CONSTRUCTION PARTNERING: A CASE STUDY & SOME ISSUES

1. CONSTRUCTION PARTNERING: A CASE STUDY & SOME ISSUES Tas Yong KOH

2. Why partnering? Some views . . .

3. Why partnering? “I am convinced that over half the cost of a project is socially determined” - John Mather, NASA, 2006 Nobel Laureates for Physics The industry’s characteristics Commercial aspects Hard competitive tendering Decision based on price Conditions of contract Multiple subcontracting Low investment in training HIGH WASTAGE HIGH COST! Adversarial industry culture Mistrust Confrontational attitude Conflict Opportunistic behaviour Operational aspects Fragmentation Diffused responsibility TMO Hierarchical nature Macho environment

4. Why partnering? Ways of working not sustainable! The Tang’s Report (CIRC, 2001): • Strategic thinking on future development • Move away from traditional approach • Fair consideration of interests and risks for all To move forward and improve, we need to: • Increase harmony among clients, consultants, contractors, and subcontractors • Address the critical relationships between time, cost, quality, and safety

5. Why partnering? Partnering is recommended as a management tool to achieve the above! • Fair apportionment of risks • Economic construction cost • Achieve value rather than price

6. Definitions of partnering • National Economic Development Office, UK (NEDO 1991:5): • A long-term commitment between two or more organizations for the purpose of achieving specific business objectives by maximizing the effectiveness of each participant’s resources • Construction Industry Institute, US (CII 1991:iv): • Long-term agreement between companies to cooperate to an unusually high degree to achieve separate yet complementary objectives • Association of Project Management Hong Kong (APMHK 2003:4): • A commitment between two or more organizations to achieve specific business objectives by maximizing the effectiveness of each party’s capability through cooperation • Barlow and Jashapara (1991:3): • A variety of managerial practices and organizational designs that enhance and maintain collaboration

7. Definitions of partnering • No standard definition! • Defined mostly by its outcomes and processes • But, central themes are: • Long-term commitment • Cooperation • Complementary objectives • Win-win(-win) attitude • For successful partnering, need: • Attitudinal change • Managerial practices • Organizational designs

8. Trust Equity Commitment Proactive attitudes Shared understanding Improved communication Mutual goals Joint evaluation Joint problem-solving Training and maintenance Incentives Performance measurement Success factors Soft aspects Hard aspects

9. Some issues Some issues . . . Power relations Competing demands Temporary settings Cultural divide

10. A tale of one project!

11. Project description ROUTE 8 SHATIN HEIGHTS TUNNEL & APPROACHES

12. Project description ROUTE 8 SHATIN HEIGHTS TUNNEL & APPROACHES

13. Project description ROUTE 8 SHATIN HEIGHTS TUNNEL & APPROACHES • A direct link between northeast of New Territories and airport. • The Contract involves: • 1.0km long dual three-lane tunnels under Shatin Heights, • Site formation for a toll plaza at a valley, • 0.6km long dual two-lane tunnel approach road in Tai Wai, • Two 1.0km slip road viaducts to Che Kung Miu Road, • Noise barriers and enclosures, • Slopes, and • Drainage, and landscape works. • Tunnels runs through rocks!

14. Project description ROUTE 8 SHATIN HEIGHTS TUNNEL & APPROACHES • Client: New Territories East Development Office, CEDD • Commencement date: 18 November 2002 • Expected completion date: November 2007 • Contract type: Engineer’s design, re-measurement contract with provision for price fluctuation • Revised contract sum: HK$1,196 million (?)

15. CEDD partnering approach • HKSAR Government’s initiative for public works contracts (since mid 2002) • Non-binding, post award partnering approach • First deal with relationship aspects • Then develop tools and techniques: • Procedures, processes, and systems • Believes that: • Contract sets out legal relationships • Partnering process establishes working relationships

16. CEDD partnering approach • Develop among the project team mutual strategy of commitment and communication • Aims to create an environment of: • Trust and teamwork, co-operative bond • Objectives: • More fruitful business relationship • Effective communication and decision structure • Supporting culture

17. CEDD partnering approach Trust Mutual objectives Problem resolution CEDD Key Partnering Elements Cooperation Commitment Win-win philosophy Group working Equity Continuous evaluation

18. CEDD partnering approach Implementation flow chart Workshop type Auxiliary activity Start-up partnering Pre-workshop meeting Steering group sessions One-day partnering workshop Partnering charter Cascade workshops Workshops for middle management Reviews Half-day review workshops Social events Actions tracking meetings End of project review End of partnering review workshop

19. CEDD partnering approach • A structured format to develop, foster, engineer, and implement partnering through: • Teambuilding exercises; • Signing of charter; • Facilitation workshops; • Problem resolution mechanisms; and • Continuous evaluation, monitoring, and improvement of performance.

20. Pre-workshop meeting • Attended by senior managements of both the client and main contractor • To develop and promote: • Understanding of partnering concepts, • Understanding of partnering implementation process, • Change in culture, and • Commitment and rapport Laying the ground works

21. One-day partnering workshop • Attended by senior management of all parties • Workshop aims to achieve: • Commitment from the senior managements of stakeholders; • Team spirit - team building exercises (e.g. Red/Blue Game); • Mutual objectives – formation of Partnering Charter; and • Improved decision making process – Problem Resolving Process, and Problem Resolution Matrix

22. One-day partnering workshop • Key factors learnt from team building exercise: • Cooperation is better than internal competition, • Selfish behaviours led to lose-lose outcomes ( BLUE behaviours), • Necessary to take risk to help others ( RED behaviours), • Groups are interdependent, • Trust needs to be built, and • Mutual understanding of rules and objectives. Client Client + Designer + Contractor To The works Designer Contractor

23. One-day partnering workshop Objectives of various parties:

24. One-day partnering workshop Partnering Charter:

25. One-day partnering workshop • 4-way analyses of needs and expectation: • Each party lists needs required of other parties • Each party identifies typical barriers • Based on importance to achieve mutual objective  1, low to 10, high importance • For example . . .

26. One-day partnering workshop Clarify understanding Problem Resolution Process • A model that emphasizes: • Common understanding • Joint problem solving • Problem resolution matrix • Allocate responsibilities • Communication links • Sets time target >> No stagnation of issues! Aligning team to solve problem together Define problem Decide decision level + time limit Create options • Raise to next level Propose option No Agreed? Yes

27. One-day partnering workshop Problem Resolution Matrix

28. Partnering steering group • Meeting held every 4 to 6 weeks • Membership comprises of senior management of client, designer, and main contractor • Main roles and • responsibilities: • Provide role model • Promote partnering • behaviours • Induct new • members • Review and monitor • performance • To promote • partnering • behaviours: • Promote model • behaviours • Arrange workshops • Establish joint team • Arrange social • events • Review and • monitoring: • Score aspects given • in Charter • Reveal critical issues • Clarify differences • Better understand • progress thro dialogue • Agree on actions

29. Partnering steering group Review and monitor performance – Partnering Scoring (Apr 2003)

30. Partnering steering group Review and monitor performance: Matching Needs (Dec 2003)

31. Partnering steering group Review and monitor partnering performance (Dec 2003) • Assess and discuss on “what has gone well?” • Teamwork and cooperative relationships • Quality • Safety • Environmental aspects • ENT North Portal and Toll Plaza site formation • Assess and discuss on ”what has not gone so well?” • We are running behind schedule! • There is still too much bureaucracy and paperwork • Finalizing the supplementary agreements

32. Partnering steering group Review and monitor partnering performance (Dec 2003) Some key issues requiring improvement: • Joint problem solving: • Definition: Problems not resolved quickly enough, cannot be resolved by one party alone etc • Causes: Concentrate on reasons rather than solutions, solving problems for oneself only etc • Improvement: Concentrate on solutions and deal with reasons later, establish joint group, close communication • Construction planning: • Definition: Insufficient planning • Causes: Uncertainties over design, lack of experience in foreseeing problems • Improvement: Employ more experienced frontline supervisors, better risk management

33. Challenges and difficulties • Challenges for government teams working on partnering projects: • Relational • Difficult trust building • Difficult relationship • building • Arm-length treatment • Structural • No clear procedures • Lack of incentive • Lack of authority • Unclear line of • communication • Stakeholder • Conflicting objectives • Outside stakeholders’ • challenge • Other departments • not keen

34. Challenges and difficulties • Changes made: • Trading the REDs • Avoid throwing problems to others • Be open about own mistakes • No blame culture • Use less formal communication • Share good ideas from other projects • Include other authorities in the partnering • Some RED behaviours reported: • Take risk • Sticking to promise • Give and take • Accepting responsibility • Showing trust in others

35. Outcomes and performance Improved communication Meeting objectives Speedier problem resolution BENEFITS Possible budget surplus Improved quality Fewer claims Improved safety Cost effective design Better environmental concerns Better public relations

36. But, . . . some issues . . .

37. Our findings (1/5) • Presence of partnering arrangement on project success: • Comparison across 28 success criteria; soft criteria and hard criteria • No significant difference for almost all criteria except the above two • “Information sharing” higher in “No partnering” projects!? • Difference is not very clear! • Partnering beneficial?

38. Our findings (2/5) • Type of partnering arrangement on project success: • “Binding partnering” consistently higher rating • “Non-binding partnering” consistently lower rating; even lower than “No partnering”! • Communicational benefits – effective meetings, info sharing, good communication • Binding partnering better?

39. Our findings (3/5) • Type of procurement arrangement on project success: • No significant difference for almost all criteria except the above two • Integrative procurement (e.g. design-and-build) fares better • No systematic trends on partnering benefits (Nystrom, 2008): • Partnering as hygiene factor? • Still in “infancy” stage or “old habits die hard”? • Intangible effects – less stressful work environment, better public image, improved communication, (slight) change in attitude? • Possible missing link – survey did not ask for possible incentive arrangement!

40. Our findings (4/5) • Some sample quotes from case study:

41. Our findings (5/5) • Some sample quotes from case study (cont’d):

42. Points of concern Unitaristic entity > Project organisation not unitaristic > Different acceptance at different levels > Competing demands e.g. collaborative vs commercial relations Equity > Risk reward arrangement > Unequal power relation e.g. difficult for Client to give up their power > Difficult to agree formulae for sharing Integration > Structural and professional culture divide > Project temporary settings hinders trust development > Control or responsible autonomy? Benchmarks > Social and economic purposes > Select easily achievable targets > Ratcheting up performance Project processes > Use common standard or procedures > Overlook human and social elements in work > Tensions between flexible partnering ways and control Feedback > Tacit knowing in project > Discontinuity of project organisation > After-the-fact project review – details lost > Different propensity to report on mistakes Adapted from Bresnen, 2007

43. Current practice • Multi-prong approach • Three main mechanism: • “Gain share and pain share” arrangement • Project dispute resolution system • Promotion of collaborative environment • May augment with other initiatives, e.g. contractor design elements, project bank account, GMP, relationship facilitator, etc. • Target main interest – monetary incentive • Use both hard and soft elements

44. Possible development • Move towards contractual partnering: • Contractual adherence as norm • Move beyond hygiene factor • Aim to achieve best value • 8 key values: • Cost and margin – client’s cost saving, contracting parties’ reasonable margin • Timely delivery • Quality • HSE, and corporate social responsibility • Joint risk management • Whole life cost reduction • Better relationship during and after a project • Claim and dispute reduction

45. Over to you . . . • Your thoughts on the followings, please: • The project parties encountered difficulties in building good working relationships and trust at the beginning of the project. What do you think were the causes and how do you propose to solve it? • The objectives of the four main parties in the project are different. What problems do you foresee will emerge in the running of the project? • The partnering approach is non-binding in nature. How do you think this arrangement affect the running of the project? • What do you think are other factors that affect the level of cooperation in the project (apart from those already covered)? • Which approach do you think is better in implementing partnering in construction: an engineered or evolutionary approach? Why?

46. End of our partnering for now . . . Thank you for your attention!

47. Appendixes

48. Success factors: Trust Equity Commitment Improved attitudes Shared understanding Improved communication Mutual goals Joint evaluation Joint problem-solving Training and maintenance Incentives Performance measurement Likely problems: Lack of commitment Uncomfortable in trusting Lip-service Win-lose mentality Lack of perseverance Commercial pressures Not all parties are included Lack of empowerment Inefficient problem solving process Success factors and likely problems Soft aspects Hard aspects

49. One-day partnering workshop • A proper start-up workshop for the partnering project two months after commencement. • Attended by: • Senior management of the client, • Senior management of the main contractor, • Consultant and his resident site staffs (RSS), • Representatives of other interfacing government departments (e.g. HyD, ICAC!) • First three parties jointly formed a Partnering Steering Group.

50. One-day partnering workshop Client’s needs to achieve mutual objectives: