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A project alliance is a project delivery system in which the owner and service providers share the risks associated with the project. The aim of this paper is to increase understanding of the functioning of the payment bases of alliance projects, especially from the perspective of diverse uncertainty. The work is based on the plans and contracts of one of the implemented alliance projects and on modelling the project’s payment system. The developed model was simulated taking into consideration the multiple uncertainties associated with the project. The compensation paid by the owner to the service providers and the service providers’ consortium fee were examined in particular. Alongside the original model based on the project’s contract, some alternative instances were also defined. The focus was on the effect of the cost escalation and on the transfer of the corresponding risk to the alliance, as according to the contract the inflation risk of the project lay with the owner. In addition, the model was examined in situations where uncertainty increases significantly, or risk events tend to co-occur. At their most extreme, the risks were assumed to be so high that the service providers’ loss limitation clause could have steered the determination of compensation. The contribution of the work is in illustrating the effect of different contractual solutions and broadening our understanding of the functionality and sensitivity of the alliance payment system.

Design- build (DB) is a much-used project delivery system with operational variations for different needs and situations. Yet, novel applications have to be strived for as all current applications have some drawbacks. Accordingly, by means of a constructive research approach, this study focuses on a DB procedure that exploits the parties' collaboration in order to improve the economic efficiency of construction projects. It is called \"design-build with a development phase\" (DBd). In the procedure, the owner and the selected contractor continue the development of the project solution in co-operation, adhering to the principle of benefit sharing, which is enabled by pre-agreed rules and the benchmark solution, formed as a result of price-inclusive contractor selection. More precisely, this paper presents the DBd procedure and how it was initially constructed and eventually applied in some road infrastructure projects. The paper also reports the related experiences, which were positive based on the improved value for money in the trial projects. Thus, the paper offers a novel option for the industry to improve its performance and contributes by disproving the dominant view, which has been guiding the formulation and use of the current project delivery practices, that price-inclusive competition and collaborative development thereafter could not be matched successfully.

PurposeThe purpose of this study is to create a framework to analyze approaches for coordination, adaptation and safeguarding of exchanges in interorganizational project networks.Design/methodology/approachAn analysis framework to analyze governance in project networks was created based on a systematic review of existing literature. The framework was applied to analyze governance approaches used in a large infrastructure project implemented with an alliance project delivery method to illustrate the practical validity of the framework.FindingsThe analysis framework categorized governance in project networks in six dimensions: goal setting, rewarding, monitoring, roles and decision-making, coordination and capability building. A set of questions for each governance dimension was created and the analysis framework was applied in the context of a project alliance.Research limitations/implicationsThe focus of this research is on governance internal to a project network. The authors identified dimensions of governance in project networks and related governance approaches based on a systematic literature review. The practical applicability of the framework was validated in a single case study setting.Practical implicationsThe paper introduces a concept of governance in project networks, which takes the perspective that all actors that have an influence on project implementation are part of an interorganizational project network. The focal organization may have had a significant role in the design of governance, but governance also emerged from the network structure of companies and the interactions among them. The analysis framework created in this research can be used to design and analyze governance in different type of project context.Originality/valueThe paper introduces a concept of governance in project networks, which takes the perspective that all actors that have an influence on project implementation are part of an interorganizational project network.

Alliancing is a relatively new construction project delivery method receiving increasing interest globally while also eliciting many questions about its effectiveness. That is why its operating logic should be clarified beyond the currently existing genera views. Correspondingly, this paper aims to define the means and mechanisms which influence the capacity of alliancing to produce value for money. The work establishes the interlaced impact chains between format basic solutions of alliancing and the key result areas defining the value-for-money ratio. This is made by focussing on a singe alliance project and its procedural solutions and experiences. The case project of the study was an urban road tunnel under a city structure and the impact chains were explored by interviewing all eight members of the alliance readership team covering all contracting parties. The two-stage persona interviews were conducted in accordance with the systematic modelling procedure resulting in eight cognitive maps which were then combined into a group map. The resulting model included around one hundred interlinked concepts initially, but was streamlined for the paper. Accordingly, alliancing offers a concrete framework which gives better than normal chances of success in the case of complex, challenging projects fraught with much uncertainty. Many diverse basic alliance solutions/features contribute to success, white each feature also seems to strengthen the impact of the others. This suggests that, at its best, pure project alliance is not only a coherent but also a holistic solution to challenging projects.

Purpose – Early involvement of the project team with the construction resources seems to be gaining popularity as it aims to improve the cost efficiency of a project as there is significantly more potential to influence the project solution at that point in time. The missing price during early involvement/selection and the principal-agent setting, however, tend to leave the project owner in doubt of the reasonableness of pricing when it is fixed only later after the joint design phase involving the service provider and the owner. The purpose of this paper is to find a solution for this challenge. Design/methodology/approach – A two-stage target-cost (2STC) arrangement has been proposed as the solution. In this model the service provider earns a bonus by suggesting a lower target cost than the reference set at the time of the involvement of the provider. The amount of bonus also impacts the cost over-run risk transferred to the service provider to avoid overly optimistic promises. The proposition encompassed just the basic idea, and did not really delve into actual model formulations and their functioning under practical realities. Therefore, the required work is presented here in the form of a conceptual, discursive study focusing on relevant theories and empirical findings from major investment projects. Findings – The study produces a requirement framework for the 2STC model to allow functioning models to be formulated and tested. The framework incorporates numerous requirements, constraints and a suggested path forward. For instance, while the model may not be manipulatable, it must incentivise the service provider to seek more cost-effective project solutions, be feasible also from the view of the project owner and adapt to various project risk profiles and ranges of efficiency improvements. Research limitations/implications – The study suggests more concrete model formulations to be provided under the guidance of the presented framework. Originality/value – The 2STC model is a unique concept and no comparable construct is known to exist. Besides the requirement framework, the study also strengthens the foundation of and need for the 2STC model by a thorough survey of its theoretical linkages. Accordingly, the study presented in this paper forms the second stage in the overall 2STC development process focused on benefiting project owners and the industry.

Purpose – Early involvement of the project team with the construction resources seems to be gaining popularity as it aims to improve the cost efficiency of a project as there is significantly more potential to influence the project solution at that point in time. The missing price during early involvement/selection and the principal-agent setting, however, tend to leave the project owner in doubt of the reasonableness of pricing when it is fixed only later after the joint design phase involving the service provider and the owner. The purpose of this paper is to find a solution for this challenge. Design/methodology/approach – A two-stage target-cost (2STC) arrangement has been proposed as the solution. In this model the service provider earns a bonus by suggesting a lower target cost than the reference set at the time of the involvement of the provider. The amount of bonus also impacts the cost over-run risk transferred to the service provider to avoid overly optimistic promises. Besides the initial conceptualisation of the idea, earlier research has also produced a framework for developing and assessing alternative formulations of the 2STC model. By means of mathematical modelling and optimisation and critical review the work seeks to provide formulations that meet the set requirements. Findings – The study establishes concrete formulations that are believed to function as intended with certain reservations. Two potential mechanisms, the constant and variable share models, are generated and presented, and recommendations are given for their use in practice. In the former, the extent of cost efficiency improvement in the development phase has no impact on percentage shares, but in the latter the service provider’s relative development bonus and share of cost over-runs are the bigger, the bigger the improvement. Research limitations/implications – The study suggests piloting the formulations in carefully selected projects in order to discover their practical feasibility. Originality/value – The 2STC model is a unique concept and no comparable construct is known to exist. The study produced concrete formulations for a 2STC construct while ensuring and illustrating their functioning to avoid surprises in their use. The study presented in this paper forms the third stage in the overall 2STC development process focussed on benefiting project owners and the industry.

PurposeRelational contracting is increasingly being applied to complex and uncertain construction projects. However, it has proved hard to achieve stable performance and industry-level learning in this field. This paper employs an institutional perspective to analyze how legitimacy for relational contracting has been produced and challenged in Denmark, Finland, Norway and Sweden, including implications for dissemination and learning.Design/methodology/approachA collaborative case study design is used, where longitudinal accounts of the developments in relational contracting over more than 25 years in four Nordic countries were developed by scholars based in each country. The descriptions are underpinned by literature sources from research, practice and policy.FindingsThe countries share similar problem perceptions that have triggered the de-institutionalization of traditional contracting practices. Models and policies developed elsewhere are important sources of knowledge and legitimacy. Most countries have seen pendulum movements, where dissemination of relational contracting is followed by backlashes when projects fail to meet projected outcomes. Before long, however, relational contracting tends to re-emerge under new labels and in slightly new forms. Such a proliferation of concepts presents further obstacles to learning. Successful institutionalization is found to rely on realistic goals in combination with broad competence development at the organizational and industry levels.Practical implicationsIn seeking inspiration from other countries, policymakers should go beyond contract models to also consider strategies to manage industry-level learning.Originality/valueThe paper provides a unique longitudinal cross-country perspective on the field of relational contracting. As such, it contributes to the small stream of literature on long-term institutional change in the construction sector.

The prevailing practice in new areal real estate development is for public and private actors to perform their duties by turns. Yet, the planning process could benefit from simultaneous contributions from society and developers and their designers. That, again, requires that the municipality selects the private partner consortia prior to completion of the local detailed plan through a competition in order to find the most potential actors and the best ideas for implementation of an urban structure of high quality. Candidates will be attracted by offering them the right to implement a residential/business block as a developer. The several blocks involved in an areal development project, and the laboriousness of producing competitive solutions, require a well planned selection process. A novel multi-target competition process was developed which is presented in this paper with special emphasis on the allocation algorithms that allow selecting the most qualified competitors for parallel follow-up competitions from among a large group of registered candidates. The approach was tested in an actual real estate development project in the municipal district of Vuores which was the original reason for launching the study.

Purpose - A project delivery system (PDS) refers to the organizational framework of a project that defines the control mechanisms and the relationships between actors and their incentives. It is of major importance to the project owner as it, for instance, contributes to the project's level of efficiency. This paper aims to define indicative, relative cost performances of different PDSs in a road management context to support the road owner's strategy development.Design methodology approach - This study compares the costs of design-bid-build, construction management at-fee, design-build, design-build-operate and design-build-finance-operate based on an international data capture focusing on the operational performance of these PDSs. A financial analysis was made to determine the systems' present costs to a road authority based on relevant market estimates. Moreover, a step towards understanding their overall efficiency was taken by focusing also on differences in speed of delivery which result in expenses or savings to the user community.Findings - Although the applicability of a PDS depends on project properties and constraints, the study concludes that, in general, the broader the scope of services supplied by a single contract, the lower the system's present cost to the owner. The inclusion of private finance and early commissioning advantage, however, change the ranking so that universal conclusions cannot be drawn. DBFO seems to be commonly in the middle category.Research limitations implications - Here, PDSs are applied to a relatively large project, minimum size €30-60m, in well-known conditions and involving no factors of uncertainty due to third parties. The results are not valid in smaller and or more constrained projects.Originality value - The study provided new knowledge of the owner's and society's average comparable cost performances in the case of five different PDSs. Since a single-value, exclusive solution hardly exists, the study on the sensitivity of different PDSs to key financial parameters is also valuable.

Early involvement of the construction team is increasingly utilized in demanding projects to incorporate versatile expertise in their planning. For public owners this is a challenge since they are obliged to use competitive, transparent team selection based on the ‘most economically advantageous’ criterion which ensures that both price and quality viewpoints are taken into account. In the case of early involvement, the price component naturally does not include the total price, but may consist only of the fee-percentages of competing service providers. This study examines such a selection situation in project alliancing in the European context and seeks to find a way to integrate the fee component in a multi-criteria selection system and determine reasonable fees for different levels of capabilities. The study builds on the performance difference between different capabilities, derived from a survey of practitioners, and determines an indifference curve arithmetically for the planning of a selection method. The influence of the owner‘s risk attitude and risk premiums are also considered exploratively based on the pricing methods of the theory of finance.