Project Management Institute

Selection of a project delivery system using analytical hierarchy process

Introduction

Project delivery is a comprehensive process wherein designers, constructors, and various consultants can provide for design and construction to deliver a built project to the owner (Dorsey, 1997; Peck, 2001). It is important for the owner to define his or her project characteristics well before deciding on the project delivery system as it will help in reducing the project cost and duration, provide flexibility for changes, and thus help in the smooth execution of the project later in the project cycle. There are several issues that have made the project owner search for alternatives project delivery strategies. Such issues include:

•   Shortening the duration of projects by overlapping design and construction and reducing bidding time

•   Providing flexibility for changes during construction

•   Creating more designer/contractor team work

•   Allowing the contractor to participate in the design process

•   Providing incentives for the contractor to save money

•   Providing alternative financing methods.

In response to these issues, and with project complexities, new techniques have led the emergence other project delivery strategies that can be viewed as an improvement over the traditional method know as the general contracting (GC). The following brief descriptions provide an insight of these project delivery systems:

1. The General Contracting (GC). The most commonly used method in which it is based on a separate contract with a designer and a general contractor. Both contracts are fixed lump-sum contracts arrived at by competitive bidding. The risk is spread equitably between the parties. This strategy is generally used where the scope of the project is clearly defined. The advantages of this method from the client's viewpoint is that they have complete control over the design, have a single contractor to deal with, and the total price is known.

2. Design and Build (DB). In this approach, the client contracts with a single organization to do both design and construction. The issue for better integration between design and construction has led to the client's recognition that DB is an appropriate answer for some large and complex engineering projects. The main characteristics under which DB option may be appropriate are when early delivery of project is desired, and there is a need for early start on the site, and the project is of technical complexity and a single point of responsibility is required.

3. Agency Construction Management (CM). A project delivery system based on the agreement whereby the construction entity provides leadership to the construction process through a series of services to the owner, including design review, overall scheduling, cost control, value engineering, constructibility, preparation of design review of bid packages, and construction coordination. In Agency CM the construction entity is typically retained at the same time as the design team and provides continuous services to the owner without taking on financial risks for the execution of the actual construction. Benefit of using Agency CM is services provided on the owner's behalf throughout the project. In contrast to some other project participants, the ACM has no vested interest in the project and maintains a fiduciary duty to act on the owner's behalf and provide impartial advice concerning the construction project. As such, ACM firms should be selected based on qualifications, and not on a cost or low-bid basis.

4. Construction Management at Risk (CM-R). In this approach the CM firm, after providing agency services during pre-construction period, takes on the financial obligation to carry out the construction under a specified cost agreement. A guaranteed maximum price is frequently provided by the construction manager in CM-R. CM-R is sometimes called CM/GC because the construction entity becomes essentially a general contractor through the risk agreement. Benefits of using At Risk CM are the opportunity to incorporate a contractor's perspective and input to planning and design decisions and the ability to “fast-track” early components of construction prior to full completion of design. Disadvantages cited in the CM-R system involve the contractual relationship among designers, construction manager and owner. Once construction is under way, the CM-R converts from a professional advisory role to the contractual role of the general contractor.

5. Program Management (PM) strategy is the result of owners' needs for more external management of their project, particularly projects, which are quite complicated or have multiphase building program. The owner retains a program manager early in the decision-making stage and the program manager guides the entire design/construct process. PM is sometimes called “professional project management.”

Criteria for Selecting Project Delivery System for a Proposed Project

The first and most important decision by the project owner involves the selection of a project delivery system. Clearly, there is no right project delivery system for a given project. All of the methods discussed have been used successfully, and have weaknesses, which can limit their success. Early investigation and decisions by the project's key players are crucial in avoiding the problems that may be initiated by any party during design or construction. Criteria for determining the best project delivery system for a proposed project may differ from project to project, and a discussion on the considerations, which should guide the owner in selecting the proper delivery method.

There are various methods in selecting project delivery system. However, the choice of a project delivery method should be systematic and should be based on the evaluation of strengths and weakness of the different project delivery systems. In addition to this, any potential project delivery selection method should give weightage to human intuition and judgment because the selection depends on the judgment, engineering knowledge, and experience of the client. Therefore it is necessary to make use of an approach within which one can sort through and give relative weights to relationships values, and to the strength and direction of these relationships and values.

This paper has the objective of introducing an approach to the selection of a project delivery system. The method uses analytical hierarchy process (AHP) technique and stresses the importance of the intuitive judgments of a decision-maker as well as the consistency of alternatives in the decision-making process (Saaty 1980; 1996). The strength of this approach is that it organizes tangible and intangible factors in a systematic manner, and provides a structured yet relatively simple solution to the decision-making problems related to the selection of a construction project delivery system.

The Analytical Hierarchy Process

The AHP helps decision-makers to identify and set priorities on the basis of their objectives and their knowledge and experience of each problem. Intuitive judgment is assumed to be more representatives of human thinking and behavior than our verbalizations of them. AHP stresses the importance of intuitive judgments of a decision-maker as well as the consistency of comparison of alternatives in the decision-making process. In general, the AHP solution process is as follows:

Step 1: Formulating the decision problem in a hierarchical structure. Any complex problem can be made simple by splitting the problem into many levels of hierarchy. The hierarchy should be constructed so that elements at the same level are of the same order of magnitude and must be capable of being related to some or all elements in the next higher level. The highest level of the hierarchy represents the overall goal while the next level usually represents the decision criteria and the lower level consists of the decision alternatives.

Step 2: The Prioritization Procedure. Once the hierarchy has been constructed, the decision-maker begins the prioritization procedure to determine the relative importance of the element in each level of the hierarchy. The elements in each level are arranged into homogeneous groupings and compared with respect to their importance in making the decision under consideration. The comparison takes this form: which of the two elements is more important with respect to a higher-level criterion; and how intense, using a scale of 1–9. It is a scale of absolute numbers used to assign numerical values to judgments made by comparing two elements with the smaller element used as the unit and larger one assigned a value from this scale as a multiple of that unit.

Step 3: The Comparison Ratings. For each level, starting at the top of the hierarchy and working down, a number of square matrices are formed from the results of comparing the elements of that level with respect to an element in the upper level. A value of “1” shows equal importance and a value higher than “1” shows greater importance of one value over the other. While comparing element A with element B, if A is more important, then a higher number is assigned, whereas if B is more important, the reciprocal of that number is assigned in the comparison matrices. The comparison ratings will be reciprocals of the elements in the lower-left triangle. The largest Eigen value is then solved and the Eigen-vector corresponding to the largest Eigen value (Principal Eigen Vector) is calculated to provide priority for the alternatives.

Step 4. Aggregating Overall Score. After forming the comparison matrices, the process moves to the phase of deriving and computing the relative weights for the various elements of each level (with respect to an element in the adjacent upper level). The composite weights of the decision alternatives are then determined by aggregating the weights through the hierarchy. This is done by following a path from the top of the hierarchy to each alternative at the lowest level and multiplying the weights along each branch and summing the products for each alternative. The result is a set of composite or multi-criteria weights, one for each decision alternative. Based on these composite scores the alternatives are ranked and the one with the largest weight is selected as the preferred choice.

Case Study: An Illustrative Example Using AHP

A case study based on a real construction project in Kuwait is presented here in this paper to illustrate the applicability of AHP in selecting the suitable project delivery system for this project. The construction project is Kuwait University Enhancement Program (KUEP). It is considered to be a large-scale project valued around 132 million Kuwait Dinars (KD) (KD 1 = 3.24 US dollars). The new enhancement program is part of an original Kuwait University (KU) building program that actually started in 1992 with a budget of 214 million KD and constituted of more than 40 design and construction packages. These packages included college buildings, utility buildings, sport complex, infrastructure, and landscaping projects for the five campuses of KU. Ministry of Public Works (MPW) had contracted with an international CM firm on behalf of Kuwait University to manage the original program with a target finish date of four years (i.e., 1996). However by end of 1997, only seven projects were finished, 17 projects were designed but have not started construction, four college buildings started their construction with various percentage of completion; while the remaining projects were still under planning. The delays were due to a large number of reasons that made both MPW and KU to search for a more suitable project delivery system. Both KU and MPW decided to tender the remaining work and additional new packages into a new project entitled KUEP.

Exhibit 1. Classifications of Factors and Subfactors Affecting Project Delivery Selection

Classifications of Factors and Subfactors Affecting Project Delivery Selection

Exhibit 2. Structuring the Elements of Project Delivery Systems Example Into Hierarchy

Structuring the Elements of Project Delivery Systems Example Into Hierarchy

Exhibit 3. Comparison of Type of Project, Client Involvement, Client's Special Needs, Legal and Contractual Requirements and Financial, Economic, Social and Political Risks in Their Influence on The Selection of a Procurement Strategy

Comparison of Type of Project, Client Involvement, Client's Special Needs, Legal and Contractual Requirements and Financial, Economic, Social and Political Risks in Their Influence on The Selection of a Procurement Strategy

The management of KUEP is faced with the decision whether or not to select approach (i.e., CM) or select the other project delivery strategies (i.e., GC, DB, ACM, and PM). The selected approach should take into consideration the factors surrounding a selection and these factors that attributed to the delay of the pervious project. A major concern is the considerable potential risks involved. These risks are due to the fact that this mega-size project has two key players (KU and MPW) leading and influencing the project progress. Knowing that the risk factors are difficult to evaluate using the traditional analysis methods, the author suggested to the management of the project to perform a complete analysis for selecting a project delivery system using AHP. Participants representing both KU and MPW were invited in a group meeting to select a project delivery system suitable to complete the remaining KU building program by utilizing the AHP method. The methodology to select the best project delivery system using AHP includes the following steps.

Identification and Classification of Factors Affecting Project Delivery Selection. By following the AHP procedures, the author, after considerable discussions with management and the four participants, identified a list of risk factors and sub factors affecting the project delivery system. The main criteria and subcriteria that were found to influence the project delivery system were identified and listed as shown in Exhibit 1.

Structuring the elements of the problem into a hierarchy. Exhibit 2 illustrates the decision problem as a hierarchy of goal, criteria, subcriteria, and alternatives. The project delivery strategies will be evaluated based on the five selected criteria with respect to the goal of selecting the best project delivery system among the five known strategies (i.e., GC, DB, ACM, CM-R, and PM). At the third level, the criteria's are gradually divided into more specific evaluation elements.

Relative Weights Development of the Various Elements. The model evaluates alternatives according to comparison of the relative strength of one over another with respect to each higher-level item. Elements at each level were compared pair-wise with respect to each element in the adjacent upper level and the ratings are entered in the comparison matrix. The level of importance is expressed in a scale of 1–9, ranging from 1 = equally preferred to 9 = extremely preferred. First, the five criteria are compared with each other in regard to the goal as shown in Exhibit 3.

Once judgments have been entered for each part of the model, the information is synthesized to achieve an overall ranking of the alternative. This mathematical synthesis produces a report showing the preferences for the alternatives with respect to each subcriterion, the relative importance of the subcriteria with respect to the criteria, and the relative importance of the criteria with respect to the goal.

The comparison of each of these factors in influencing the project delivery selection was determined form the experts relative priorities by entering their judgments in a numeric mode and in a pair-wise fashion as shown in Exhibit 3. Each of these main factors has subfactors and each of these subfactors was compared among themselves to decide the influence on the main factor, with respect to the five project delivery strategies. Finally a comparison matrix is formed to decide how important these factors are in influencing the five project delivery strategies.

Exhibit 4. Synthesis Showing the Levels of Hierarchy in the Proposed Model and the Result

Synthesis Showing the Levels of Hierarchy in the Proposed Model and the Result

Similarly, at the same level, this procedure is repeated under each criterion and then each subcriteria, keeping in view the goal. Likewise pair-wise comparisons are carried out for each of the strategies and judgments are entered into the model. A synthesis, which details all the judgments, is shown in Exhibit 4. The exhibit shows that the sum of the assigned weights at each level equals to 1. The result of the synthesis is shown at the bottom of the exhibit, which rank orders the project delivery strategies. The analysis shows to the decision-maker that project delivery system Construction management at risk (CM-R) is preferred followed by DB, PM, GC, and ACM. The model developed was tested for inconsistency, and the inconsistency ratio was determined to be less than 0.1 for the judgments made by the experts, which proved to be consistent.

Conclusion

The paper proposes the analytical hierarchy process to evaluate the available options. The importance attached by the client on these factors is evaluated and the weight attributed by each project delivery system on these factors is computed to help the client to decide about the appropriate project delivery system. AHP helps to quantify the decisions of experts when a set of multiple criteria are present in the decision-making process. AHP also provides means to accommodate any additional criteria, which might influence the decision. The proposed AHP method for selecting the project delivery system augments the decision-maker's knowledge. The analysis shows that Construction Management at Risk (CM-R) alternative is the project delivery system to be selected under the given conditions. AHP method has the potential for decision-making during bid evaluation, equipment selection, staff selection, and decision involving strategic planning. To the practicing scientist and engineer, the use of personal judgment in the form of comparison matrices may be considered as a limitation.

Acknowledgment

The author wishes to acknowledge the support of the research administration of Kuwait University for their support and Kuwait Foundation for the Advancement of Science in supporting this work.

References

Dorsey, R. W. 1997. Project Delivery Systems: for Building Construction. Published by Associated General Contractors of America.

Peck, B. 2001, March. Choosing the Best Delivery Method for Your Facility. Facilities Manager APPA, Vol. 30.

Saaty, T. 1980. The Analytical Hierarchy Process. New York: McGraw Hill.

Saaty, T. 1996. Decision-Making With Dependence and Feedback: The Analytical Network Process (1st ed). Pittsburgh, PA: RWS Publications.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA

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