Service delivery--preparing for a new future in projects


The construction industry, as with many other industries, is evolving, although not at the pace of those such as IT, product development, and manufacturing. Influences of the changes within those evolutionary industries have led to a number of examinations (for example, Egan 1998) of the construction industry in the United Kingdom (UK) with a view to improving both implementation and behavioural processes. During the same time that this introspection has taken place, changes to the market environment, in particular, in client contractor relationships have had a major effect on the organization and strategy of projects. One change within the construction industry has lead to an extension of the traditional project life cycle and this has potential implications for many other project-based sectors not only in the UK but also throughout the world.

Over recent years and with full government support, there has been an increasing move towards “service-inclusive” contracts where clients require from their suppliers both the delivery of a fixed asset plus a guaranteed service over a fixed period of years. Adjusting to this manner of business changes, in a fundamental way, the method of operation of the contractor, the nature of client/contractor relations and places new emphases on configurations of requisite organizations to support these needs.

The construction industry is characterized by project-based working (Bresnen and Marshall 2000), and the move towards project types that emphasize service delivery needs a step change in mindset. To this effect, the authors have adopted Service Delivery Focused (SDF) project term as a new organizational form to differentiate them from Asset Delivery Focused (ADF) projects. SDF covers range of project varieties, worldwide: from Public-Private Partnerships (PPP) in Australia and in Continental Europe as well as Private Finance Initiative (PFI) projects in the UK it also includes Build Operate Transfer (BOT), Build-Own-Operate (BOO), and so on (see Ahadzi and Bowles 2001 for further discussion of PPP types). In all these project types it is the operations phase that forms a key part of the process and service delivery the key success criterion.

The authors are currently investigating UK-centered projects, such as PPPs, characterized as having a SDF. The configuration of UK PPP projects is evolving as experience develops in this relatively new field as very few projects have reached the service (operational) phase. PPP projects—such as PFI—can be described as those where a supplier is contracted not only to construct a facility such as a road or prison, but also to deliver the services, which the facility is intended to provide.

An early political driver for PPP was the requirement to spread the cost of major projects and transfer payment from Capital to Revenue accounts. The emphasis of payment has changed (cf. ADF projects) from the delivery of the asset, to the delivery of the services that the asset provides. In theory this gives advantage to the customer, as payment is more closely linked to the quality of service delivery.

State of Play in the Construction Industry: Need for a Change of Mindset?

Apart from the issues of SDF projects, there is a need for change in methods of working within the industry. In particular, how contractors treat each other, clients, and sub-contractors. Despite the influence that PPP projects have on the contracting process, it has been lamented that they

… have not eliminated the adversarial relations associated with the traditional contracting system but have created the potential for new conflicts in the construction industry. (Miozzo and Ivory 2000)

Thus, there are calls for organizations in the construction industry to actively tackle this adversarial mindset, in order to develop an attitude that is more responsive to the needs of all parties in the construction process.

A pertinent summary of this change of mindset comes from the National Audit Office (2000). The report Modernizing Construction suggests that the overall requirements for better construction performance may be summarized as:

1. Construction meets user requirements and is fit for a specific purpose

2. Lower through-life and operational costs

3. Greater certainty over project costs and time

4. Elimination of waste in labor and materials.

[Note that the last three are efficiency outputs, which can be measured against the first criterion. It is this criterion and its ramifications for service delivery that is the main focus of this paper.]

Extending the Project Life Cycle

The emphasis on service delivery rather than asset delivery needs a different approach to the traditional methods of contracting. Responsibility for full life-cycle management requires fundamental changes to project concept and particularly design. Project priorities of least cost together with a compressed schedule have to be reassessed in the light of operations with low maintenance and low cost operations. Design for operability therefore becomes of paramount importance when considering the viability of the project. One of the factors affecting successful post-delivery is that the design phase must be informed by the requirements of the operations phase and its people. The funding and financing of the project is conceptually different to the traditional construction approach of asset delivery, which is frequently governed by a bidding process designed to minimize the installed cost of the asset. The traditional approach also assumes a client body that can specify the asset requirements.

The contention that the UK construction industry needs to be more “customer-centered” is hardly novel. A fundamental part of the Lean Production philosophy as applied to the construction industry is built upon the elimination of non-value adding activities through systematically considering client requirements (Koskela 1992).

Much has been written of the adversarial nature of construction contracting. UK contracting is portrayed by highly competitive and aggressive tendering (Bresnen and Marshall 2000). Clients try to get the lowest priced bids from contractors who, in turn, try to drive down costs by leaning upon subcontractors (Miozzo and Ivory 2000). This generates a cost obsessed mindset that results in a fragmented, adversarial culture militating against ensuring the best project performance for the customer.

Lean thinking philosophy has triggered research combining ideas such as Concurrent Engineering (Anumba et al 1997; Kamara et al 2000) and methodologies such as the Process Protocol (Kagioglou et al 1998, Lee et al 2000). Common to this research is the appreciation of a construction project whole life. However, seemingly the main emphasis hitherto has been on the production phase. This is significant for SDF projects, for the overall success of the project relates to the operations phase (Owen and Merna 1997; Merna and Owen 1998). Service delivery research suggests that not all contingencies can be built-in before this later phase (Zeithaml 1981).

The existing literature shows specifically that there are two main issues to be considered in relation to SDF projects. Firstly, the impact of PPP type projects upon the relationship between the “end-user” customer and the management of the project. Secondly, there needs to be a rethink of the idea of “customer.” This draws partly from lean-informed philosophy, which assumes that everyone is a customer and supplier.

End-User Orientation

Criticisms have been made of existing PFI schemes suggesting that bidders are more concerned with maximizing revenue for their own gains, often at the customer’s expense. For example, there have been accusations that PFI schools projects are being configured to benefit the contractor rather than the long-term viability of education provision in the locality (Shaoul and Edwards 1999). Also, allegations have been made that the designs of PFI hospitals have not met the requirements of Health Service staff (Clark 2001). Contractors have been criticized for refinancing PFI projects at more advantageous terms and not sharing the benefits with the client (Miozzo and Ivory 2000). Indeed, Winch (2000) suggests that the client has become ever more separated from the design activity, passing on design leadership and specification to private sector architects and becoming a recipient, not a participant. This is pertinent for PPP/PFI, as (apparently) the public sector client is reintroduced into the processes of brief preparation, because user departments know what services they require.

However, a significant problem is how to translate a customer’s knowledge of their service needs into a brief for a building designed to deliver those outputs. This is often because users have deficient understandings of building design or construction management. Looking at service delivery in general, Zeithaml (1981) notes that the customer is not always able to define the quality of services prior to purchase. She identifies three levels of quality that the customer has to appraise goods and services:

1. Search qualities that a consumer can determine prior to purchasing a product.

2. Experience qualities, which can only be discerned after purchase or consumption.

3. Credence qualities, which the customer may find impossible to evaluate, even after purchase and consumption.

Here Zeithaml is looking specifically at service levels in product purchase, which is relatively straightforward. In SDF projects, however, there can be significant changes in customer requirements in the design stage. Hence, it is espoused that closer client integration in the procurement process is indispensable in order to incorporate changing client needs in design. But the fragmentation of the design and construction team can militate against this information exchange. Indeed, the evaluation of service levels is further complicated, because customer requirements can change significantly through the whole life of an SDF project, which impacts upon Zeithaml’s levels 2 and 3.

Consequently, theory suggests that if client needs are assimilated in the design stage, then performance levels can be measured and improved, because whole life project costs are lowered by designing-in operability (Lee et al 2000). However, given Zeithaml’s hypothesis that many qualities are realized post-purchase (or in SDF projects, in the operations phase), it could be queried as to whether this designing-in can usefully affect later operations.

Developing a Service Approach

Much research to date has focused upon improving the asset production process. These initiatives have reflected the industry’s view of making itself more responsive to customer needs as a process of building production rather than as a process of building use. Mathe and Shapiro (1993) have identified three aspects of product planning:

1. The “physical” (and technological) dimension, including the product and process design for the physical product.

2. The “service mix” dimension, which involves establishing the range and performance of the different services to be offered in conjunction with the physical product and the methods by which these services are to be produced and delivered.

3. The “time” dimension which necessitates constructing a “product” management system for the length of the product’s active life—a management system for the lifetime of the physical product and its accompanying services.

In SDF projects, dimensions 2 and 3 are particularly crucial, given that they are (by construction industry standards) long-term projects, whose success (failure) is largely determined (for the client) by the performance of the services offered by the product. Project financing is also highly important. Namely, that reward primarily comes but from the performance of the asset over the whole life of the project, rather than from delivery of the physical asset value (as in ADF projects), which has been the case for most construction projects. Refocusing upon service, rather than asset, delivery also needs a different approach to methods of contracting (Merna and Dubey 1998; Owen and Merna 1997).

Changes to Teamworking

The historical practices of the construction industry and the move to service delivery point to the need to improve alignment between client and deliverer and consider the implications of extended teamworking. The notion of “teamworking” as a way of harnessing all necessary abilities and inputs to carry out complex industrial and commercial tasks as efficiently as possible is well established and has become a highly fashionable method of reconfiguring a manufacturing organization. It was conceived initially as a generic form of organization and has been widely applied as such, but mature users have realized the importance and significance of the need to contextualize particular teamwork structures and forms to meet the needs of specific task environments. Consequently, the generic approach has been modified in practical application (e.g., Wickens 1995).

It has been argued that obtaining effective performance results from the careful and specific application of appropriate team based structures and ways of working (Niepce and Molleman 1996). Such application enables a group of people to become a high performance work team within a particular local and specific task environment. Introducing change of this type requires an initial design followed by a period of fine-tuning and adaptation. Recent work (Tranfield 1998, in publication) on organizational forms in a variety of manufacturing contexts has identified both a single generic model (the self-directed model) and two sub-types appropriate for quite different and separate task environments. These are the “lean” model, suitable for high volume production, and the “project” model, suitable for low volume, unique, or “stranger” environments.

The construction industry, particularly at the instigation of major clients, has embraced teamworking concepts, and there have been a number of research initiatives in this area which address either explicitly or implicitly the issues of teamworking and collaborative working as a way of improving efficiency and added value but the focus has, naturally, been project based. The aim has been to generate the correct team dynamics to deliver a facility (the physical asset) in accordance with the clients’ requirements.

Given these recent developments, the notion of considering different teamworking models is particularly significant and timely to an industry where we might expect that the “project” form to have predominated. Certainly the application of teamworking to date (e.g., the British Airports Authority partnership structure) and the use of core and cluster groups has been project oriented and parallels to some extent team working in aerospace (Deasley 1997) which also focuses in large part on small batch, nonrepetitive manufacture. The experience of teamworking in the construction sector has identified that there is poor visibility of cost and program issues at the design stage (Tavistock Institute 1999). This suggests inappropriate team-based design and implementation resulting in inadequate communication within teams and poor optimization of team organization to deliver full benefits.

In SDF projects the traditional project team extends from its “delivery” oriented constitution to one, which encompasses parties from each life-cycle phase including, in many cases, a thirty-year operational phase. The input and requirements of the operations phase and its social organization to the design phase are vital to the success of the project.

In summary a number of issues can be highlighted by these trends:

1. A team assembled for the design and construction phase has a clear aim, is relatively short lived, and will have a stable membership. A team responsible for the service delivery is long lived, and, membership of the team will change a number of occasions as the requirements evolve over time.

2. The overall organization and approach needed for project (asset) delivery is not the same as that which is needed for long-term service (operations) delivery.

3. In “service” contracts, the capital cost of the physical asset is a very small proportion of the whole life cost of the service provision, and so whilst service/operational issues should drive the team, this has to be reconciled with the first requirement to construct the physical asset.

4. The established models or protocols for design management do not extend into design for sustainability and change of use. Therefore these models provide inadequate briefs for team working and operation.

5. The risk issues relate not only to the normal technical, contractual, and commercial issues but extend into the cultural dimensions of team formation often within an alliance and partnering framework.

All of these emergent and sometimes conflicting trends result in a consequential need to understand both the way in which teams are designed and assembled as well as their deployment and modi operandi. Resolving these issues will impact upon the direction and extent of cultural change within the industry.

A detailed review of extant literature supports this team-working/culture nexus as an area for further exploration in the construction industry. Here, research has been vocal in calling for improved working relationships in the supply chain. For example, partnering and alliancing literature stresses this need for collaborative teamworking at project and organizational level (Bresnen and Marshall 2000a). However, recent research also shows how effective team-working seemingly runs counter to the cultural norms of the participants, for example, the use of integrated project teams in procurement strategies such as Design and Build has challenged traditional demarcation lines. Nevertheless, barriers formed by interorganizational and departmental subcultures still inhibit teamworking (Moore and Dainty 1999). It is safe to say that the culture of the construction industry is synonymous with fragmentation and adversarialism between actors (Bresnen and Marshall 2000; Winch 2000). Indeed, this cultural perspective informs the direction of the current research project. Because SDF projects place greater emphasis upon the long-term operation of asset, then it is even more crucial to develop workable organizational forms that can engage with the deeply held assumptions of its actors (Schein 1991).

It is our view that these developments in the industry whilst reinforcing the need for a team-based approach, fundamentally question the taken-for-granted (cultural) assumptions concerning guidelines for optimal team-based design and operation.

Research Methodology: A Two-Part Study

Research Aims and Objectives

The current research project is a three-year joint government (Engineering and Physical Sciences Research Council—Grant IMI GR/N33263/01) and industry sponsored project, which is entitled Teamworking and Cultural Change in Construction: Developing a Service Delivery Approach, its working title is Building Responsiveness into Construction (BRiC).

The overall research study involves collaboration with seven collaborators from both industry and the public sector. The first part of the study was exploratory in nature and involved five organizations currently involved with SDF projects, the sample provided as broad a picture as possible of the dimensions of SDF projects. These organizations acted variously as contractors, financiers, clients, or advisors for a number of projects. It had the following research aims:

1. To provide an overview of the collaborators’ experience of SDF-type projects.

• This was achieved through the development of “storylines” from focused discussions with senior managers to explore the perceptions that the managers have of these SDF-type projects as key informants. Therefore, although the main unit of analysis was at the organization level, it is acknowledged that the storylines developed will reflect the organizational cultural milieus within which they work (Schein 1991).

2. To identify further linkages for the main part of the empirical study, both in terms of detailed case studies and potential informants.

• In the event, the richness of the findings from this exploratory study, when compared with extant theory from an extensive literature search enabled the development of robust categorizations.

Theoretical Boundaries

The research proposal notes that the BRiC project is focused upon “the significance of the teamworking/organizational culture relationship.”

Considering that the research strategy is broadly inductive, these definitions of culture and teamworking are not assumed to be immutable. As two eminent grounded theorists point out, “deductive thinking plays a role alongside inductive thinking in grounded research” (Strauss and Corbin 1990). The extant literature has informed this exploratory study, both in terms of drawing generalized definitions of phenomena under investigation, but also in respect of the imprecise ways in which terms are used in theory and practice, partly because the arrangement of SDF type projects are ever-changing.

Exhibit 1. Description of Participating Organizations

Description of Participating Organizations

Data Gathering and Processing

Data from the focused discussions were supported by analysis of relevant company documentation, providing a background to the particular projects or organizational aspects surfaced in the discussions.

The term “Service Delivery Focused project” was validated by the key informant practitioners to include other forms of procurement, such as Design, Build, Finance, Operate (DBFO). In this way, comparisons could be made between the various forms of service-based procurement projects. For instance, one of the key informants at an established developer/contractor was connected with private sector DBFO projects servicing gas stations on the European continent, therefore comparisons were made between these projects and the public/private systems of PFI and PPP that the same organization was bidding for and running. Senior management was targeted as “key informants” for this preliminary study, because they ultimately have a key role as “‘architects’ and ‘engineers’ of company organization.” Therefore, they could give insights into strategic level decision-making across the construction sector from their different perspectives.

The deliverables of this study, apart from the storylines, were a series of mindmaps that were developed from the interviews and from an inductive analysis revealed some of the dimensions of the SDF environment and the impact the projects had on the organizations concerned. A conceptual framework was then developed that modeled the overall environment and is now being used to guide and inform the second and main part of the study. The foci of the main study are the interfaces to the organization unique to PPP/PFI projects—the Special Purpose Vehicle (SPV). This organization is responsible for delivering the SDF project to the client. The SPV is unique in form and relationship for each project. The interfaces created and maintained through the whole life cycle of SDF may well prove to be the key success factor for such projects.

The exploratory study focused upon the experience of managers in five organizations currently involved with SDF projects. These organizations acted variously as contractors, financiers, clients, or advisors for a number of projects. The research design can be understood as “grounded in practice, and informed by theory,” combining inductive and deductive analysis. The study was deductive in that it was originally informed by the research proposal. The interviews were therefore aimed at identifying actors involved in SDF projects, what activities were taking place, for what reason, and with what resources. However, the study also drew out details inductively, by developing storylines from interviews with senior managers as key informants. Therefore, although the fundamental unit of analysis is the organization to which the interviewees belong, it is appreciated that the storylines developed will reflect the organizational culture in which they work.

The data collected was abstracted from specific instances, in order to distil second order categories from “first order” open codes. These were compared with extant theory to provide constructs that could be fed back to the respondents. For identification purposes in this paper, the types of organizations represented in the study are as follows: each organization is given a letter, with a number denoting the individual manager (Exhibit 1).

The sample draws from the main first tier of actors on SDF projects. However, as the study revealed, these organizations could play a number of roles in SDF projects from client, contracting, public, and private sector organizations. This first tier was chosen because it was felt they are particularly informed about the strategic issues in managing SDF projects.

Semistructured Interviews

The interviews with senior managers were directed at understanding the experience of the organization with SDF projects like PFI and PPP. Most of the comments that they made relate in part to “objective” details of dates and places, but also incorporated also more “subjective” opinions, and so on. The timeline approach detailed objective “milestones” while the mind maps enabled more subjective opinions to be identified. The mind maps made it is possible to develop a storyline composed of multiple “stories,” each of which provide detailed causal linkages, from which to develop grounded theory (Partington 2000).

Developing Storylines

The proponents of grounded theory particularly highlight the need for explicating a storyline in the early stages of data analysis (Strauss and Corbin 1990; Partington 2000). These researchers relate this idea of a storyline in terms of a core category that emerges from an empirical study. In this exploratory study this was achieved in the data analysis, as it moved through the various stages of coding.

However, in this exploratory study, the idea of a storytelling approach is also applied to the data collection. By asking key informants to relate their organization’s background, “timelines” were generated through an organizational story-telling approach, from the perceptions of the senior managers interviewed. Consequently, the results are not envisaged as forming a complete representation of “what went on” in the organizations, free from personal bias. However, by interviewing managers from different organizations with differing perspectives of the contracting process (i.e., from both client and contractor perspectives), it is possible to explore in depth the project experiences. This approach has become more credible as a way of engaging with the complexities of managerial experience, as opposed to more logico-deductive approaches (Hatch 1997). In particular, it has been applied in practitioner-based methodologies because of the opportunities for providing reflective organizational learning (Senge 1990).

Exhibit 2. Top-Level Mindmap

Top-Level Mindmap

A storyline methodology has been developed elsewhere by other members of the research team (Tranfield et al 1998). By using continuous stationery, with a line running along the center of each page, it is possible to denote above the line details and timings of events that took place, whilst below the line, further reasons are given as to why and how these decisions, events, and so on took place as they did.

In addition, mindmaps were generated as a graphical aid to the researchers in order to understand the complex data more effectively. These were sent back to interviewees for validation.

Research Findings

Data Analysis and Representation

Not surprisingly the picture that emerged from the initial part of the study was complex and it was difficult to illustrate the many links that there were between the industry, project and organizational issues. A number of themes emerged from the initial study that were categorized at a number of levels and were conveniently represented as a series of (hierarchical) mindmaps. Exhibit 2 shows the top-level map, each of the branches expands further into a separate mindmap. The software used to draw the diagrams (MindManager) can move rapidly between maps via hyperlinking and connections between branches can also be emphasized. The mindmaps were used to validate the relationships between data categories by both direct communications with the collaborators and also within the six monthly review meetings held with the group of collaborators.

The data representation informed the formulation of a model to represent the dimensions and processes that characterize the SDF environment.

Presentation of Results and Conclusions of Exploratory Study

Overall, there is a need to reconceptualize the construction industry in the light of SDF projects, as an intricate network of relationships. The findings of the exploratory study would suggest that there is a multilayered structure, filtering down from industry level network, encompassing organizational networks and project networks as well. Each of these is interdependent with the others. In terms of the BRiC project and its deliverables, it is clear that there is a fundamental driver behind developing successful SDF projects is the “dynamic configuration” of the relationships of actors, activities, and resources.

The model developed from the exploratory research can be summarized in the following way:

1. It indicates how the influence of SDF projects, such as PFI and PPP, has impacted upon construction at all levels: industry, organizational, divisional, departmental, project, and so on.

• Impact is upon structures (redesigning existing, developing new departments/divisions)

• Also upon relationships: organizations working together who previously would not have done so, organizations new to the industrial sector.

• Consequently, there are many interrelationships between changes at these different levels: e.g., changes in corporate strategy impact upon how different departments/divisions relate to each other.

2. There is a need to look beyond strictly formal organizational boundaries.

• In terms of formal cross-organizational bodies (e.g., Special Purpose Vehicles). The construction industry has always been based upon cross-departmental, and particularly cross-organizational, working. However, the development of SDF projects has highlighted the role of bodies such as SPVs. The key difference is that the longer format of these projects requires these bodies to remain together for longer. However, the exploratory study also reveals how the composition of these bodies can change.

• But also, by talking to practitioners, what emerges is that these formalized relations form only part of the experience of practitioners. Certainly, it is noticeable how more informal collectives (Communities of Practice) develop.

3. Changes over time: The exploratory study has revealed how SDF projects vary from project to project across time. This seems to be due to the improvisation of the prime actors (e.g., clients, contractors) who experiment with configurations of projects, developing upon the experience of previous projects.

• Changes take place within individual projects over the project life cycle. These changes involve actors changing roles, new actors coming into the project as others leave. These changes are partly contractual (e.g., certain contractor nominated for the construction side, another taking over the operations). However, there are other extra-contractual developments. For example, examples of actors attempting to gain control of the SPV by buying out the other member organizations.

• Therefore, there are changes in actors, as well as structures. The importance of this is that these actors are involved in multiple activities simultaneously.

Networks of Relationships

What appears to be of paramount importance is how the participants relate to each other, the resources they use and the activities that they are involved with in SDF projects.

A network has been defined as “a fabric whose component strands are knotted, twisted, or otherwise fastened to form an open mesh” (Hakansson and Ford 2000). This metaphor has been adopted in order to reflect the complex interrelationships that emerge from business relations in industrial networks (Peck 2000).

There has been a tradition within management research to favor linear representations of organizational processes, particularly in terms of supply chain management, for example. This is a good way to conceptualize processes and has been put to good effect in construction industry research (e.g., Process Protocol [Fleming et al 2000]).

However, what does emerge from the exploratory study is the dynamic nature of SDF projects from both an industry perspective (e.g., differences from earlier projects) and an actor/activity viewpoint that reflects the variation through the project lifetime.

Therefore, the arrangement of actors, activities, and resources infers multifarious linkages that can exist simultaneously or develop through time. This is opposed to a representation of simply sequential activities, as found in some supply chain analysis.

[Note: Although the term actor has associations with the theatre, as well as connotations of “playing” or being deceitful, it has become current terminology in management theory (Vickers and Kouzmin 1999), because it also includes moves from, a focus on individuals, to incorporate organizations and subdivisions of organization (Hakansson and Ford 2002).]

In the exploratory study, the actors involved with SDF projects include individuals (e.g., project sponsors) as well as organizations and particularly parts of organizations, appropriate to their activity set. It is significant to note, that the traditional (ADF) roles of, for example, client and contractor are not equivalent in the SDF environment due to the variation between projects and longitudinally within a project. It is further complicated by the existence of the extra actor, the SPV.

Detailed examination reveals how actors are involved in different networks. For example, in the exploratory study, it was noted by E1 how his organization was involved in a number of SDF projects, often (officially) performing a different role.

Consequently, it can be envisaged that the roles and identities of the actors are enacted. Although there are formalized definitions of actors and their roles (e.g., contractual arrangements), in practice there is a degree of negotiation of roles and identities. What the exploratory study has revealed is that there are differing perceptions of actors’ identities and particularly their roles. For example, it has been stated (by members of contracting organizations) that clients need to understand their responsibility is not to change remits part way through the bidding process. Also, there have been direct attempts by contractors to change the composition of SPV, in seeking to redefine the role of the other organizations whose representatives were members of the SPV.

This emphasizes the need for all actors to understand how their actions impact upon the other members of the network, requiring mutual adjustment between actors, i.e., the essence of effective teamworking (Tranfield et al 2001).

Linked formally, but also informally: The empirical study and extant literature has tended to focus upon the formalized relationships between actors, particularly between organizations, and their configuration (such as contractual arrangements). However, the empirical study does reveal how within organizations, differing departments interact on a semiformal basis. Also, it was noted how organizations appeared to choose similar bid group partners for further projects [D3]. This was mirrored by suggestions that keeping in-house organization bid teams together also contributed to bid success [D1+3]. This suggests that there are important informal activities that help facilitate the formal activities (e.g., bidding).

Particular actors concentrate upon some activities, whilst other activities are broken up between actors. This is particularly pertinent when applied to the construction industry, because the development of SDF projects has meant that certain activities are formally (contractually) allocated to actors, for example, in one of the collaborator projects, there is a formal split between the asset provider and the service provider.

Impacting upon other activities: Indications in the literature suggest that SDF projects like PFI and PPP can highlight the problems of parties “cutting corners,” which can impact other actors in subsequent years (Miozzo and Ivory 2000). In the exploratory study, comments were made that directly supported this.

There were also effects from changes in corporate strategy, participation in previous projects, changes in government policy and uncertainty of future government policy.

In addition, informal as well as the stated formal relationships also occur. The exploratory study reveals how actors involved respond to each other. For example, it was noted how some contractors in SDF projects were still putting the interests of their contractor organization first, their behavior adversely affecting other members of the project team [D3]. Conversely, it was noted that one of the reasons why the Prisons PFI projects have a notably more effective procurement process was because the participants did not argue over every single clause in the contracts, but work together to accommodate the need to reach agreement quickly. Consequently, as Hakansson and Johanson (1993) point out, when a relationship is created by successive interrelated activities “they act in response to and in anticipation of each others’ actions.” This mutuality need not be altruistic, but because, in practice “it is in the actors’ own interest to act according to mutuality in settings where actors meet repeatedly or know that they will meet in the future” (Hakansson and Johanson 1993). But, it would appear that mutual adjustment is a mechanism through which the managers have worked on the more successful PFI projects, supporting the need for effective teamworking (Tranfield et al 1998).

Generally, supply chain research has indicated that collaborative arrangements “can provide a more effective means of satisfying customer needs at a profit than the single firm undertaking multiple value-creating activities” (Peck 2000). Indeed, for PFI/PPP type projects, the creation of chains of what are effectively “virtual organizations” is highlighted because of the fragmented nature of project teams drawn from diverse organizations.

The empirical study noted how, in certain projects, there were occasions when, for example, recourse to contract would take place [E1]. Also, there were examples of how certain organizations would exert a disproportionate influence over project teams, through their superior experience of leading projects [D3].

Relationships can be a resource: The empirical data indicated that over time, organizations develop relationships. For example, the experience of companies bidding together resulted in further joint bids, improved bid performance, and a better mutual understanding of how each other worked.

A key point is that the configuring of resources in relationships generates knowledge. This can be seen in the PFI prisons projects [mentioned by respondents D3 and E1] and also in certain PFI hospital projects, where the solutions were seen as being more innovative than the original brief had envisaged (Ahadzi and Bowles 2001). This supports one of the main aims of PFI/PPP in encouraging more innovative thinking (Treasury Task Force 1997).

Communities and Networks

By envisaging SDF projects as being embedded in a web of networks, it can be seen that the focus of further research needs to be upon the business relationships developed in practice. The networks of business relationships effectively form communities as actors begin to develop shared understanding of how each interrelates, and how they perceive the other networks. This highlights the recent research into phenomena such as the communities of practice concept, as noted by Brown and Duguid (1994).

It has been noted elsewhere that the construction industry appears to lack the skills necessary for providing innovative practice (Whittle 1998). The research community has focused upon formalized “learning networks” but has begun to appreciate how effective practice can be facilitated through less formal working arrangements, such as partnering. Together, these formal and informal sources can nurture the social learning that takes place through practice, balancing tacit and explicit knowledge, an aim still to be effectively accomplished in the industry.

This exploratory study supports the proposition that improved performance is driven by learning through practice. From the empirical study and extant literature, managing an SDF project requires particular skills and an understanding of how different contexts require different approaches. For example, it was noted that the approach required by participants for effective working in long-term, service-based projects had to change from the typically adversarial, short-term perspective held by contractors in particular [Interview D3], which is supported by the existing academic research (Miozzo and Ivory 2000b).

Therefore, learning is mingled with working and also there is a degree of innovation, because relationships are formed, developed, and reformed in practice, and can affect roles, identities, and activities.

Depicting the Exploratory Model

From the previous analysis it is possible to propose a model that summarizes the relationship and processes found in the exploratory study. This model can be represented as a series of levels, which although interdependent, also highlight specific, configurational considerations. Exhibit 3 shows this model diagrammatically.

Although these levels are presented here simply as concentric circles, they represent complex networks of actors, activities, and resources.

Practice: The notion of “practice” is seen here as an overarching term, incorporating the structures and processes involved in the working of SDF projects.

Exhibit 3. The “Roundels” Model

The “Roundels” Model

Learning: Here, the model is focusing upon cognitive and behavioral change stemming from experience. This is not to ignore completely “book learning,” but to go beyond it in order to embrace learning in practice.

Structure: The formal arrangement of organizational actors, activities, and resources, which are associated with SDF projects.

Process: The dynamic formal and informal routines through which actors, activities, and resources are configured in relation to SDF projects.

The Layers and Processes Are:

Industry Environment

• The study notes the development of a SDF marketplace, through government Public and Private Partnerships as well as other Project Financing schemes.

• New players have been attracted to the marketplace, who have often had little contact with the construction industry. Existing players change roles.

• Whole life considerations are becoming more important for construction industry particularly in relation to Service Delivery.

• Mindset Change is starting to permeate through industry, although this is uneven.

• The impact of corporate and business level strategies, which are changing in response to the pervasiveness of SDF projects.

Interorganizational Relationships

• SDF projects have placed even greater emphasis upon maintaining and sustaining interorganizational relationships.

• The experience of SDF projects shows the need for organizations to understand how they perform a variety of roles, for example, as partners or in terms of upstream-downstream relationships.

• These roles can be performed simultaneously, by different parts of an organization, manifested in different projects or in different stages of a project life cycle.

• It is vital that the linkages between organizations are managed successfully; otherwise these interfaces could become barriers to effective interorganizational working.

Within Organization Relationships

• The experience of SDF projects has stimulated reconfiguration of organizations.

• The effect has seen major changes within existing firms. For example, specialist SDF structures introduced at departmental and team level.

• It is not only structural changes that have been influenced by SDF project experience. Evidence suggests that the broader range of skills required by SDF projects means the composition of these structures has to change. Departments and teams require members with more diverse competences.

• Also, greater consideration is required for the management of knowledge information systems. For example, the type and amount of information required for long-term SDF projects.

Project Relationships and Processes

• Traditional project structures have to change in order to accommodate the requirements of SDF projects. Contractual forms change because of the changed metrics for project performance alongside increasingly complex financing arrangements.

• These changing requirements have influenced the configuring of structures such as rewards/remuneration systems and risk management systems.

• In terms of operational working, the ability of project teams to work seamlessly over the longer life of an SDF project is paramount.

• This teamworking is complicated by the changing composition of these teams over the project life. Also, different teams are involved at different stages of the project life.

• Therefore, there is a greater need for effective project management systems and methods.

• Above all, effective project practice for SDF projects is founded on maintaining and sustaining relationships between all actors.

• It is clear that although no two projects are alike, there is a need for learning to be managed.

Conclusions and Future Work

The findings of the exploratory study have been represented as a series of relationships in an attempt to model the complexity of the emergent SDF phenomenon. One of the objectives of the study was to inform the direction of the main study, which, at the time of writing, is under way. The interfaces around the SPV were chosen as the main focus of this study—our ultimate deliverable for the research grant being a set of field-tested guidelines to aid teamworking and culture change. The research design is complete and interviewing is under way.

During our initial investigations and literature survey other potential areas of study arose which regrettably have to fall out of the scope of the present study. In particular, there could be a strong connection between the issues of design for operation and bodies of theory around High Reliability (Tranfield et al 2001). Similarly the design definition and scoping processes could well be informed by the experiences of the manufacturing industry in using techniques such as QFD—Quality Function Deployment (Levene and Goffin 1996) and the processes of DFM—Design for Manufacture.


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Proceedings of PMI Research Conference 2002



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