TY - BOOK
T1 - Financial analysis of project delivery systems
T2 - Road projects' operational performance data revisited
AU - Lahdenperä, Pertti
N1 - Project code: R2SU00764
PY - 2008
Y1 - 2008
N2 - 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 publication compares
the cost efficiency of Design-Bid-Build (DBB),
Construction Management at-fee (CM), Design-Build (DB),
Design-Build-Operate (DBO) and
Design-Build-Finance-Operate (DBFO) in road management
based on an (earlier reported) international data capture
focusing on the operational performance of these PDSs.
Operational performance refers to the activity-based cost
performance of an organization characteristic to a PDS
where the timing of the activities is taken into
consideration. On these premises a financial analysis
that takes into account financing arrangements and
corresponding payment systems 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.
The financial analysis of the costs to the owner revealed
that, apart from the evenly matched DBB and CM, the
broader the scope of services supplied by one contract in
the case of public-financed systems (DBB, CM, DB and
DBO), the more cost efficient the PDS. If the early
commissioning advantage is included in the analysis,
especially CM, but also DB improves its competitiveness
in relation to the other PDSs. The variation in the
financial estimates has no influence on the ranking of
public-financed PDSs in practice. DBFO's competitive
position is not absolutely clear, but it seems to be in
the middle category with DB. Consideration of the early
commissioning advantage, however, makes CM (that enables
fastest commissioning) nearly equal or in some cases even
better than DBFO, which, on the other hand, increases its
superiority over DBB.
It must be remembered though that the scheme is, in
general, sensitive to project properties and constraints,
and fluctuations in the financial and construction
markets. The PDSs of the analysis were applied to a
relatively large road project in well-known conditions
where all PDSs could be considered be applicable.
AB - 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 publication compares
the cost efficiency of Design-Bid-Build (DBB),
Construction Management at-fee (CM), Design-Build (DB),
Design-Build-Operate (DBO) and
Design-Build-Finance-Operate (DBFO) in road management
based on an (earlier reported) international data capture
focusing on the operational performance of these PDSs.
Operational performance refers to the activity-based cost
performance of an organization characteristic to a PDS
where the timing of the activities is taken into
consideration. On these premises a financial analysis
that takes into account financing arrangements and
corresponding payment systems 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.
The financial analysis of the costs to the owner revealed
that, apart from the evenly matched DBB and CM, the
broader the scope of services supplied by one contract in
the case of public-financed systems (DBB, CM, DB and
DBO), the more cost efficient the PDS. If the early
commissioning advantage is included in the analysis,
especially CM, but also DB improves its competitiveness
in relation to the other PDSs. The variation in the
financial estimates has no influence on the ranking of
public-financed PDSs in practice. DBFO's competitive
position is not absolutely clear, but it seems to be in
the middle category with DB. Consideration of the early
commissioning advantage, however, makes CM (that enables
fastest commissioning) nearly equal or in some cases even
better than DBFO, which, on the other hand, increases its
superiority over DBB.
It must be remembered though that the scheme is, in
general, sensitive to project properties and constraints,
and fluctuations in the financial and construction
markets. The PDSs of the analysis were applied to a
relatively large road project in well-known conditions
where all PDSs could be considered be applicable.
KW - road procurement
KW - project delivery systems
KW - project finance
KW - road management
KW - financial analysis
KW - cost comparison
M3 - Report
SN - 978-951-38-7230-4
T3 - VTT Tiedotteita - Meddelanden - Research Notes
BT - Financial analysis of project delivery systems
PB - VTT Technical Research Centre of Finland
CY - Espoo
ER -
