Original Article

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Impact of market fluctuation on relative advantageousness of project delivery systems

Pertti Lahdenperä January 4, 2020


https://doi.org/10.25219/epoj.2020.00102

Abstract

An appropriate project delivery system is a key means for the owner to create preconditions for successful realisation of a project. The decision to use a certain system is likely the result of considering numerous factors since project owners and projects have divergent objectives and constraints. Market situation is one constraint, which can be expected to impact the relative capacities of project delivery systems to meet critical project objectives. There is, however, little research on that impact and existing project delivery system selection tools seem to ignore it.


To correct that shortcoming, this study focusses on the impact of market cycles on the expected preference for and use of various project delivery systems. Literature and expert interviews were utilised to generate understanding, which was then tested against market practice, based on extensive data on new building construction projects extending over a period of a quarter century. Shares of different project delivery systems were examined in relation to market situation separately for different building types. The method involved calculation of partial correlations, which eliminate the impact of intervening variables that complicate the relationship between the shares and the market situation. Changes in the use of different project delivery systems over time were also examined.


The results indicate that market situation is not a determinant. Yet, for instance, Construction Management methods become more advantageous as the market outlook improves. The traditional Comprehensive Contract (Design-Bid-Build), again, assumes a larger role as market trends weaken although a heated market is likely to make some of its users adopt the Separate Contracts method. Moreover, the study indicates that there has been a minor move towards increased use of Design-Build during the long period of examination.


Keywords: Project delivery systems, procurement systems, buildings, new construction, market cycles, Finland, trends