Contingent Information Systems Development

Situated approaches based on project contingencies are becoming more and more an important research topic for information systems development organizations. The Information Services Organization, which was investigated, has recognized that it should tune its systems development approaches to the specific situation. A model has been developed, dealing with the matching between prevailing contingency factors and the preconditions of already existing situated approaches. Furthermore, a generic process model for systems development, including the information systems operations stage, is proposed. This model makes it possible to derive from it specific systems development strategies. A number of basic development strategies, specific for the Information Services Organization, are described. Preconditions, specific for this organization, are added to the standard situated approaches

Target value design: using collaboration and a lean approach to reduce construction cost

Target Costing is an effective management technique that has been used in manufacturing for decades to achieve cost predictability during new products development. Adoption of this technique promises benefits for the construction industry as it struggles to raise the number of successful outcomes and certainty of project delivery in terms of cost, quality and time. Target Value Design is a management approach that takes the best features of Target Costing and adapts them to the peculiarities of construction. In this paper the concept of Target Value Design is introduced based on the results of action research carried out on 12 construction projects in the USA. It has been shown that systemic application of Target Value Design leads to significant improvement of project performance – the final cost of projects was on average 15% less than market cost. The construction industry already has approaches that have similarities with elements of the Target Value Design process or uses the same terminology, e.g. Partnering and Target Cost Contracts, Cost planning, etc. Following an exploration of the similarities and differences Target Value Design is positioned as a form of Target Costing for construction that offers a more reliable route to successful projects outcomes

The price of risk in construction projects: contingency approximation model (CAM)

Little attention has been focussed on a precise definition and evaluation mechanism for project management risk specifically related to contractors. When bidding, contractors traditionally price risks using unsystematic approaches. The high business failure rate our industry records may indicate that the current unsystematic mechanisms contractors use for building up contingencies may be inadequate. The reluctance of some contractors to include a price for risk in their tenders when bidding for work competitively may also not be a useful approach. Here, instead, we first define the meaning of contractor contingency, and then we develop a facile quantitative technique that contractors can use to estimate a price for project risk. This model will help contractors analyse their exposure to project risks; and help them express the risk in monetary terms for management action. When bidding for work, they can decide how to allocate contingencies strategically in a way that balances risk and reward

Risk and price in the bidding process of contractors

Formal and analytical risk models prescribe how risk should be incorporated in construction bids. However, the actual process of how contractors and their clients negotiate and agree on price is complex, and not clearly articulated in the literature. Using participant observation, the entire tender process was shadowed in two leading UK construction firms. This was compared to propositions in analytical models and significant differences were found. 670 hours of work observed in both firms revealed three stages of the bidding process. Bidding activities were categorized and their extent estimated as deskwork (32%), calculations (19%), meetings (14%), documents (13%), off-days (11%), conversations (7%), correspondence (3%) and travel (1%). Risk allowances of 1-2% were priced in some bids and three tiers of risk apportionment in bids were identified. However, priced risks may sometimes be excluded from the final bidding price to enhance competitiveness. Thus, although risk apportionment affects a contractor’s pricing strategy, other complex, microeconomic factors also affect price. Instead of pricing in contingencies, risk was priced mostly through contractual rather than price mechanisms, to reflect commercial imperatives. The findings explain why some assumptions underpinning analytical models may not be sustainable in practice and why what actually happens in practice is important for those who seek to model the pricing of construction bids

The emergence of international food safety standards and guidelines: understanding the current landscape through a historical approach

Following the Second World War, the Food and Agriculture Organization (FAO) and the World Health Organization (WHO) teamed up to construct an International Codex Alimentarius (or 'food code') which emerged in 1963. The Codex Committee on Food Hygiene (CCFH) was charged with the task of developing microbial hygiene standards, although it found itself embroiled in debate with the WHO over the nature these standards should take. The WHO was increasingly relying upon the input of biometricians and especially the International Commission on Microbial Specifications for Foods (ICMSF) which had developed statistical sampling plans for determining the microbial counts in the final end products. The CCFH, however, was initially more focused on a qualitative approach which looked at the entire food production system and developed codes of practice as well as more descriptive end-product specifications which the WHO argued were 'not scientifically correct'. Drawing upon historical archival material (correspondence and reports) from the WHO and FAO, this article examines this debate over microbial hygiene standards and suggests that there are many lessons from history which could shed light upon current debates and efforts in international food safety management systems and approaches

EX ANTE CONSTRUCTION COSTS IN THE EUROPEAN ROAD SECTOR: A COMPARISON OF PUBLIC-PRIVATE PARTNERSHIPS AND TRADITIONAL PUBLIC PROCUREMENT

Theoretical literature suggests a variety of reasons why a public-private partnership (PPP)should exhibit higher costs of construction than traditionally procured public infrastructure projects. The bundling of construction and operation contracts in a PPP give the private partner greater incentives to make investments in the construction phase to lower subsequent operation and maintenance costs. Also, the transfer of the construction risk to the private partner should be explicitly priced in a PPP. We use data on ex ante construction costs of road projects in Europe to test the existence and the magnitude of any such difference between PPPs and traditional procurement. We estimate the ex ante cost of a PPP road to be, on average, 24% more expensive than a traditionally procured road, all other things equal. This estimate corresponds by and large to reported ex post cost overruns in traditionally procured public roads. To the extent that the two measures are representative, this suggests that the largest part of the ex ante construction cost difference originates from the transfer of construction risk. This, in turn, implies that other possible sources of higher PPP construction costs, including bundling, seem to be of second-order importance in the road sector. The analysis does not allow drawing normative conclusions about the desirability of PPP as a procurement method as it focuses only on one cost component in isolation, without being able to quantify its impact on life-cycle costs and benefits.Construction costs; Road sector; public-private partnership; public procurement; infrastructure projects; Europe

Testing Williamson’s theory on transaction-specific governance structures: Evidence from electricity markets

Long term contracts increase the hazard of ex post maladaptation, creating demand for processes that enable adaptation over the course of long-term exchange. Enabling adaptation, however, may diminish the effectiveness of the long-term contracts, designed as prima facie hold-up remedies. Following Joskow (1987), we attempt to empirically capture the positive relationship between physical asset specificity and the duration of long-term contracts between California electricity generators. In addition, following Masten and Crocker (1985), we try to measure the effect of legal provisions on contract duration and interpret them as efficient instruments for providing flexibility in long-term relationships. The more important the investment in relationship-specific assets, the longer the contractual duration. However, parties mitigate long-term contract inflexibility, based on ex ante bargained terms and conditions, with provisions that allow for contingent adaptation. Our empirical results provide support for the hypothesised relationships under different model specifications and alternative estimation techniques.electricity long-term contracts, idiosyncratic relations, asset specificity, efficient adaptation