasury estimates that investment worth more than GBP 1 billion could be generated during the next three years. Private funding and the PFI should result in a slight increase in investment in the sub-sector

as a whole in 1997 and 1998.

Changes to the rules governing local

authorities and PFI deals and a pick-up in the pace of PFI, together with a significant impact from lottery funds, should see output increase by about 3% in 1998, after a drop of 3% in 1997 (Cannon, 1997).

In the public housing sector, the Housing Corporation has advised housing associations to utilise D&B contracts.

Along with central government finance, the

Housing

Corporation provides 75 per cent of the public money available to housing associations. However, from 1994 onwards, the Government cut the Housing Corporation’s budget

60


for the 1994/95 financial year withfurther reductions in 1996, with the reason that housing associations will secure financing from the private sector. The reduction by the government of its own capital expenditure hit the construction industry particularly hard, which resulted to a restriction in the demand of D&B (MSI, 1997). Mason (1993) reported on a survey of 20 housing associations and found that all of the respondents were now using D&B for the majority of their current programme and 70% of the associations favoured the D&B approach.

3.2.2.3 Encouragement of Partnership/Partnering The Government, through a report, ‘Constructing The Team’ headed by Sir Michael Latham, has encouraged all parties in the construction contract to enter the partnering concept in their business. Partnering is a management approach used by two or more organisations to achieve specific business objectives by maximising the effectiveness of each participant’s resources. The approach is based on mutual objectives, an agreed method of problem resolution and an active search for continous measurable improvements (Bennett et al., 1995).

Therefore, it is more than just building close

relationship; it is about developing a partnership between equals who share the risks and rewards. So far, it has been claimed that partnering has contributed benefits such as improved effeciency, reduced costs, reliable quality, fast-track construction, completion on time and continuity of workflow. However, this can only be achieved through good management skills, shared goals and a will to resolve potential difficulties almost before they arise. A recent survey carried out by Construction Manager found that all major

61


contractors in the UK had an increasing trend towards substantial partnering workload (Walter, 1998).

The close relationship that exists between the client and contractor resulting from the partnering system has caused D&B to be widely used due to a lower number of parties involved in the contract and the integration of design and construction. On the other hand, the fragmented nature of the traditional method involves a long winded way for the benefits to be achieved.

3.2.3 Economical Factors Construction plays an important role in the economy. It produces and maintains the built environment which consists of infrastructure, commercial and industrial buildings and housing. Therefore, the relationship between the economic conditions and construction is very close, which means whatever occurs in the economy will directly affect the construction industry.

The influence of economical factors towards the trend of D&B can be analysed through the following aspects as below:

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3.2.3.1 The Economic Condition of the Nation The construction industry market, like any other industry tends to develop a pattern known as the business cycle during which alternating periods of booms and slumps in the construction industry coincide with the movements of trade.

The effects of the

contruction industry on the economy and of the economy on the industry occur at all levels and are interrelated to each other.

The four main ones are, however, the

relationship of the economy and the industry (1) in demand and output (2) in employment and incomes (3) in balance of payments and (4) in the level of prices (Hillebrandt, 1985). These effects have repercussions on other sectors of the economy through a knock-on effect. Thus a decline in construction will have an adverse effect upon other activities and industries in a market economy.

In terms of demand creation, there are three groups of environmental factors that affect all construction demand and which are as follows:

a) The general economic situations and expectations about how this will change. •

Prosperity as an economic condition will lead to a low rate of interest and therefore a ready availability of finance which later increases the demand for construction.

•

The rate of inflation does have an effect on the construction activity if the level of house prices and property values rises so much that it exceeds the general level of inflation and Government takes action to deflate.

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b) Cost of construction in relation to the cost of other products and services on which persons and organisations can spend money. •

Construction demand may be affected if the cost of new construction rises considerably faster than durable consumer goods. This means that individuals or organisations will prefer to spend their income on other things; for example, durable consumer goods or cars. Industrialists may consider putting plant and machinery into old buildings. However, subsidies and grants may influence the effective price paid by purchasers of construction products. Incentives, schemes including cash grants for capital investment, provision of government factories and loans can, may also affect demand decisions.

c) The operation of rules and regulations governing land use and construction. •

Delays in the processing of applications for planning may reduce the construction demand (Hillebrandt, 1984).

Finally, it is clear that the construction industry is a useful indicator that recession or prosperity is to follow.

3.2.3.2 The Extent of Booms in the Construction Industry According to Cannon (1997), in 1997, the construction industry can look forward to a period of sound and sustained growth. After a meagre growth in construction output of 0.3% for 1996, total workload is expected to rise to £51.16 billion during 1997, a growth

64


of 2.7%. In 1998, growth will be even steeper, rising to £52.93 billion, an increase of 3.4% - only 4% down on the boom years leading up to 1987.

Since the late 1980s, the construction industry has been badly hit by the recession in the UK. In Figure 3.1, this can be clearly seen from total construction new orders which decreased from the highest level in 1988 at £28,039 million to £22,847 million in 1993, showing a decline of 18% (HMSO, 1984-1997). However, towards 1997, it shows a gradual increase to £22,955 i.e. a rise by 0.50 %.

On the other hand, the D & B trend has been increasing between 1984 and 1993 and from Figure 3.1, there is a sharp increase of 20.9 % to 35.7% of contract value

between

1991 and 1993. At the same time, traditional procurement method has been going in the opposite direction. The driving force towards D & B in that period was determined as the impact of the recession and disillusionment with many conventional contractors (New Builder, 1995).

65


In an attempt to cut public expenditure resulting from the bad situation of the recession, the Government took the iniative by introducing the Private Finance Initiative (PFI) in 1992. The establishment of the PFI clarified the Government’s intention by encouraging private sector investment involvement in traditionally publicly procured projects. Many companies have closed down their non-core construction departments during the recession and these services have been replaced by D & B contractors (Bollton, 1995). One of the reasons that has contributed to their survival is the price certainty, one of the most attractive features offered by D & B and one which has become an advantage during recession.

Figure 3.1:Trend in Construction New Orders and Design and Build (1984 - 1996)

40.00 35.00

25000

30.00 20000

25.00

15000

20.00 15.00

10000

10.00 5000

5.00

Source: HMSO (1984-1997) & RICS, (1996)

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1996

1995

1993

1991

1989

1987

1985

1984

0

D & B (% of contract by value)

Construction new orders ($ Million)

30000

New orders D&B


3.2.3.3 Interest Rate Whether by Government action or by constraints of supply and demand, interest rates tend to rise when economic activity is buoyant and fall when it is slack. Lower interest rates encourage borrowing, which leads to more consumer spending and investment, increased imports, a higher level of economic activity and possibly faster inflation (The Economist, 1995). Higher interest rates do the opposite. Figure 3.2 show the trend in interest rate.

Figure 3.2: Trend in Interest Rates - (base rate), 1983 - 1997

16.0 14.0 12.0 (%)

10.0 8.0 6.0 4.0 2.0 1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

0.0

end year

Source: Economic Trends, 1997

Interest rates have a key role to play in the construction industry because these markets are heavily financed through borrowing. When the balance of payments is in imbalance, the Government has usually reacted by restricting growth and damping down demand by putting a tax on employment, which may decrease the amount of expenditure on

67


construction projects, taxing incomes to reduce spending power or taxing goods to raise their price and hence reduce demand.

Unfortunately, these measures affect the

construction industry directly or indirectly. An increase in interest rates raises the cost of capital projects at the same time as the reduction in purchasing power makes it less likely that profits from capital expenditure would be as high as seemed likely before these measures were taken. This reduces industrial and commercial building, including that of nationalised industries. It also affects the rate at which local authorities may borrow and hence increases the cost of their schemes, which results in a reduction in the availability of funds for house purchase (Hillebrandt, 1985).

It is important to distinguish between nominal and real rates of interest. Nominal rates are the rates quoted by banks or lenders. The real rate of interest is approximately equal to the nominal rate of interest minus the rate of inflation (Gruneberg, 1997). In periods of changing prices, the nominal interest rate may prove a poor guide to the real return obtained by an investor. Most investments in construction are financed from loan credit or organization profit, hence real interest rates constitute an important cost factor in construction. Even where investment is financed from an organisational profit, interest rates are still an element in the decision-making process. The real interest rate also reflects an unobserved variable i.e. the real cost of funds. This means a rise in the real cost of funds may be implied as a result of the rise in the nominal interest rate and a fall in inflation (Akintoye & Skitmore, 1993).

68


3.2.4 Marketing Marketing has been defined as the profitable matching of the company’s resources to the needs and wants of its clients’. From the marketing point of view, it seems that this has contributed more towards the declining trend of D & B which shows that as a construction product, D&B has failed to attract more clients. The reasons might be either that it has a lot of defects and disadvantages, or because the contractor as producer/manufacturer has failed to market D&B. This may also be due to several factors:

3.2.4.1

Service Industry

A number of authors agree that marketing in a service industry differs considerably from marketing consumer goods (Moore, 1984; Fisher, 1989; Pearce, 1992). Marketing in construction is in essence selling promises, because the client is normally being asked to buy something which does not exist (intangibility of services, inseparability, perishability and heterogenity) (Yisa et al., 1996). The same goes for D & B as it fails to attract clients unless it is proven through past track records that D & B is working to the advantage of the client.

69


3.2.4.2

The Unique Characteristics of the Construction Industry

The construction industry has unique characteristics which are related to its structure, production process, physical characteristics and composition. Those characteristics go a long way towards explaining methods of production, organisation, price determination, payment methods, financial decision control and an industrial structure unlike those met in other sectors. Hence, the construction process generates management problems and opportunities at the level of the firm which may differ in scope, scale, time and the type of appropriate solutions from those met in firms of other industries ( Yisa et al., 1996). As for D & B, the main difference exists in the procurement process, that is, the integration of design and construction done by the same party (such as transfer of risk to the contractor and single point responsibility) whereby the contractors are responsible for the design as well as construction. This shows that the scope of contractor’s responsibility is much more wider compared to the traditional method which would only involve construction work, therefore, the problems of managing the organisation as well as marketing the product would be still exist and show very little improvement.

3.2.4.3 Client-oriented Business One of the difficulties met by companies in attempts to develop and integrate marketing policy into their strategic planning and to accomodate marketing activities is due to the attitudes and beliefs among the contractors that only clients can create demand for work they themselves cannot do so (Yisa et al., 1996).

70


In D & B, certain companies still believe that the choice of procurement methods are totally based on the client and the contractor has no power in creating the demand. In other words, the trends can only be determined by the client.

Above all, however, the introduction of Private Finance Initiative (PFI) which produces a varieties of D & B types has replaced these perceptions whereby the contractors have become a consortium comprised of contractors, consultant and a financial institution instead of operating alone as a contractor. Therefore, through the formation of the consortium, they now have more power and control in creating demand instead of totally dependent on the client.

Furthermore, there is today ample evidence that contractors can create work for themselves, and that contractors can become developers, especially in industrial and commercial building fields .

3.2.4.4

Lack of Marketing Experts

Construction, education and training, according to Harris (1991), gradually evolved into a system producing a few “highly scientifically trained engineer- graduates� from universities, with the majority of tertiary studies for craft, technicians and professional groups mainly delegated to day-release instruction at local colleges. These engineers

71


and technicians, Harris added, are often reluctant to take on a wider as distinct from a purely professional, engineering role in general management.Therefore, they fail to realize the importance of marketing which later affects an effective implementation of marketing strategies, which also affects the development of D & B.

Pheng (1991) observed,

marketing has attracted only little attention among construction contractors and professionals alike.

3.2.5 Complexity and Technological Change NEDO (1983) found that the complexity of construction is one of the elements to be considered in selecting types of procurement. Turner (1990) states that the increase in automation, information technology, robotics and so on constantly affects the balance between peoples’ involve ment and the attention that should be given to technology and machinery. The majority of buildings required are still relatively technically simple and require only simple environmental services.

However, some offices, more complex

hospitals, clinics, enclosed shopping facilities, department stores and similar structures will

require

a

high

level of environmental servicing.

Some

buildings

for

industrial/commercial processes, may need to be technically advanced, truly ‘high-tech’ for such processes as electronics, ‘micro-chip’ production and pharmaceuticals. Turner added that complexity as a procurement assessment criterion (PAC) is not therefore something that can be generalised by building type - it requires to be assessed and it should become apparent fairly early in the project’s life. He suggested that D & B should only be considered for a building which is not complex. For a building which needs to be

72


‘technically advanced and/or highly serviced’, D & B may not be appropriate for complex solutions because complexity may involve a relatively long design period with client involvement throughout. Turner’s arguments have been agreed by most architects: that D & B is only suitable for simple buildings, not for large and complex projects (Smith, 1994). However, the above arguments are no longer valid as Hutchison and Spencely (1991), Akintoye (1994), Sweett (1997) found that D & B is adopted for all kinds of projects. In fact, a report by the University of Reading (Chevin,1996; Clark, 1997) highlighted that D & B performs consistently better in meeting standards for complex or innovative buildings than for simple, standard and traditional buildings.

3.2.6 Life-Cycle Cost According to Flanagan and Norman (1983), life-cycle cost can be applied in any area of economic decision making. It is particularly relevant to the proper identification and evaluation of the cost of durable assets in the construction industry. Experience has indicated that decisions should be made on the basis of the total life-cycle cost of the building and not just the initial capital cost. The basic premise of life-cycle cost is that all costs, future or present, arise from an investment decision and life cycle cost should be seen as essential in the decision-making process from the beginning and must be considered as a major evaluation criterion in the design brief.

73


Price certainty as offered by D & B means that the initial cost is certain. As indicated in the life cycle cost, the cost of a building comprises of the initial cost and running costs whereby running costs will only be incurred after the building is completed. As has been explained, any procurement will only involve initial cost. Therefore, D & B only differs in terms of construction cost, in which D & B can offer price certainty as compared to traditional method. The integration of design and construction that is offered by D&B is also an advantage in the application of life-cycle costing whereby the decision of what kind of design, types of material to be used and methods of construction to be applied would be made by one single party (i.e. contractor). Therefore, the total life-cycle cost can be considered much more easily rather than be dealt with many different parties because of the separation of design and construction function. The running/maintenance cost will be cheaper if D & B can offer quality building, but if D & B has failed to offer quality building, the maintenance cost will be higher compare to the building procured by another type of procurement method.

3.3

Summary

A vast review on the literature has been carried out in various aspects in order to identify the possible factors affecting the trend in D&B. To simplify the study, the factors have been classified into six groups namely clients’ factors, government policies, economical, marketing, technological and life cycle cost.

74

These factors are vital as a basis for


designing a questionnaire in which will be discussed and and explained in the following chapter.

75


CHAPTER 3 3.1

Introduction

44

3.2

Factors Influencing the Trends in Design and Build Procurement Method 3.2.1 Clients’ Factors

46

3.2.1.1

Price Certainty

46

3.2.1.2

Single Point Responsibility

47

3.2.1.3

One stop shopping approach

48

3.2.1.4

Shorter Project’s Duration Time

49

3.2.1.5

Reduction In Cost

51

3.2.1.6

Transfer of Risk

53

3.2.1.7

Quality Achievement

54

3.2.1.8

Better Buildability

57

3.2.1.9

Avoidance of Conflicts and Claims

57

3.2.2 Government Policies

58

3.2.2.1

Introduction of Private Finance Initiative (PFI)

58

3.2.2.2

Cut in Government Expenditure

59

3.2.2.3

Encouragement of Partnership/Partnering

60

3.2.3 Economical Factors 3.2.3.1

The Economic Condition of the Nation

62

3.2.3.2

The Extent of Boom in the Construction industry 63

3.2.3.3

Interest Rate

65

76


3.2.4 Marketing Factors

3.3

67

3.2.4.1

Service Industry

68

3.2.4.2

The Unique Characteristics of the Construction Industry

68

3.2.4.3

Client-oriented business

69

3.2.4.4

Lack of Marketing Experts

70

3.2.5 Complexity and Technological Change

71

3.2.6 Life Cycle Cost

72

Summary

77


CHAPTER 2 2.0

Introduction

9

2.1

Definition

9

2.2

Types of Design and Build

10

2.2.1

Pure/Traditional Design and Build

10

2.2.2

Novation Design and Build

12

2.2.3

Develop and Construct

14

2.2.4

Design and Manage

15

2.2.5

Architect/Designer-led Design and Build

17

2.3

2.4

Private Finance Initiative

18

2.3.1

20

Design, Build, Finance, Operate (DBFO)

The Characteristics of Design and Build

23

2.4.1

Responsibility

23

2.4.2

Price and Time Certainty

24

2.4.3

Speed

24

2.4.4

Cost

25

2.4.5

Quality

25

2.4.6

Improved Communication

26

2.4.7

Complexity

26

2.4.8

Risk

26

78


2.5

The Trend in Design and Build

27

2.5.1

Trend in Design and Build by Procurement Type

34

2.5.2

Trend in Design and Build by Sector

37

79


44


4.1

Introduction

The trend in D&B procurement method has been influenced by various factors. One of the purposes of this study is to review the factors that are influencing the trend of D&B procurement method that had been identified in the chapter 3. In order to meet the second objective of the study, this chapter will discuss the views of the contractors, quantity surveyors and architects towards the present and future trend and the degree of influence that these factors have on the trend.

4.2

Survey Methodology

Based on the literature review, twenty three factors that have affected the trend in the use of D&B procurement method, and formed the basis for the designing of a questionnaire, were identified. The questionnaire consisted of five questions(see Appendix 1). In the last question, the 23 factors were presented. The factors were ordered to try and avoid primacy and recency effect in completing the questionnaire. As cited in Atkinson (1998), the primacy effect is where items presented early in a list are more likely to be recalled than those presented towards the middle. The recency effect is where items presented at the end of a list are more likely to be recalled than those towards the middle. A two-page questionnaire was mailed to 100 UK contractors, 75 quantity surveyor firms and 75 architect firms (refer to Section 1.4.1 in Chapter 1). Attached with the questionnaire

77


was a letter indicating the objectives of the study, addressed to the Managing Director for construction firms and Senior Partner for consultancy firms. Within three weeks of mailing, 60 completed questionnaires had been returned. A reminder letter with another copy of the questionnaire was mailed to the selected 150 firms who had not replied. A further 46 replies were received within two weeks of the reminder letters which brought a total of 106 replies (42%). However 15 (6%) questionnaires were returned incomplete by some respondents for various reasons, including lack of time or resources, lack of experience in D&B, etc. Therefore a total of 91 (36%) replies were analysed. The questionnaire survey was supported by some follow-up interviews. Table 4.1 shows the statistics of the questionnaires.

Table 4.1: Statistics of the questionnaire

Contractor Q. Surveyor Architect No No No 100 75 75 38 30 23 5 6 4 38% 40% 31% 5% 8% 5% 43% 48% 36%

Number of questionnaires sent Number of positive replies replied Number of negative replies recieved Percentage of positive replies Percentage of negative replies Percentage of total replies to total sent

4.3

Total No 250 91 15 36% 6% 42%

Methods of Data Analysis

The questionnaires were analysed using the Statistical Package for the Social Sciences (SPSS) in order to isolate the most important factors responsible for the trend and to

78


compare the views of these categories of respondents on the factors. Respondents were presented with a graph indicating the trend on the use of D&B procurement method between 1984 and 1995 and a list of factors that may affect the trend which was found from the literature. They were asked to rate them on a 5-point likert scale in term of their extent in affecting the trend with ‘5’ indicating ‘greatest extent’ and ‘1’ indicating ‘least extent’.For each factor, the mean value of the respondents’ rating was named the index. Also, the questionnaires include the ‘category of firms’, ‘experience in D&B’, ‘D&B workload’ and ‘the respondents perception on the future trend for D&B’ which were analysed versus the methods of D&B and factors. The null hypothesis for the study is that the views of the contractors, quantity surveyors and architects on the factors that are influencing the trend in the D&B are the same, i.e. H0: Contractors = Quantity Surveyors = Architects The alternative hypothesis is that there is a difference in the views of contractors, quantity surveyors and architect., i.e. H1: Contractors

Quantity Surveyors

Architects

The null hypothesis was then tested by using Analysis of Varience (ANOVA) to determine the similarities of the views of the contractors, quantity surveyors and architects on the factors.

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4.4

Characteristics of the responding firms.

Figure 4.1 and Table 4.2 respectively show the proportion of the respondents and position held in the organisation. Majority of the respondents held a senior position within their employer’s organisation. Looking at the position of the respondents in the organisation it proves that the respondents have adequate knowledge of the theme of this study to support confidence in the data obtained through the questionnaires. Out of the total, the majority of the respondents are contractors (42%) followed by quantity surveyors (33%) and architects (25%).

Figure 4.1: Proportion of respondents

Architects 25% Contractors 42%

Quantity Surveyors 33%

Table 4.3 shows that most of the respondents are directors (38%) followed by partners (31%), managers (14%), others (9%) and respondents who did not indicate their position (8%).

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Table 4.2: Position held by the respondents Position held

Directors Managers Partners Others Not indicated Total

Category of respondents Contractor No % 18 47 11 29 5 4 38

13 11 100

Quantity Surveyor No % 4 13 1 3 22 74 3 10 30

100

Architect No % 13 57 1 4 6 26 3 23

13 100

No 35 13 28 8 7 91

Total % 38 14 31 9 8 100

Contractor Directors include managing director. Managers are commercial, D&B, public relation and estimating. Others include head of technical service, deputy chief engineer, project controller, cost planner, surveyor coordinator. Quantity Surveyor Directors include managing director. Managers include project manager. Partners are managing, senior and associate Others include head of cost research, project quantity surveyor and R&D analyst. Architect Directors include managing, chairman and principal. Managers include project manager Partners include associate.

In terms of the firms’ experience, it shows that more than half (60.4%) have more than ten years experiences in D&B project followed by 26% who have 6-10 years experiences (Table 4.3).

Table 4.3: Firms’ experience in D&B project Years of experiences

None Less than 5 6 - 10 11 - 20 More than 20 Total

Category of firms Contractor No % 3 8 2 5 12 32 10 26 11 29 38 100

Quantity Surveyor No % 1 4 16 9 30

3 13 53 30 100

81

Architect No % 3 13 3 13 8 35 8 35 1 4 23 100

No 6 6 24 34 21 91

Total % 7 7 26 37 23 100


The breakdown of figures shows that 55% of the contractors, 83% of the quantity surveyors and 39% of the architects have more than 10 years involvement in the D&B project. Six firms (3 contractors and 3 architects) have no involvement in D&B and have therefore been removed from subsequence analysis i.e. subsequent analysis is based on 85 firms with involvement in D&B.

With respect to D & B works involvement compared to other types of procurement methods, Table 4.4 shows that 72% of the contractors have more than 30% D & B works. However, 64% of the quantity surveyors and 70% of the architects involve less than 30% of D & B works.

Table 4.4: Firms’ D&B workload Percentage of workload

Less than 10% 10% - 30% 30% - 50% More than 50% Total

Category of firms Contractor No % 3 9 7 20 16 46 9 26 35 100

Quantity Surveyor No % 2 7 17 57 8 27 3 10 30 100

82

Architect No % 5 25 9 45 3 15 3 15 20 100

No 10 33 27 15 85

Total % 12 39 32 18 100


4.5

Procurement Method Analysis

From the literature, it was found that D & B is constituted of six methods (Table 4.5). The respondents were asked to identify the D&B method mostly used in practice. Some of the respondents give more than one method. The respondents were also given an opportunity to supply other methods in practice but nothing was given.

4.5.1 The Relationship Between The Construction Activity and The D&B Methods

Among the various methods offered by D&B, the majority of the contractors (63%) and quantity surveyors (73%) are involved in traditional D&B procurement method. On the other hand, most architects (70%) are involved in novation D&B. As a whole, traditional D&B (60%) was favoured among the respondents. Design and manage, and develop and costruct are found less popular as they show show only 11% and 22% respectively. However, the designer-led D & B and DBFO also show a low percentage of respondents’ involvement. Table 4.5 shows the relationship between the construction activity and D & B methods.

83


Table 4.5: Relationship between construction activity and D&B methods Method

Traditional D&B Novation D&B Design and Manage Develop and Construct Designer-led D&B DBFO

Category of firms Contractor No % 24 63 13 34 6 16 10 26 1 3 7 18

Quantity Surveyor No % 21 73 16 50 1 3 6 20 2 7 5 17

Architect No % 9 39 16 70 3 13 4 17 2 9 1 4

Total No 55 44 10 20 5 13

% 60 48 11 22 5 14

DBFO: Design, Build, Finance, Operate

4.5.2 The Relationship Between Firms’ Workload and The D&B Methods Table 4.6 shows that firms with less than 10% and 30% - 50% D & B workload do not involve any designer-led D & B. There is also too little involvement of this type in other groups of firms which shows the lack of popularity of this type. It appears that traditional D & B is the most favoured type followed by novation D & B. Nevertheless those firms with more than a 50% D & B workload preferred traditional and Develop and Construct.

Table 4.6: Relationship between firms’ D & B workload and D&B methods Method

Traditional D&B Novation D&B Design and Manage Develop and Construct Designer-led D&B DBFO

Firms’ workload No 6 4 1 1 1

< 10% % 60 40 10 10 10

10% - 30% No % 20 61 20 61 3 9 6 18 3 9 3 9

DBFO: Design, Build, Finance, Operate

84

30% - 50% No % 16 59 15 55 3 11 5 19 6

22

No 12 6 3 8 2 3

> 50% % 80 40 20 53 13 20

No 54 45 10 20 5 13

Total % 64 53 12 24 6 15


4.5.3 The Relationship Between Firms’ Experience and The D&B Methods In terms of responding firms’ experience, Table 4.7 shows that, regardless of the experience, all the responding firms favour traditional D & B followed by novation D & B when it shows more than 50% involvement in traditional D & B. Firms with less than five years experience, have not ventured into Develop and Construct, Designer-led, and DBFO yet. It appears that those firms with more than ten years experience do not favour designer-led D & B whereas the firms with six to ten years experience least favour Design and Manage.

Table 4.7: Relationship between firms’ experience and D&B methods

Method

Traditional D&B Novation D&B Design and Manage Develop and Construct Designer-led D&B DBFO

Firms’ experience < 5 years No % 3 50 2 33 1 17

6 - 10 years No % 16 67 16 67 1 4 4 17 2 8 5 21

DBFO: Design, Build, Finance, Operate

85

11 - 20 years > 20 years No % No % 22 65 13 62 17 50 10 48 4 12 4 19 10 29 6 29 2 6 1 5 5 15 3 14

% 54 45 10 20 5 13

Total % 64 53 12 24 6 15


4.5.4 General Comments In general, the results show that traditional D & B is the most favourable type of D & B followed by novation D & B. This result reflects earlier findings in the study of construction contractors by McLellan (1994), Akintoye (1994) and Contract Journal (1994). This is because the majority of the sample are contractors (41%) who favour the procurement of construction work by the continous use of traditional D & B contracts where the contractor has full responsibility for the design, from concept design to detailed and production drawings and construction services (Akintoye, 1994).

On the other hand, novation D & B is preferred by architects, which appears the same as a study by Akintoye & Fitzgerald (1995). This is because in this method they may take the reins and allow the client to have direct access to the design team throughout the construction process (MacNeil, 1993).

In terms of popularity, Designer-led D & B and DBFO are lacking. Thomas (1990) claimed that under Designer-led, the architects need to expend substantial effort at their own risk, only encouraged by the trustworthiness of the clientâ&#x20AC;&#x2122;s track record. Therefore, because of this risk, this method is incompatible (Thomas, 1990).

For DBFO, most of the projects are government projects which related to infrastructure. In general, the number of infrastructure projects are lesser than housing and commercial

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projects. On the other hand the percentage of DBFO was also low due to delays in a number of DBFO projects (MBD, 1998) and a shift in government policy on the DBFO projects (MBD, 1998; Barrie, 1998).

4.6.

Respondentsâ&#x20AC;&#x2122; View on the Future Trend of D&B

The respondents were also asked to give their opinions towards the future trend on the use of D & B procurement workload for the construction industry. The results appear to show that most of the contractors (74%) and quantity surveyors (47%) think that the trend will be increasing except for the majority of architects (50%) who think that the trend might decrease in the future. Table 4.8 shows the perception of respondents on the future trend for D&B procurement workload for the construction industry.

Table 4.8: Respondentsâ&#x20AC;&#x2122; perception on the future trend for D&B procurement workload for the construction industry. Future Trend

Increase Decrease Stagnant Uncertain Total

Category of respondents Contractor No % 26 74 1 3 6 17 2 6 35 100

Quantity Surveyor No % 14 47 1 3 10 33 5 17 30 100

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Architect No % 4 20 10 50 4 20 2 10 20 100

Total No 44 12 20 9 85

% 52 14 24 11 100


4.7

Analysis of Factors Influencing D&B Trend

Table 4.9 shows the level of most important factors influencing the trend in the use of D & B procurement method provided by the respondents. The mean value of the respondentsâ&#x20AC;&#x2122; importance rating was named the index .It ranges from 1 to 5. The results show that 18 factors indicate a mean of more than 2.500 and only five factors less than 2.500. The five factors agreed as great extent influencing D&B trend by all groups of respondents (i.e. contractors, quantity surveyors and architects) were single point responsibility (4.388), price certainty (4.212), the extent to which transfer of risk is

Table 4.9: Level of factors influencing the trend in D&B procurement method Factors

Total n = 85 Index 4.388 4.212 4.095 3.965 3.718 3.410 3.313 3.306 3.119 3.118 3.095 3.072 3.012 2.941 2.695 2.679 2.610 2.578 2.471 2.458 2.415 2.353 1.310

Single point responsibility Price certainty The extent to which transfer of risk is achieved One stop shopping approach Avoidance of conflict and claims The extent to which client create demand for D&B Ability of D&B to meet the functional needs of client Better buildability Shorter project duration time Reduction in development cost Contractors marketing expertise for D&B Encouragement of partnership/partnering Better value for money Level of contractor performance The extent to which contractor can use marketing Change in complexity & technological requirements of building The extent of boom in the construction industry The economic condition of the nation Quality of work High interest rate Cut in government expenditure Maintenance cost associated with building procured by D&B Introduction of PFI Note: The scale of indices ranges from 1 to 5

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Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

F-Stat

Sig.

1.030 0.343 0.812 0.531 2.181 0.668 5.626 4.274 2.855 1.395 1.102 0.732 1.791 1.869 1.638 0.045 1.754 0.415 0.904 0.531 1.002 1.750 0.049

0.362 0.711 0.448 0.590 0.120 0.516 0.005 0.017 0.063 0.254 0.337 0.484 0.173 0.161 0.201 0.956 0.180 0.662 0.409 0.590 0.372 0.180 0.952


achieved (4.095), one-stop shopping approach (3.965) and avoidance of conflict and claims (3.718) On the other hand the five factors agreed as least extent were quality of work (2.471), high interest rate (2.458), cut in government expenditure (2.415), maintenance cost associated with building procured by D & B (2.353) and the introduction of PFI (1.310). The factors were further analysed in order to look the relationship with the construction activity, firm’s experience, firm’s workload and the respondents’ perception on future trend.

4.7.1 The Relationship Between Construction Activity and Factors Influencing the Trend.

In Table 4.10, the results were presented according to three categories of firms i.e. contractors, quantity surveyors and architects. All respondents, regardless of the firm’s category agree that single point responsibility, the extent to which transfer of risk is achieved, price certainty, the one-stop shopping approach and avoidance of conflict and claims are the factors that greatly influence the trend. Also, all of them agree that the introduction of PFI has least effect on the trend. Both contractors and quantity surveyors have almost a similar level of agreement on the factor that D & B is able to meet the functional needs of a client, which they rank as

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sixth and eighth respectively, except for architects who rank it as eighteenth. In terms of quality, quantity surveyors and architects rank it as the third last factor in influencing the trend except for contractor who rank it as sixteenth. The results show that, at 0.05 level of significance, only two factors i.e.ability of D & B to meet the functional needs of the client (F statistic = 5.6256, p = 0.0052) and better buildability (F statistic = 4.2735, p = 0.0172) with p < 0.05 are significant. Therefore, with exception of these two factors,

Table 4.10: Firmsâ&#x20AC;&#x2122; ranking of factors influencing D&B trend Factors

Single point responsibility The extent to which transfer of risk is achieved Price certainty One stop shopping approach Avoidance of conflict and claims Ability of D&B to meet the functional needs of client Better buildability The extent to which client create demand for D&B Shorter project duration time Reduction in development cost Better value for money Encouragement of partnership/partnering Level of contractor performance Contractors marketing expertise for D&B Change in complexity & technological requirements of building Quality of work Maintenance cost associated with building procured by D&B The extent to which contractor can use marketing The economic condition of the nation High interest rate The extent of boom in the construction industry Cut in government expenditure Introduction of PFI Note: The scale of indices ranges from 1 to 5

Contractors Q. Surveyors n = 35 n = 30 Index Rank Index Rank 4.51 1 4.37 1 4.24 2 4.03 4 4.23 3 4.27 2 4.00 4 4.03 3 3.97 5 3.60 5 3.77 6 3.21 8 3.66 7 3.13 9 3.44 8 3.52 6 3.41 9 3.07 10 3.31 10 3.00 11 3.29 11 2.83 15 3.23 12 2.93 13 3.14 13 2.90 14 3.09 14 3.28 7 2.71 15 2.63 18 2.63 2.57 2.56 2.46 2.37 2.35 2.29 1.22

90

16 17 18 19 20 21 22 23

2.27 2.17 2.96 2.69 2.41 2.82 2.39 1.21

21 22 12 17 19 16 20 23

Architects n = 20 Index Rank 4.20 1 3.95 3 4.10 2 3.80 4 3.45 5 2.63 18 2.95 9 3.20 6 2.70 13 2.95 8 2.80 11 3.00 7 2.65 17 2.85 10 2.70 14 2.50 2.25 2.55 2.63 2.68 2.75 2.68 1.63

21 22 20 19 15 12 16 23

F-Stat

Sig.

1.030 0.812 0.343 0.531 2.181 5.626 4.274 0.668 2.855 1.395 1.791 0.732 1.869 1.102 0.045

0.362 0.448 0.711 0.590 0.120 0.005 0.017 0.516 0.063 0.254 0.173 0.484 0.161 0.337 0.956

0.904 1.750 1.638 0.415 0.531 1.754 1.002 0.049

0.409 0.180 0.201 0.662 0.590 0.180 0.372 0.952


the null hypothesis cannot be rejected. It can be concluded that there is no evidence of a difference in the views of the factors influencing the D & B trend among contractors, quantity surveyors and architects.

4.7.2 The Relationship Between The Respondents’ Experience and Factors Influencing The Trend.

Based on the experience of the respondents, single point responsibility, price certainty, the extent to which transfer of risk is achieved, one stop shopping approach and avoidance of conflict and claims are among the first five factors which have a great influence on the trend in the use of D & B procurement method (see Table 4.11). The results also show that cuts in government expenditure and maintenance costs associated with building procedure are the least important factors that influence the trend. With the exception of single point responsibility (F statistic = 3.166, p = 0.029), the extent to which transfer of risk is achieved (F statistic = 3.387, p = 0.022), shorter project duration time (F statistic = 2.470, p = 0.068) and avoidance of conflict and claims (F statistic = 2.435, p = 0.071), there does not appear to be any significant difference in the factors influencing the trend on firms’ experience basis. It is apparent that those respondents who have more than six years’ experience give almost a similar ranking on the factors influencing the trend. However, those who have less than five years’experience provide a totally different

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ranking from the others. Therefore, it can be concluded that the more experience that a respondent has, the greater the agreement they have on the priority of factors which influence the trend.

Table 4.11: The relationship between firmsâ&#x20AC;&#x2122; experience and factors influencing D&B trend

Factors

Single point responsibility Price certainty The extent to which transfer of risk is achieved One stop shopping approach Avoidance of conflict and claims The extent to which client create demand for D&B Ability of D&B to meet the functional needs of client Better buildability Introduction of PFI Shorter project duration time Reduction in development cost Contractors marketing expertise for D&B Encouragement of partnership/partnering Better value for money Level of contractor performance The extent to which contractor can use marketing Change in complexity & technological requirements of building The extent of boom in the construction industry The economic condition of the nation Quality of work High interest rate Cut in government expenditure Maintenance cost associated with building procured by D&B Note: The scale of indices ranges from 1 to 5

Firmsâ&#x20AC;&#x2122; experience (years) <5 6-10 11-20 > 20 n=6 n=24 n=34 n=21 index rank index rank index rank index rank

F-Stat.

Sig.

3.50 3.67 3.17 4.00 2.83 2.67 2.83 3.33 2.83 2.83 3.17 3.50 3.67 3.33 3.50 3.00 3.33

5 3 11 1 17 19 14 9 16 13 10 6 2 7 4 12 8

4.42 4.21 4.33 3.83 3.92 3.48 3.74 3.63 3.14 2.78 3.29 3.13 3.00 3.21 2.96 2.38 2.57

1 3 2 5 4 8 6 7 11 16 9 12 13 10 14 22 18

4.41 4.24 4.03 3.97 3.62 3.44 3.18 3.03 2.97 3.09 2.94 3.15 3.03 2.85 2.85 2.85 2.62

1 2 3 4 5 6 7 11 12 9 13 8 10 15 14 16 18

4.57 4.33 4.20 4.10 3.90 3.50 3.19 3.38 3.65 3.62 3.19 2.86 3.05 2.95 2.90 2.74 2.71

1 2 3 4 5 8 11 9 6 7 10 15 12 13 14 16 17

3.166 1.423 3.387 0.376 2.435 1.315 1.331 1.814 1.298 2.470 0.749 0.777 0.731 0.641 0.832 1.353 0.967

0.029 0.242 0.022 0.771 0.071 0.276 0.270 0.151 0.281 0.068 0.526 0.510 0.536 0.591 0.480 0.264 0.413

2.50 2.17 2.50 2.33 2.83 2.67

21 23 20 22 15 18

2.54 2.83 2.54 2.58 2.38 2.38

20 15 19 17 23 21

2.78 2.56 2.59 2.59 2.47 2.32

17 21 20 19 22 23

2.45 2.43 2.19 2.14 2.25 2.29

18 19 22 23 21 20

0.473 0.923 0.625 0.868 0.574 0.278

0.702 0.434 0.601 0.462 0.634 0.842

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4.7.3 The Relationship Between Firms’ D&B Workload and the Factors Influencing the Trend

Table 4.12 shows that all respondents regardless of their amount of workload, claimed that single point responsibility, price certainty, the extent to which transfer of risk is achieved and the one-stop shopping approach are the first four factors that have a great

Table 4.12: The relationship between firms’ workload and factors influencing D&B trend Factors

Single point responsibility Price certainty The extent to which transfer of risk is achieved One stop shopping approach Avoidance of conflict and claims The extent to which client create demand for D&B Ability of D&B to meet the functional needs of client Better buildability Introduction of PFI Shorter project duration time Reduction in development cost Contractors marketing expertise for D&B Encouragement of partnership/partnering Better value for money Level of contractor performance The extent to which contractor can use marketing Change in complexity & technological requirements of building The extent of boom in the construction industry The economic condition of the nation Quality of work High interest rate Cut in government expenditure Maintenance cost associated with building procured by D&B Note: The scale of indices ranges from 1 to 5

< 10% n=10 index rank 4.30 1 4.00 2 3.50 4 3.90 3 3.30 8 3.20 11 3.22 9

Firms’ workload 10-30% 30-50% n=33 n=27 index rank index rank 4.33 1 4.41 1 4.27 2 4.15 2 4.15 3 4.11 3 3.91 4 3.93 4 3.76 5 3.70 5 3.59 6 3.33 7 3.06 10 3.44 6

> 50% n=15 index rank 4.53 1 4.33 3 4.36 2 4.20 4 3.93 5 3.29 11 3.71 6

F-Stat.

Sig.

0.263 0.590 2.173 0.490 0.857 0.673 1.000

0.852 0.623 0.098 0.690 0.467 0.571 0.397

3.50 2.89 2.50 2.90 3.30 3.00 3.10 3.20 2.90 3.50

6 16 19 14 7 13 12 10 15 5

3.09 3.19 3.18 2.97 2.97 2.94 2.82 2.70 2.81 2.61

9 7 8 11 12 13 14 17 15 18

3.33 3.23 3.22 3.22 2.96 3.19 3.00 2.96 2.70 2.62

8 9 11 10 15 12 13 14 18 20

3.60 3.21 3.21 3.40 3.50 3.21 3.40 3.27 2.23 2.40

7 15 13 9 8 14 10 12 22 20

1.103 0.160 1.236 1.065 1.275 0.404 0.935 1.672 1.293 2.795

0.353 0.923 0.302 0.369 0.289 0.751 0.428 0.180 0.283 0.046

2.40 2.00 2.60 1.90 2.10 2.60

20 22 17 23 21 18

2.58 2.47 2.09 2.47 2.71 2.18

19 21 23 20 16 22

2.78 2.89 2.59 2.48 2.27 2.63

17 16 21 22 23 19

2.50 2.64 3.00 2.79 2.27 2.07

19 18 16 17 21 23

0.403 2.007 2.871 1.299 1.576 1.977

0.751 0.119 0.041 0.281 0.202 0.124

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influence on the trend in D & B. However, the rating given by the respondents who have more than 50% work in D & B should be more reliable considering the frequency of work that they do. They rank the extent to which the contractor can use marketing as the second least factor that influences the trend, which makes this ranking different from the other respondents. With the exception of quality of work (F statistic = 2.871, p= 0.041), change in complexity and technological requirements of building (F statistic = 2.795, p = 0.046), the extent to which transfer of risk is achieved (F statistic = 2.173, p = 0.098), the economic condition of the nation (F statistic = 2.007, p = 0.119), there was no significant difference in the relationship between firmsâ&#x20AC;&#x2122; D & B work load and factors influencing the trend

4.7.4 The Relationship Between The Future Trend in D & B and The Factors Influencing The Trend. One of the studyâ&#x20AC;&#x2122;s aims was to get the respondentsâ&#x20AC;&#x2122; views on the future trend of D & B. Half of the respondents (51.8%) claimed that the trend would be increasing in the future followed by 23.5% who claimed that it is likely to be stagnant. However, quite a few (10.6%) claimed that the future trend is going to be uncertain.

Table 4.13 shows that the first five factors that are responsible for the increasing trend are single point responsibility, price certainty, the extent to which transfer of risk is achieved, a one-stop shopping approach and avoidance of conflict and claims. For the decreasing trend, the first five most important factors are similar to the increasing trend except for

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the one-stop shopping approach which was ranked as sixth.

The categories of the

stagnant and uncertain trend of D & B also show a similar ranking on the first five most important factors except for avoidance of conflict and claims which was ranked as sixth in the stagnant trend and seventh in uncertain trend.

Table 4.13: The relationship between respondentsâ&#x20AC;&#x2122;perception on the future trend and the factors influencing D&B trend Respondentsâ&#x20AC;&#x2122; perception on the future trend Increase Decrease Stagnant Uncertain F-Stat. Sig. n=44 n=12 n=20 n=9 index rank index rank index rank index rank Single point responsibility 4.43 1 4.00 1 4.50 1 4.44 2 1.172 0.326 Price certainty 4.36 2 3.92 3 4.00 3 4.33 3 2.134 0.102 The extent to which transfer of risk is achieved 4.14 3 4.00 2 3.95 4 4.33 1 0.499 0.684 One stop shopping approach 4.07 4 3.50 6 4.10 2 3.78 4 1.901 0.136 Avoidance of conflict and claims 3.89 5 3.17 4 3.40 6 4.33 7 3.932 0.011 The extent to which client create demand for D&B 3.47 8 3.17 9 3.42 5 3.44 6 0.299 0.826 Ability of D&B to meet the functional needs of client 3.73 6 1.91 12 3.20 8 3.25 23 7.450 0.000 Better buildability 3.55 7 2.75 7 3.00 12 3.56 10 3.189 0.028 Introduction of PFI 3.11 15 3.18 5 3.00 11 4.00 5 1.068 0.368 Shorter project duration time 3.40 9 2.00 16 3.30 7 2.89 21 6.532 0.001 Reduction in development cost 3.32 10 2.58 11 2.90 13 3.33 13 2.757 0.048 Contractors marketing expertise for D&B 3.23 12 2.58 13 3.05 9 3.25 14 1.434 0.239 Encouragement of partnership/partnering 3.20 13 2.50 10 3.00 10 3.43 16 1.877 0.140 Better value for money 3.23 11 2.08 8 2.90 14 3.44 18 4.173 0.008 Level of contractor performance 3.14 14 2.67 15 2.70 19 2.89 11 1.476 0.227 The extent to which contractor can use marketing 2.83 17 2.08 17 2.75 17 2.75 20 1.942 0.130 Change in complexity & technological requirements 2.84 16 2.08 18 2.70 20 2.67 19 1.760 0.162 of building The extent of boom in the construction industry 2.51 19 2.83 19 2.79 16 2.38 8 0.601 0.616 The economic condition of the nation 2.43 21 2.50 14 2.79 15 3.00 15 0.996 0.399 Quality of work 2.52 18 2.67 21 2.30 22 2.33 12 0.368 0.777 High interest rate 2.39 22 2.42 22 2.74 18 2.25 17 0.565 0.640 Cut in government expenditure 2.39 23 2.83 20 2.22 23 2.38 9 0.950 0.421 Maintenance cost associated with building procured 2.45 20 1.92 23 2.50 21 2.11 22 1.474 0.228 by D&B Factors

Note: The scale of indices ranges from 1 to 5

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However, cut in government expenditure is among the five least factors which influence the increasing, decreasing and stagnant trends, except for uncertain trend which was ranked as ninth. All respondents have almost a similar level of agreement on the extent to which clients create demand for D & B (F statistic = 0.299, p = 0.826), quality of work (F statistic = 0.368, p = 0.777) and the extent to which transfer of risk is achieved (F statistic = 0.499, p = 0.684)

4.7.5 General Comments In the above analysis, it was found that single point responsibility (4.388) is the most important factor responsible for the trend followed by certainty in price (4.212). The respondents agree that transfer of risk (4.095) can be achieved in D & B projects as it is listed as the third most important factor. It was also reckoned that the one-stop shopping approach (3.965), avoidance of conflict and claims (3.718) and the extent to which clients can create demand for D & B (3.410) are the following factors that are responsible for the trend. The respondents claimed that D & B is able to meet the functional needs of the client (3.313) beside provide better buildability (3.306). Also, they agree that D & B can shorten project duration time (3.119) and can reduce the development cost (3.118). This could be interpreted that the factors which to a great extent were influencing the D&B trend were the advantages of the D&B procurement method (Griffith, 1989; Clamp and Cox, 1989)

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However, quality of work, a high interest rate, cuts in government expenditure, maintenance costs and the introduction of PFI do not have many effects on the trend. These show that factors associated with the disadvantages of D&B had the least influence on the D&B trend.

4.8

General Comments By The Respondents

Respondents were asked to give their general comments on the use of the D & B procurement method.

4.8.1 General Comments By The Contractors Table 4.14 shows the contractors’ comments on the use of a D & B procurement method. Generally, they think that D & B has a bright future, and could benefit both the contractors and clients provided that it is properly carried out, such as tying up all the ‘loose ends’ before the work starts, providing clearly defined requirements and a carefully selected tender list. Promotion will also be helpful in making the future of D & B more certain. As one of the comments stated: “If the current trend of ‘Design and Dump’ continues with contractors not realising what this means, D & B will take a downward trend because of ‘advised and ignorant’ contractors. But, such bodies as the D & B Forum and studies such as those at Reading University should do much to promote true D & B, making the future more certain.”

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Table 4.14: General comments on D&B procurement method by the contractors 1. An excellent future providing contractors continue to meet client neeeds. 2. It is a more efficient procurement method so the trend will naturally be for an increase in D&B? 3. It will remain as one of several procurement methods but not the most common. 4. Clients wish to get rid of responsibility and risk and this is the best way to date and it will therefore continue to expand until a better way is perceived. 5. Less of a single stage bid/novation - and more of a two stage/partnering approach. 6. Whilst clients and the institution continue to seek value for money associated with less risk and confrontation, then there should be an upward trend in the choice of the D&B route. 7. Clients will want more because if properly carried out D&B delivers what they want. 8. D&B will continue to increase as a procurement method partly due to buildings becoming more functional to encourage more investment in clients’ main stream business. 9. If all the ‘loose ends’ can be tied up before work starts, D&B should benefit client and contractor alike. 10. The client can take advantage of a work shortage by getting contractors to undertake design elements at very competitive prices 11. Various forms of D&B will be used in future to avoid claims, conflict & expensive litigation. 12 Without doubt, as more clients seek to limit their exposure both contractually and against costs/claims, so will the demand for D&B increase. Contractors are now far more experienced in D&B, and better equipped to give clients an all-embracing, professional D&B service 13. Best value will come from clearly defined requirements and short, carefully selected tender lists. 14 If the current trend of ‘Design and Dump’ continues with contractors not realising what this means D&B will take a downward trend because of “advised and ignorant” contractors. But such bodies as the D&B Forum and studies such as those at Reading should do much to promote true D&B, making the future more certain. 15. It has been proven to be quicker and cheaper with less financial risk to clients. The above indicates that the D&B share of the market will continue to increase for some years to come.

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4.8.2 General Comments By the Quantity Surveyors

The general comments by the quantity surveyors (see Table 4.15) mainly focused on the reasons why D & B is favoured compared to other procurement methods. Among the reasons are as the following: •

single-point responsibility

cost savings

price certainty

poor commercial performance by professionals.

The success of D & B is summarized by comments from two respondents. •

“The success of D & B depends to a great deal on the documentation produced by the client’s advisers. Poor product is often related to poor brief specification”.

“In my experience, the single most important factor is how busy the industry is. When times are hard D & B prices are very low and the contractor will take the risk. In boom times the contractor will not speculate time on a good quality proposal and builds in high costs for the risk”.

99


Table 4.15: General comments on D&B procurement method by the quantity surveyors

1. Is here for good 2. We believed that D&B is used mainly by organisation who do not want the hassle of trying to manage the project and believe (often incorrectly) that it gives the best price. 3. D&B projects will increase due to poor commercial performance by professional teams which lead to delays, increase cost and claims. 4. The success of D&B depends to a great deal on the documentation produced by the clientâ&#x20AC;&#x2122;s advi sors. Poor product is often related to poor brief/specification. 5. Unlikely to grow - many owner/occupiers positively dislike it - it is a myth to say it is quicker than other forms of contract. 6. Change is in the air: Single point responsibility has attractions but design control and quality need to be better than traditional D&B. 7. Single point responsibility - particularly with developer lead projects - developer wishes to avoid future liability. 8. Good. A lot of clients are now aware of advantages and disadvantages. Therefore clients make good, comprehensive briefs which result in price certainty. 9. In my experience, the single most important factor is how busy the industry is. When times are hard D&B prices are very low and the contractor will take the risk. In boom times the contractor will not speculate time on a good quality proposal and builds in high costs for the risk. 10. Risk adverse clients will always tend towards D&B. 11. D&B use will increase. 12. PFI/DBFO will influence the D&B market but competition and feasibility will dictate the type of procurement and the variant of D&B. 13. Clients erring towards develop and construct as they become better educated as to their requirements and hence are better placed to produced a far more developed and concise brief.

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4.8.3 General Comments By the Architects Generally, the comments by architects emphasized cost and quality (see Table 4.16). The benefits of cost certainty, cost control and cost savings were apparent but design and construction quality were quite poor as one of the respondents commented that

Table 4.16: General comments on D&B procurement method by the architects 1. Cost certainty very important for clients although quality is proven more important in the long term. 2. Long term relationships that are being developed between contractors/consultants etc. will steer the industry towards many different variants of D&B, DMC, DBFO etc. Other forms will nevertheless continue to exist. 3. Cost control - good. Design and construction quality - poor. 4. Likely to become sectorised - D&B more suitable for certain types of project or serial production. More specialisation rather than global approach. 5. In our opinion it is likely to decrease in the next 5 years. 6. The continuing failure of design consultants employed direct by employers and the consequentials costs incurred by employers as a result thereof will continue to mean the growth of D&B. 7. Clients receive poor quality work with D & B and have to have professional help to monitor contractors work. Cheapest is not always the best and clients are beginning to realise this. Ask the development arm of any of the large builders if they get satisfaction from their own Building company when they go to D&B route. 8. Will continue to grow but types will become more fragmented. 9. Unless projects are procured with a high level of specification, quality control will suffer as D&N contractors may cut corners to improve profit margins. 10. Less appropriate where the project works are i) complex (i.e. special needs or high specification projects) or ii) where high quality is an important factor. 11. I believe that D&B increases the risk of building failures and I would anticipate D&B becoming increasingly popular until this become apparent.

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‘cheapest is not always the best’. They believed that the use of a D & B procurement method will continue to grow and the long term relationships that are being developed between contractors/consultants will steer the industry towards many different variants of D & B, DMC, DBFO etc and it will become more fragmented.

4.8.4 Summary of Comments In summary, the comments from the contractors mainly focused on the bright prospect of D & B with some criteria that still need to be improved. The emphasis was also on the benefits that clients will obtain from D & B.

On the other hand, most quantity surveyors’ and architects’ comments are mainly on the benefits of costs and poor quality of the product. However, some of the respondents provide the factors underlying the success of D & B.

4.9

Discussion of Results

In the previous chapter, various factors that are responsible for the trend have been identified through numerous pieces of literature which provide a basis for designing the questionnaire. Those factors have been grouped into six main categories namely: clients’ factors, government factors, economical, marketing, technological and life-cycle cost. It seemed that all factors under clients’ factors extensively benefit the client, except for quality which was the most arguable factor arising in the literature. The main argument

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for the implementation of a better quality is the measurement of quality and the knowledge of the respondents towards quality due to its subjective nature.

The government policies and economical factors can be considered as external factors since they are beyond the control of either contractors, quantity surveyors, architects or clients. However, it has determined that they have an essential relationship with the construction industry (Hillebrandt, 1985; Gruneberg, 1997) and therefore may influence the trend in D & B.

Marketing is important in any business as well as the construction industry. However, it is not popular and seemed difficult to be implemented due to the unique characteristics of the construction industry which are related to its structure, production process, physical characteristics and composition. Moreover, most parties in the industry believe that the creation of demand is dominated by the clients and also, the industry has a lack of marketing experts (Moore, 1984; Harris, 1991) due to its technical nature.

Complexity and technological change and life-cycle cost have also been identified as important in the selection of any procurement method and therefore are included in the study.

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Twenty three factors had been identified in the literature and have been used in the questionnaire in order to isolate the most important factors influencing the D & B trend in the view of contractors, quantity surveyors and architects. Table 4.9 shows the ranking of the importance of those factors. It appears that eighteen factors have more than a 2.5 mean rating. Those factors are considered important and have an influence on the trend. Specifically, single point responsibility, price certainty and the extent to which transfer of risk is achieved have a mean rating of more than 4.0 which shows the greatest extent of influence on the trend. The following ten factors have a mean rating between 3.00 and 4.00 followed by five factors which have a mean rating between 2.50 and 3.00. The results show that all those factors which have a mean rating of more than 3.0 are the clientâ&#x20AC;&#x2122;s factors except for the extent to which clients create demand for D&B and contractors marketing expertise for D&B which falls under marketing factors.

In terms of government policy, encouragement of partnership is the only factor that influences the trend. As has been discussed earlier, quality of work is the only clientâ&#x20AC;&#x2122;s factor which does not have much influence on the trend where it is ranked among the five least important factors. Other factors which are considered as not having much influence on the trend are those which come from external factors such as government and economical factors which involve a long term effect. Introduction of PFI was ranked as the least important factor affecting the trend because it is expected that the impact of large PFI projects boosts activity will occur in 1998 (Cannon, 1997).

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Looking at the group mean of each factor, most of the contractorsâ&#x20AC;&#x2122; means are the highest followed by quantity surveyors and architects. This could be interpreted as being because contractors favour a D&B procurement method much more than the other groups. This argument could be supported by looking at the respondentsâ&#x20AC;&#x2122; involvement in the D&B method (see Table 4.6) when a majority of contractors (65%) are involved in traditional D&B. This is because the method really benefits them due to their full responsibility for the design, from concept design to detailed and production drawing, and construction services (Akintoye, 1994).

On the other hand, the majority means of the quantity surveyors are in the middle because they get benefits from both sides i.e. contractors or architect and characteristically they occupy a more detached position between the design (architect) and construction (contractor) element. In fact, they are required by most standard forms of contract to take a neutral stance (Atkinson, 1998).

The results of the D & B types (Table 4.6) show that most contractors (63%) and quantity surveyors (70%) are involved in traditional D & B whereas architects were more involved in novation D & B. Architects might be interested in novation because they may take the reins in the construction process. On the other hand the traditional D & B gives opportunities to the contractors to lead the construction work. This has been clearly explained in Chapter 2.

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In terms of the relationship between the firmsâ&#x20AC;&#x2122; category and factors influencing the trend, there is no significant difference in the firmsâ&#x20AC;&#x2122; ranking of factors influencing the trend except for the ability of D & B to meet the functional needs of the clients (F statistic=5.626, p=0.005), better buildability (F statistic=4.274, p=0.017) and shorter project duration time (F statistic=2.855, p=0.063).

In relation to the future trend of D & B (Table 4.9 and 4.14), half of the respondents predict that the trend will increase followed by 22% who claimed that the trend would be stagnant. 13% say the trend would be decreasing and 10% are uncertain about the future of D & B. However, the majority of contractors (71%) and quantity surveyors (47%) claimed that the trend would increase in the future except for the majority of architects (43%) who predict that the trend would decrease.

This is because most

contractors (85%) believe that single-point responsibility, which appears as the most unique attribute in D&B, always works to the advantage of the client (Ndekugri and Turner, 1994 ).

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4.10

Summary

In summary, this chapter provides the view of the three categories of respondents namely contractors, quantity surveyors and architects on the importance of factors affecting the trend of D & B. A total of 91 (36%) positive replies have been received. Of these, 38 (42%) replies were from contractors, 30 (33%) from quantity surveyors and 23 (25%) from architects. Two main analyses have been carried out by using the Statistical Package for the Social Sciences (SPSS).

First, six procurement methods were analysed in relation to

construction activity, firms’ workload and firms’ experience. The results show that, of the three relationships the traditional D & B method (more than 50%) was favoured among the respondents except for architects who utilise only 39%. Two other methods which are quite popular are novation D & B and Develop and Construct. Second, factors which were identified to affect the trend were analysed in relation to construction activity, firms’ experience, firms’ workload and respon dents’ perception on the future trend of D & B. On average, the results show that single point responsibility has the greatest influence on the trend followed by price certainty (Table 4.10). Other factors which have a scale of indices of more than 2.5 are also considered to have influence on the trend. In terms of equality of views, the results conclude that there is no evidence of a difference in the views of the factors influencing the trend among the contractors, quantity surveyors and architects.

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Finally, the respondents were also asked to give their comments and views on the future trend of D & B. Since half of the respondents think that the future trend will increase, the comments were mainly centered on the good prospects of D & B and certain aspect of improvement, except for architects and quantity surveyors who emphasize more the poor quality of the product.

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5.1

Conclusions

The study is primarily aimed at studying the factors influencing the trend of the Design and Build method.

A vast review on the literature has been made and it was found that twenty-three possible factors are affecting the trend in D&B, which are classified according to six main groups namely: the clientsâ&#x20AC;&#x2122; factors, the government policy factors, economical, marketing, technological and life-cycle cost.

This review formed the basis for designing a questionnaire. Using the Statistical Package for the Social Sciences (SPSS), an analysis was carried out in order to isolate the most important factors in the views of three categories of respondents namely: contractors, quantity surveyors and architects. The results from the questionnaire show that eighteen factors out of twenty-three found in the literature are considered as having a strong influence on D&B trend. Most of the factors are related to the clients and marketing and can be considered as internal factors because they are within their control. However, the factors which are found to have the least influence on the trend are generally the external factors i.e. the government and economical factors. This is because these factors involve a longer-term effects on the trend. This is also the reason why the introduction of PFI, which is expected to have a large impact in 1998, does not appear as having a great influence on the trend.

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The results show that there is no significant difference in the firmsâ&#x20AC;&#x2122; ranking of factors influencing the trend between contractors, quantity surveyors and architects except for the ability of D&B to meet the functional needs of the clients, better buildability and shorter project duration time. Table 4.9 shows the level of factors influencing the trend in D&B procurement method in the form of indices. These indices will prove particularly useful as benchmarks for comparison with other types of procurement method for future studies.

The overall results are also considered positive, which means most respondents believe that D&B is expected to have a bright future due to the satisfaction level offered by D&B. However, this has been influenced by the proportion of the sample (category of respondents) when the majority (42%) of respondents are constituted of contractors who prefer the D&B procurement method, specifically traditional D&B, because they are empowered by the clients to carry out the entire project, which means they have full domination of it. On the other hand, the architects who constituted the least portion of respondents (25%), do not really favour D&B, specifically traditional D&B. This was reflected in the result that majority architects and partly the quantity surveyors predict that the trend will decrease.

Their main argument was the poor quality that the

contractors provide when one of them commented that cheap does not mean quality. Therefore novation D&B is preferred compared to traditional because in novation they

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may take the reins in the project. The quantity surveyors are in the middle since they may get benefits from both contractors and architects.

There was not much difficulties in obtaining the data except for the inavailability of the contract value from RICS because the data is only available in the form of percentage. Therefore, the data from the MBD and MSI Report were employed for trend analysis.

5.2

Recommendations

Having discussed the above conclusion, there is ample room for further studies. First, as the period of the study was being carried out, the construction industry in the UK was booming.

Therefore, the ratings given by the respondents were influenced by the

condition of the industry when one of the quantity surveyor commented that the single most important factor is how busy the industry is. This is where the contractor will not speculate time on a good quality proposal and builds in high costs for the risk during a booming period and puts D&B prices at a low level, and the contractor will take the risk during hard times. Therefore, it is recommended the future research considers factors given by respondents during a recession period and identifies the difference in these factors between the two, contradictory periods.

In terms of sampling, it is recommended to have a balanced proportion of samples, so that the mean results will represent the whole industry.

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It seems that there is a contradiction between the views of the contractors and the clients on the fact that generally the contractors agree that the D&B trend will increse in the future, whereas, from the literature clients view is in the opposite way. A report based on 500 clients and 332 projects produced by the University of Reading’s Design and Build Forum in 1996 shows that the market share for D&B is stagnant at 23% because it has failed to meet the clients’ needs (Chevin, 1996; Clark, 1997). Preece and Tarawneh (1997) found that much dissatisfaction occurs among the respondents (client organisation) due to the poor service provided by the contractors and this would affect the respondents’ decision whether to reuse the contractors. Masters (1998) reported that D&B had gained a bad reputation among clients because construction teams were generally failing to be responsive and flexible to change and they were not involving the end user of the product sufficiently during the design and construction process. The factors that are influencing the D&B trend have been identified in this study and since the majority of the respondents claim that the trend will be increasing, therefore the factors determined are actually the advantages of D&B. The main question arising here is whether the view of contractors is resulting from the contractors’ ability to create demand and how this is going to be carried out. It is because on the part of the clients it seemed that generally they are not interested in D&B, and according to an interview with Mr. Ormerod, the Deputy Director of Postgraduate Research, BuHu Reseach Centre, TIME Research Institute, University of Salford via e-mail, he claimed that many clients choose D&B because they are not overly concerned about having a “statement” building. Also, in the report by the University of Reading’s ‘ Design and Build Forum warns that

113


clients are beginning to recognise and question the value that buildings can add to their business and total operating and occupancy costs because the priority of most clients is to reduce capital costs and improve the quality of new buildings. Therefore, there is room for further research as to what extent the contractorsâ&#x20AC;&#x2122; views are true in a situation where the clients are unhappy with D&B.

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