09613218 # 1998 E & FN Spon

Linking procurement systems to project priorities

Mohan M. Kumaraswamy and Sunil M. Dissanayaka

Department of Civil & Structural Engineering, The University of Hong Kong , Pokfulam Road , Hong
Kong SAR
E - mail : mohan@ hkucc. hku . hk ; h9595041 @ hkusub. hku . hk

The main objective of this work is to assess the impacts of various procurement variables on project
performance , in comparison to the impacts of non-procurement related variables, such as project conditions
and team characteristics . Since the impacts of specic procurement variables , such as contract type, have
been investigated before, it was decided to rst develop a comprehensive framework of procurement
options. This framework is based on a holistic overview of procurement systems that included, for
example, sub-systems of work packaging, and type of contract. A model was next developed to link the
procurement system variables to project outcomes. Additional variables such as the characteristics of the
project and the project participants were incorporated into this model as intervening variables. A survey
in Hong Kong tested the relative strengths of such procurement sub-systems and intervening variables, in
terms of their inuences on project outcomes. The interim results are described in this paper. This
includes observations that cost and time overruns were not signicantly inuenced by the chosen
intervening variables. Such observations led to the identication of particular needs to further probe the
inuences of team performance levels, as well as of procurement sub-systems. This evaluation of the other
relationships in this proposed model will assist clients and their advisers to design more appropriate
procurement systems, that should be geared to their particular project priorities .

L objectif principal de ce travail est d e valuer les incidences de diverses variables d approvisionnement sur
l exe cution d un projet, par rapport aux incidences de variables qui ne sont pas lie es aux approvisionnements,
comme les conditions du projet et les caracte ristiques de l e quipe. Les incidences des variables propres a un
approvisionnement , comme le type de contrat, ayant de ja e te examine es, on a de cide de constituer tout
d abord un cadre complet des options d approvisionnement . Ce cadre repose sur une vue ge ne rale holistique
des syste mes d approvisionnement qui comprenaient, par exemple , des sous-syste mes de lots de travail et la
type de contrat. On a ensuite re alise un mode le pour lier les variables du syste me d approvisionnement aux
re sultats du projet. D autres variables comme les caracte ristiques du projet et les participants ont e te inte gre es
dans le mode le comme variables d intervention . Dans le cadre d une e tude re alise e a Hong Kong , on a teste
les re sistances relatives de tels sous-syste mes d approvisionnement et variables d intervention , en termes de
leurs inuences sur les re sultats du projet. Cet article donne les re sultats provisoires. On a notamment
observe que les de passements de dates et de cou ts ne subissaient pas de fac: on importante l inuence des
variables d intervention choisies. Ces observations ont conduit au recensement des besoins particuliers pour
mieux sonder l inuence des niveaux de performance des e quipes ainsi que des sous-syste mes
d approvisionnement . Cette e valuation des autres relations dans le mode le propose devrait aider les clients
et leurs conseillers a concevoir des syste mes d approvisionnement plus approprie s et qui devraient e tre axe s
sur les priorite s particulie res de chaque projet.

Keywords: construction , project, procurement , performance , Hong Kong

The signicance of procurement system while necessary for project success , is not
systems sufcient to ensure it. For example, Rowlinson
(1988) found management, organization and con-
It has become increasingly evident over recent textual variables to be more strongly associated
years, that an appropriate choice of procurement with project performance than procurement form.

Bu i l d in g Re s e a r ch & In f o r m at io n (1998) 26(4), 223238 223

KUMARASWAMY AND DISSANAYAKA
He also found that different procurement forms
could be associated with different levels of per-
formance. While construction projects have grown
in complexity and magnitude, crossing national
and natural barriers , innovative modalities of
procurement have also been developed. These
present prospective clients with many possible
procurement paths within the complex network of
potential arrangements for procuring design,
construction , management and nancial services.
For example, Build Operate Transfer arrange-
ments in themselves can incorporate many possi-
ble variations .
Inappropriate procurement strategies may lead to
cost and time overruns , claims and disputes on
projects as previously highlighted (Masterman,
1992; Abdel-Meguid and Davidson, 1996). Con-
versely , appropriate procurement strategies are
needed to help achieve optimal solutions in
terms of cost, time and quality. They can also
contribute positively to other aspects of perform-
ance, such as meeting agreed targets, as outlined
by Jagger (1995) and detailed (in the context of
the UK construction industry) in the Latham
Report (1994).
At the macro level, broader (e.g. national)
procurement initiatives could also lead to longer-
term benets through the development and
upgrading of domestic contractors , other con-
struction organizations and national industries
themselves. This has been demonstrated by case
studies, for example in Malaysia (Abdul Aziz
and Ofori, 1996), Singapore (Ofori, 1996) and Sri
Lanka (Kumaraswamy and Dissanayaka, 1997).
However, this paper will focus on identifying
linkages between procurement systems and per-
formance outcomes at the project level, as is the
principal concern of clients. Furthermore , since
industry conditions do affect project performance
levels, while also differing from country to
country, it should be noted that this paper draws
primarily on project data from Hong Kong.
However, the general conclusions will also be
of use to other contractual regimes, given the
experienced -based perceptions that have been
captured in this research.
Missing links
When looking for linkages between project pro-
curement systems, and good performance it is
224
necessary to dene the latter in terms of a client s
particular priorities ; and identify (and allow for)
the other factors and variables that may also affect
performance . For example, the importance of the
client s and designer s characteristics , in determin-
ing project outcomes in a given scenario, have
previously been highlighted (Naoum and Musta-
pha, 1995; Walker, 1995); while the inuence of
human factors have not been overlooked
(Rwelamila and Hall, 1994). Proper communica-
tions and teamwork based on the commitment
and proactive attitudes of all project participants ,
have been conrmed as valuable in boosting
performance levels (Latham, 1994).
Innovative approaches, such as formalized but
non-contractual (non-binding) partnering ar-
rangements between the client=client s represen-
tatives and a contractor, may be superposed on
procurement systems to generate the aforemen-
tioned communications and positive team spirits ,
even within traditionally adversarial contractual
arrangements (Baden Hellard, 1993). However,
evidence from the industry and the literature
indicates an initial need to design a suitable
system with appropriate frameworks that will
facilitate such teamwork and enable success.
It is thus important to identify the relationships
between the various parts of procurement sys-
tems and different aspects of success. Particular
attention may then be focused on certain pro-
curement sub-systems, and on choosing options
therein, when addressing specic client priorities
for a given project. For example, it is generally
suggested that a client who is looking for an
economical design in a reduced (fast-tracked)
time frame and=or single-point responsibility
may need to consider Design and Construct
options.
In search of a suitable model
Skitmore and Marsden (1988) suggested a multi-
attribute technique based on the UK National
Economic Development Ofce procurement path
selection decision chart (NEDO, 1985). Such
approaches allowed for choosing between differ-
ent options related to the design, management
and construction functional arrangements. How-
ever, they generally fell short of incorporating all
aspects=sub-systems of a procurement system
such as work packaging and participant selection
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES
methods. Neither did they incorporate provision
for other variables that may interact with the sub-
systems, such as project-specic: conditions (e.g.
difcult location ); team characteristics (e.g. lack
of cohesion); and external factors (e.g. construc-
tion boom accompanied by materials and labour
shortages).
It was therefore decided at the outset of this
research to incorporate such additional variables
in the model. Linkages between all procurement
sub-systems and project performance were mod-
elled to include the intervening interactions with
other factors such as project parameters, project
team characteristics and external conditions. It
was expected that the development of a compre-
hensive model in this manner, would facilitate
more informed and intelligent choices of pro-
curement systems.
This paper presents the ndings from the rst set
of data collected in Hong Kong to identify these
links and model such relationships between
procurement sub-systems and project outcomes,
while also incorporating the contributions of
other factors such as project, client and other
participant characteristics , together with external
conditions.
The holistic view of procurement systems
adopted in this research, coupled with broader
overviews of performance and of the project
process itself , led to more comprehensive results
than were obtainable through many previous
studies. This is because many such studies had
mostly focused on identifying relationships be-
tween certain aspects of performance (such as
time performance) and specic procurement sub-
systems (e.g. contract type). Focused studies of
that nature often precluded the interactive effects
of other sub-systems and other dimensions of
performance .
Developing a general procurement
framework
Procurement has been dened as the action or
process of acquiring or obtaining material, prop-
erty or services at the operational level (McGraw -
Hill, 1984). Building Procurement has been iden-
tied as the amalgam of activities undertaken by
a client to obtain a building (Franks, 1984).
Construction Procurement has been dened by
the CIB W92 Working Commission on Procure-
ment Systems as the framework within which
construction is brought about, acquired or ob-
tained (Sharif and Morledge, 1994).
The general framework illustrated in Fig. 1 was
developed for this research exercise , in keeping
with the latter denition . The breakdown of a
typical procurement system into ve principal
sub-systems (and further sub-sub-systems there-
from) is followed by an indication of the many
choices to be made in assembling each sub-
system. For example, this broad overview of a
procurement system thus incorporates the front-
end decisions particularly on a complex
and=or high value project about the nature
and magnitude of different contracts or work
packages. Appropriate work packaging can be
crucial to the achievable economies and efcient
management of many projects (Kumaraswamy ,
1997). The principal sub-systems were thus
conceptualized as follows:
(1) Work packages
may be designed to be large enough to
attract international interest, if needed for
purposes of greater price competition , or
for deploying advanced technologies eco-
nomically (for example, if special expertise
was needed to design and=or build com-
plex structures such as double-curvature
arch dams or tunnels in poor ground
conditions ). Alternatively , the large and=or
complex work packages may be sliced , to
keep them within the capabilities of local
construction organizations . For example,
vertical and=or horizontal slicing is pos-
sible on a roadworks project, by dividing it
into different projects along the length of
the road and=or into separate parcels for
earthworks, surfacing and services, respec-
tively (Kumaraswamy and Dissanayaka,
1997).
(2) Functional Groupings
of the design, construction and manage-
ment functions may be based on either: a
separated approach of independent design
and construction as in the traditional
method, whether within a sequential or
fast-track structure; an integrated ap-
proach such as in Design and Construct
or Build Operate Transfer (BOT); or a
Management-led approach such as in
Management Contracting.
225
KUMARASWAMY AND DISSANAYAKA

CONSTRUCTION PROJECT PROCUREMENT SYSTEMS SYSTEM

TYPE OF CONTRACT

WORK FUNCTIONAL PAYMENT FORM OF SELECTION

PACKAGING GROUPING MODALITIES CONTRACT METHODOLOGIES

SUB-SYSTEMS

Contractors Joint
differentiation Consultants Project Venture
magnitude Currency Managers partners
(contract value) Timing
Valuation Method Negotiate Register
large
Prequalify Negotiate
geographical Fixed Advance 2 Open
medium
divisions Price (Yes/No) envelope Tender
small (of Cost- 2
contracts) Milestone Negotiate envelope
plus Lump
degree Sum
of over- functional Fee Monthly
lap/ divisions % BoQ
sequencing Target
fast-tracking Schedule
disciplinary of rates
divisions Mixed
General Special Other
Conditions (from Conditions Contract
Standard forms) Document
Separated Management
Integrated led FIDIC Dispute
resolution/
minimization
Design & Construction
Institute of Architects Special Arbitration
sequential Management
Build (eg: HK or USA) Risks
accelerated Mediation
Turnkey ICE (Institution
(fast Management Technology
tracked) of Civil Engineers, Transfer/ Adjudication
Contracting
UK) exchange
th
6 Ed. Dispute
BOT NEC Resolution
Government Adviser
Civil Engineering
Building Partnering
Design & Build
ACP (Airport Core
Programme) type

Notes: contains the sub-sub-systems within each sub-system

(i.e. indicates a break-down of the sub-system)

Each sub-system has series of options as indicated above

All possible sub-sub-systems and options are not indicated here

Fig. 1. Hierarchy of procurement options.

226
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES
(3) Payment Modalities
could vary from Cost Reimbursement to
Lump Sum Fixed Price. The timing and
currency of payments could also vary .
Items (2) and (3) above may be combined under
Basic Contract Type, e.g. as for a Design and
Build Cost Reimbursement contract.
(4) Standard sets of Contract Conditions
(such as the FIDIC, ICE, Hong Kong
Government Conditions for Civil Engineer-
ing Works, or for Design and Build ), may
be chosen for convenience or because they
have been tried and tested and are now
trusted by the industry. Alternatively ,
special sets of conditions may be designed
for a given programme as in the New
Airport Core Programme in Hong Kong, or
for use by a particular large client or
Consultant.
(5) Selection Methodologies
of consultants and constructors may be
open, or based on registered or pre-quali-
ed short-lists. Comparisons of such prac-
tices and possible alternatives are described
in (Holt et al., 1993) and (Kumaraswamy ,
1996). For example, different weighting
techniques can be used in balancing (as-
signing weightings to) the nancial capa-
cities , technical capabilities and pricing
differentials in the proposals of different
bidders, depending on the project require-
ments.
Selecting appropriate options
The selection of suitable options from each sub-
system (or sub-sub-system) and the development
of an appropriate procurement system would be
valuable to construction clients in increasing their
chances of project success in a particular project
scenario. However, other factors such as the
competencies and performance of the various
interacting project teams, as well as external
factors will also affect project outcomes. For
example, adverse weather or market conditions,
or client-initiated design changes may impact on
such targets. If the latter are not adjusted, such an
adverse scenario could lead to poor performance,
even if there had been an optimal choice of
procurement system at the outset.
On the other hand, the procurement framework
developed in this study, as shown in Fig. 1, also
includes a suitable selection sub-system. The
latter would ideally lead to the selection of the
best available design, management and con-
struction teams, which in turn should enhance
performance . However, the compromises that are
often reached in practice, such as in selecting the
less expensive teams (as often required on
public sector projects, to satisfy rigid account-
ability criteria ) could impact negatively on
potential performance levels . This could arise
from the poor performance of one or more of the
teams, from their incompatibilities (with each
other), from communication problems or even
from personality clashes (Kumaraswamy , 1995).
Proposals to address the potentially poorer per-
formance of less competent contractors for
example, have previously been assessed by Holt
et al. (1993) and Hatush and Skitmore (1997).
Parts of a chosen procurement system may also
turn out to be incompatible with particular
project goals or priorities . For example, a
remeasurement payment modality may not
provide cost certainty, whereas a Design and
Construct functional grouping may not be the
best to evoke high quality levels .
Furthermore , a systems approach suggests the
criticality of interactions between the sub-systems
(and also sub-sub-systems) that will affect the
output of the parent system. Such critical inter-
faces suggest that the selected options from
within each sub-system (or sub-sub-system) must
at least be compatible, while at best they could
be synergistic, when assembled into the total
procurement system. Since the latter is itself an
open system interacting with many other project
and environmental systems, it is reasonable to
conclude that the most appropriate procurement
system must necessarily depend on the project
scenario or project prole that can be derived
from: (1) the contextual conditions, including the
client s characteristics , project parameters and
external factors relating to the project; and (2)
the client s needs and priorities , including the
desired risk allocation among participants .
Contextual conditions
Conditions and constraints that bear on the
project and its environment could individually
or collectively inuence the choice of procurement
227
KUMARASWAMY AND DISSANAYAKA
system. For example, relatively low value and less
complex building projects for a reliable client
(who from past experiences or reputation may be
relied upon to full their obligations ) may not
warrant sophisticated contractual arrangements to
get a reasonable job done. But special project,
participant or environmental conditions and cri-
tical priorities may warrant special consideration
and specic measures. Examples of conditions to
be considered when proceeding through the steps
of procurement path selection include:
Type of project (e.g. housing estate, road,
dam, ofce building refurbishment).
Size of project (e.g. value ; number of stories;
oor area; km of road).
Complexity of project (e.g. special ground
conditions or technology requirements).
Type of client (e.g. public=private=mixed;
experienced=one-off; project staff calibre and
their strengths, weaknesses and management
style).
Availability of information at project incep-
tion and points at which any remaining
information will be required=be available.
Nature and status of local construction
industry, including available capacities of
potential project participants, scarcity of
work in particular elds, competitiveness ,
etc.
Availability of materials and equipment that
are required for the works.
Performance of available contractors and
consultants on previous (similar) projects in
the area in terms of meeting cost, quality
and time targets; safety records and client
satisfaction levels: as compared with the
procurement modalities used.
Local familiarity and condence in=disillu -
sionment with, particular types of procure-
ment with reasons (as perhaps veriable from
local professional institutions and techno-
commercial networks ).
Effects of relevant political , legal and eco-
nomic systems, including market conditions.
Specic location , special weather and envir-
onmental concerns.
Any other special conditions .
228
Desired risk allocation
The choices of types of contract ( functional
groupings and payment modalities ) and con-
tract conditions have been observed (through
interviews of practitioners, as well as by the
authors own experiences) to be largely based on
the desired allocation of risks between the differ-
ent groups=teams (e.g. clients, consultants , con-
tractors , nominated sub-contractors , domestic sub-
contractors , suppliers , insurers). For any project, it
is essential that each group=team be fully aware
of the risks undertaken and=or expected of them,
so that they can provide for these in terms of
proper personnel, pricing and precautions.
Risk management has been said to involve the
steps of: (1) risk identication ; (2) risk analysis ;
and (3) risk response. Risk identication ideally
models all the uncertainty and risk elements of a
particular project; while risk analysis investi-
gates the effects of such risk elements on project
viability ; for example by assessing the probabil-
ities, the quantiable impacts (in terms of cost,
time or both) and the sensitivities of the project
outcomes to such impacts. The risk response
then depends on the client s capacities and
priorities . The responses have been classied as:
risk avoidance or reduction, e.g. by redesign;
risk transfer, e.g. by contracting out that
responsibility to some other project partici-
pant, such as the designer, the contractor, the
supplier, the sub-contractor or the insurer; or
risk retention; where the residual risk which
is perhaps unquantiable or too expensive to
economically transfer is retained by the
client.
In an ideal world and for overall economies or net
savings, each risk element should be transferred
to those project participants best equipped to
handle them. But a client (or any other party)
may exercise their preference to transfer out some
element of risk and pay a premium in exchange
for a greater certainty in protection against that
aspect. The risk allocation preferences may thus
be considered along with the other client s needs
and priorities .
Clients needs and priorities
Table 1(a) was formulated by assembling sets of
possible priorities of different types of construc-
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES

Table 1(a). Rating prospective procurement systems against client priorities

Possible client priorities Priority weighting System ratings
(w) (0 to 10)
A B C

Ra wRa Rb wRb Rc wRc

1. Level of design competition

2. Level of price competition
3. Economy
4. Value for money
5. Life cycle costs
6. Cost certainty
7. Speed
8. Time certainty
9. Urgency to complete project
10. Urgency to commence construction
11. Importance of intermediate milestones
12. Aesthetic value
13. Durability
14. Innovations
15. Quality assurance
16. Construction risks allocation
17. Design risks allocation
18. Financial risks allocation
19. Other risks allocation
20. Need for mid-project design changes= exibility
21. Need to be kept informed
22. Need to be involved
23. Need to assign single-point responsibility
24. Need to delegate decision-making
25. Desire for good communications
26. Health and Safety concerns during construction
27. Health and Safety concerns during operations
28. Importance of planning
29. Importance of controls
30. Technology transfer=exchange
31. Technology innovations
32. Operational guarantees
33. Design life certainty
34. Maintainability
35. Constructability
36. Minimal environmental impacts
37. Disputes (and claims) minimization
38. Others
Total of weighted ratings for each system
Key: A, B, C, . . . etc.: shortlisted procurement systems that would suit contextual conditions w weighting; R Rating of
each prospective system (e.g. Ra for system A), say from 0 to 10 (so wRa is the weighted rating for system A against the
corresponding priority).

tion clients in the rst column. A provision was
made (in the second column) to add weightings
for identied relative importance levels of each of
such priorities on any given project. Different
procurement frameworks (A, B, C, . . .) may then
be assembled from appropriate options as chosen
from the different sub-systems (and sub-sub-
systems) as in Fig. 1. It is therefore proposed that
the following steps may be taken in selecting a
procurement system to suit a given project
scenario:
(1) Eliminate options within the general pro-
curement framework (as in Fig. 1) that are

229
KUMARASWAMY AND DISSANAYAKA

clearly incompatible with the foregoing
contextual conditions .
(2) Identify options which appear desirable at
rst sight, in achieving the desired risk
allocations and project priorities .
(3) Prepare a shortlist of up to about six
potentially suitable (prospective ) procure-
ment systems by assembling a few separate
sets of mutually compatible options each
set of which contains one appropriate
option from each sub-system or sub-sub-
system as in Fig. 1.
(4) Assign ratings (R) to each such potentially
suitable (prospective ) system against the
chosen priorities in Table 1(a), i.e. based on
how well they are expected to perform in
meeting that priority , say on a scale from 0
to 10 (or even extend to a negative scale
where they are clearly counter-productive
in respect of that priority ).
(5) Assign weightings (w) to the priorities
themselves also on a scale, say, from 0 to
10 (those with 0 weighting being totally
irrelevant in this project scenario).
(6) Compute the total sum of the weighted
ratings for each prospective procurement
system. Propose the system with the high-
est total and if necessary re-check for
external and internal compatibilities [al-
ready checked once in steps (1) and (3)].
While simpler versions of similar scoring systems
using such matrices have been suggested pre-
viously (Franks, 1984; NEDO, 1985; Skitmore and
Marsden, 1988; Love and Skitmore, 1996), the
presently proposed approach is expected to be
more comprehensive, in for example, incorporat-
ing an initial consideration of contextual condi-
tions , together with wider ranges of priorities and
options.
Table 1(b) was next developed to demonstrate a
specic (although hypothetical) example of the
application of the general scoring system indi-
cated in Table 1(a). A set of ten important client
priorities for the hypothetical project was chosen,
as indicated in the rst column of Table 1(b). The
other possible client priorities were taken to be
negligible (of 0 value ) in this example. Priority
weightings were assigned as shown. In practice
they would be assigned after an iterative process
involving the main stakeholders, such as client s
key personnel and main end users.
In this example, three potentially suitable pro-
curement systems A , B , and C were as-
sembled as follows, by combining compatible
options to also suit project conditions. (Note:

Table 1(b). Hypothetical demonstration of a comparison of three shortlisted (potentially suitable) procurement
systems for a particular project
Possible client priorities Priority weighting System ratings
(w) (0 to 10)
A B C

Ra wRa Rb wRb Rc wRc

1. Level of design competition 6 6 36 9 54 7 42

2. Level of price competition 6 8 48 9 54 9 54
3. Economy 7 4 28 8 56 7 49
4. Life cycle costs 7 8 56 3 21 7 49
5. Cost certainty 8 4 32 9 72 8 64
6. Speed 8 4 32 7 56 8 64
7. Aesthetic value 8 7 56 5 40 8 64
8. Need for mid-project design changes= exibility 7 5 35 2 14 9 63
9. Need for Single-point responsibility 6 2 12 8 48 6 36
10. Disputes (and claims) minimization 5 2 10 7 35 7 35
Total of weighted ratings for each system: 345 450 520
The above ratings and weightings are hypothetical. They would also vary with the project and external condition, as well with
client priorities. Descriptions of the shortlisted systems A , B and C are provided in the text.
Key: w weighting; R Rating of each prospective system (e.g. Ra for system A ), say from 0 to 10 (so wRa is the weighted
rating for system A against the corresponding priority).

230
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES
examples of possible options for each sub-system
are indicated in Fig. 1).
A : Traditional separated (design and con-
struction functions), sequential; re-meas-
urement with monthly payments; tenders
obtained from prequalied tenderers for
construction , and consultants selected on a
2 envelope ( technical and fee proposals
sealed in separate envelopes ) system; ICE
(Institution of Civil Engineers) Conditions
of Contract.
B : Design & Build; guaranteed maximum
price (xed price lump sum) with pay-
ments at milestones; tenderers selected
from a prequalied shortlist; Hong Kong
Government Conditions of Contract for
Design & Build projects.
C : Construction Project Manager, overseeing
both design and construction teams for a
fee; work divided into a series of pack-
ages=contracts (to aid fast-tracking ):
mostly xed price remeasure, but some
lump sum contracts; selection of project
manager and designers on 2 envelope
systems; selection of contractors by project
managers in a two-stage system (prequa-
lifying and receiving tenders from) specia-
list contractors and sub-contractors for
each work package; NEC (New Engineer-
ing Contract) Conditions.
The sub-systems and systems would be devel-
oped in practice so that they would make the best
use of opportunities provided by (and counteract
the threats posed by) the contextual conditions
surrounding the project, as discussed in a
previous sub-section.
Ratings can then be assigned for each shortlisted
system in turn, against each chosen priority, by a
set of experts who are experienced in the
management of such procurement systems. Some
possible ratings are indicated in Table 1(b). The
ratings are weighted by the corresponding
priority weightings. The totals of the weighted
ratings are then aggregated as indicated, upon
which proposed system C appears to be the
most appropriate under the assumed conditions,
weightings and ratings in this hypothetical
example. It should be noted that Table 1(b) has
been assembled for demonstration purposes only
and the indicated weightings of client priorities
and ratings of the procurement systems consid-
ered are also hypothetical.
Modelling linkages between
procurement systems and project
performance
Structuring the linkages
The foregoing recommended strategy for selecting
an appropriate project-specic procurement sys-
tem, presupposes an appreciation of the compat-
ibilities (or otherwise) of the various options
with the contextual conditions of the project and
with each other. For example, certain options may
be more (or less) desirable depending on
particular client characteristics including those of
the principal decision-makers=advisers, the speci-
c project parameters and=or external conditions .
Project parameters would include project size ,
specic location , construction type and complex-
ity; while external conditions would include the
market, legal, political , weather and other such
conditions impacting on the given project. The
model (Fig. 2) incorporates the inputs from such
contributors to the selection of the most appro-
priate procurement system for a given scenario.
Even though the chosen procurement system
includes a sub-system that should assist in the
selection of appropriate design, management and
construction teams, the performance of such teams
can hardly ever be predicted precisely. Project
outcomes or performance levels will thus be
affected by the performance of the project partici-
pant teams, as also represented in the model (Fig.
2). This model itself has been structured on the
basis of linkages as identied from the literature ,
the experiences of the authors and of four semi-
structured pilot interviews in Hong Kong (of three
senior industry practitioners and one researcher
with particular knowledge of this eld).
Evaluating the linkages
Next, it was necessary to evaluate the relative
strengths of the various linkages, so as to increase
the condence levels when assessing: (1) the
relative impacts of the different contributors to
project outcomes as in Fig. 2; and (2) the ratings
that may be assigned to prospective systems as in
Table 1; when choosing a procurement system for
231
KUMARASWAMY AND DISSANAYAKA

INITIAL CHANGED

(BOTH INITIAL AND CHANGED)

DESIGN TEAM
PROJECT * PERFORMANCE
PARAMETERS

PROCUREMENT E
E
SYSTEM X
X PROJECT
(INCLUDING WORK T
T * OUTCOMES
PACKAGING, E
E MANAGEMENT TEAM
FUNCTIONAL GROUPING R
R PERFORMANCE
PAYMENT MODALITIES N
N
SELECTION METHODOLOGY A
A
AND CONTRACT L
L CLIENT CONDITIONS)
CHARACTERISTICS,
OBJECTIVES AND
PRIORITIES.
TYPE OF DECISION *
CONTRACTOR
MAKERS/ADVISERS PERFORMANCE

(BOTH INITIAL AND CHANGED)

CONDITIONS CONDITIONS
NOTES:-

MANAGEMENT TEAM 5 EITHER INDEPENDENT PROJECT MANAGER OR

CONSULTANT WHO IS MANAGING PROJECT FOR CLIENT * OTHER INPUTS/RELATIONSHIPS

DECISION MAKERS/ 5 CLIENTS DECISION MAKERS OR PROJECT MANAGERS/

ADVISORS CONSULTANTS WHO ADVISE CLIENT

Fig. 2. Model of basic linkages between procurement system and project outcomes.

a given project. Such evaluations were expected to
assist in modelling the relationships so as to
provide a better knowledge-base for clients and
their advisers who need to decide on appropriate
procurement systems.
The second phase of this research project thus
commenced with the development of a compre-
hensive questionnaire. This contained two parts
with questions on general accumulated experi-
ences over many projects, and specic informa-
tion from a recent project. The former queried
general perceptions as to, for example, the
strengths and weaknesses of different procure-
ment sub-systems and options therein, with
particular reference to their effects in inuencing
certain project outcomes. The latter sought spe-
cic data on a particular building project in terms
of, for example, project and participant character-
istics, performance outcomes and perceptions as
to the inuence of particular procurement sub-
systems on such outcomes. While the information
sought in the rst part was necessarily qualitative ,
elements of quantication were introduced by
Likert type ratings requested in response to some
questions. The information sought in the project-
specic second part of the questionnaire was both
quantitative and qualitative.
It was decided to focus on building projects for
this questionnaire survey, so that the specic
project data sets obtained would be more
comparable . Thirty questionnaires were directed
to selected senior industry personnel, who were
personally contacted by the authors. In addition,
225 questionnaires were sent to organizations
selected randomly from available databases of
clients (e.g. developers, government organiza-
tions ), consultants and contractors. Table 2
indicates a breakdown of the groups to which
questionnaires were sent in mid-1996 and the
pattern of responses therefrom. The considerably
lower response rate from the random sample was
not entirely unexpected given the 10 page length
and detailed nature of the questionnaire; hence
the decision to approach a selected sample in
parallel. Follow -up interviews were conducted
with some of the respondents to clarify some
responses and perform cross -checks. These inter-
views were intended to check on any apparent
misunderstandings or biases; and also to probe
any perceived trends, for example.
Observations from the survey
Although only 37 completed questionnaires were
received in total, each of these contained 10 pages

232
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES

Table 2. Composition of the surveyed samples

Target group Selected sample Random sample

Dispatched Received Interviewed Dispatched Received

Clients=Project Managers 17 11 (65%) 8 45 2 (4%)

Consulting Engineers 7 5 (71%) 3 40 3 (8%)
Architects 0 0 0 35 0 (0%)
Contractors 5 4 (80%) 3 85 12 (14%)
Quantity Surveyors 1 0 (0%) 20 0 (0%)
TOTAL 30 20 (67%) 14 225 17 (8%)

of useful data and some of the respondents were marginally more important than others, perhaps
interviewed as indicated above. A summary of depending again on the conditions and priorities
the relevant results from the primary analysis of of a given project.
this data is presented in this paper. Detailed
results and derived relationships are expected to The relative importance (or Relative Importance
be presented in a subsequent paper, following Index as described by Kometa et al., 1994) and
further data collection and analysis that will focus sumarized below; RI p of the pth sub-system
on the key areas identied in this primary expressed as:
analysis .
N
X
ri
For example, one of the questions required i1
respondents to assign a rating (ranging on a RI p (1)
N3 H
scale from 0 [not signicant] to 4 [extremely
signicant]) according to their perception of where ri rating given by the ith respondents
relative importance of each of the different (ranging from 0 to 4) 0 is not signicant and 4
procurement sub-systems. The relative impor- is extremely signicant; H highest rating (4 in
tance of each sub-system was then compiled on this case); N total number of respondents.
a scale from 0 to 1 as in Equation 1. The relative
signicance percentage of each sub-system was The above Relative Importance was then con-
next computed as in Equation 2, so that the verted to percentage terms as a Relative Sig-
summations totalled 100 in each case, for nicance Percentage. The Relative Signicance
convenient comparison as relative percentages. Percentage ( RS p ) of the pth sub-system is ex-
The averages of responses within each group (i.e. pressed as:
separately for the 21 clients=their representative
project managers or consultants and for the 16 ( RI ) p
RS p 3 100 (2)
contractors ), were computed to yield a prole as K
X
in Table 3. This suggests that none of the sub- ( RI ) p
systems can be neglected, while some may be p 1

Table 3. Perceived relative signi cance of procurement sub-systems

Sub-system Relative signi cance percentages (and ranks)

Clients Contractors

Work packaging 21.0 (2) 22.5 (1)

Functional grouping 19.4 (3) 21.2 (3)
Payment modality 16.8 (5) 15.8 (5)
Selection methodology 19.4 (3) 18.5 (4)
Contract conditions 23.4 (1) 22.0 (2)
Relative percentages, i.e. totalling 100.
Clients include their representatives, e.g. consultants=project managers.

233
KUMARASWAMY AND DISSANAYAKA

where K number of sub-systems (5 in this case)
and the other variables are as in Equation 1.
Little disagreement was noted between the two
groups (i.e. clients and contractors) based on the
foregoing Relative Signicance values. The rela-
tive rankings were also compared using a Rank
Agreement Factor (RAF) as computed according
to the procedure described by Okpala and
Aniekwu (1988) and summarized below. The
RAF was found to be 0.60 and the Percentage
Agreement related to the above rankings was
then quantied as 75.0 (using the formula
below). This indicated a reasonable, degree of
agreement between the groups as to the relative
importance of the sub-systems.
In general, for any two groups, if the ranks of
the ith item in Groups 1 and 2 are Ri1 and Ri2 ,
respectively ; and if N is the total number of
items; then the Rank Agreement Factor (RAF) is
expressed as:
N
! response was weighted by the experience of the
X
j Ri1 Ri2 j
RAF
i1
N for no personal experience in that grouping, 0.6
The maximum possible RAF ( RAFmax ) could also
be computed as follows , assuming that when the
rank of the ith item in Group 1 is i, then the rank
of the corresponding item in Group 2 is j, where
j N i 1 (i.e. ranked at the other extreme)
! multiplied by 100 to convert it to a percentage.
N
X The resulting weighted averages (which could
j Ri1 R j2 j
i1
RAFmax
N
The Percentage Disagreement (PD) is then ex-
pressed as 100 3 RAF=RAFmax :
N
X
(j Ril Ri2 j)
i 1
or PD
N
3 100
X
(j Ri1 R j2 j)
i1
The Percentage Agreement (PA) is then obtained
from:
PA 100 PD
Table 4 indicates the quantied collective re-
sponses of the client and contractor groups to
another set of general (non-project-specic) ques-
tions related to the perceived inuences of differ-
ent functional groupings (such as design &
construct or traditional=separated groupings of
the design, construction and management func-
tions ) on specic performance outcomes, namely
in meeting time, cost and quality targets. These
responses were obtained on a scale ranging from
relatively low (1) and average (3) to relatively
high (5), in terms of their positive impact in
achieving either time, cost or quality targets. Each
respondent in working with such a specic
functional grouping on a scale that assigned 0.2
for moderate experience, and 1.0 for substantial
experience in that particular grouping.
The individual ratings were thus weighted by
either 0.2, 0.6 or 1.0 and combined by adding the
weighted ratings and dividing by the maximum
possible score in each case. Each gure was
range from 0 to 100) are compared in Table 4.
The Table 4 summary suggests that there are no
very strong perceptions as to the superiority of
any one functional grouping in meeting specic
targets, although the response patterns are inter-

Table 4. Perceived positive impact of different functional groupings on principal performance outcomes
Functional grouping Perceived impact on time (T), cost (C) and quality (Q) outcomes

Clients (average perception) Contractors (average perception)

T C Q T C Q

Traditional separated 62.2 67.4 70.0 61.0 57.4 65.1

Design & Construct 74.7 66.5 44.5 86.4 60.9 63.4
Management Contracting 61.9 63.2 65.4 77.4 70.4 79.1
Construction Management 65.6 65.6 66.7 73.1 65.5 73.8

234

esting. For example, they reinforce the perception
of achieving better quality through traditional=
separated or management type groupings;
better construction time performance through
design and construct; and also interesting
(although not always considerable) differences
between the average perceptions of clients and
contractors . A general conclusion that contributes
to the subsequent study is that the functional
grouping sub-system alone is unlikely to sig-
nicantly determine project success against any
of the above criteria, thus reinforcing the need to
investigate the contributions of other sub-systems
in the procurement system, as well as the
contributions of the intervening variables , such
as project and team characteristics .
The project-specic questions in the questionnaire
covered a wide range of items as deemed useful
for modelling the relationships in Fig. 2. For
example, Table 5 summarizes the initial results of
the analysis of the group of attributes (as listed
in the rst column of the table), in respect of the
sub-sample of traditional separated type con-
tracts. Specically, while the sixth column in
Table 5 contains the variables (including factors
described below) as nally derived to represent
these attributes, the rst ve columns indicate:
(1) the attributes postulated as inuencing
project performance outcomes, in addition
to procurement system and team perfor-
mances;
(2) the percentage agreement on the impor-
tance rankings of such postulated variables
between the Client and Contractor
Table 5. Sets of variables and representative factors (derived from the traditional separated functional grouping
type projects)
Attribute Percentage Number of
(1) agreement on variables
relative postulated
importance (3)
(2)
Client characteristics 71 29
Contractor characteristics 69 20
Project parameters 100 5 5
Design team 67 5 3
characteristics
External factors 89 6 naa
a
na not applicable, as an analysis of the responses as to the relative importance of the six variables chosen to represent
external factors revealed very little internal differences. In view of this apparently close correlation, just one factor (as an
average of the six variables) was selected to represent them conveniently.
LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES
groups (computed as described previously
in this section in relation to Table 3);
(3) the numbers of specied variables initially
postulated by the authors, so as to collec-
tively represent each such attribute ade-
quately; for example variables such as (a)
client involvement in planning; and (b)
client s speed of decision making under
the client characteristics attribute;
(4) the numbers of the foregoing variables that
were found to be suitable for factor analy-
sis on the basis of initial statistical tests
including the Kaiser Meyer Olkin s mea-
sure of sampling adequacy (. 0.5) and the
Bartlett test of sphericity (at a 0.05 sig-
nicance level) as described in the SPSS
software manual (Norusis, 1990).
(5) the numbers of factors which were
derived to represent the foregoing corre-
lated variables [in item=column (4)] more
concisely for purposes of multiple re-
gression analysis .
The foregoing factors [in column (5)] were
derived in a data-reduction process , in order to
reduce the large numbers of variables that were
initially postulated, to a more manageable num-
ber. [It would be noted from column (1) that 65
variables were initially postulated.] The factor
analysis technique was employed for this data
reduction using the SPSS statistical software
(Norusis, 1990). Factor analysis itself, has been
found to be a useful statistical technique in
representing a large number of variables in terms
of a smaller number of hypothetical variables or
Number of correlated No. of representative Number of factors=
variables used for factors extracted by variables used for
factor analysis factor analysis multiple regression
(4) (5) (6)
16 6 19
14 6 12
3 3
2 3
naa 1a
235
KUMARASWAMY AND DISSANAYAKA
factors. The main advantage of factor analysis is
that a smaller set of uncorrelated factors is much
easier to understand and use in further analysis ,
than a larger set of correlated variables . In this
case, the factors which accounted for 80% of the
total variance (in the attributes) were extracted
using the strategy and procedures described by
Lewis-Beck (1994).
The derived factors [as shown in column (5)],
were used as independent variables in the
subsequent regression analysis, together with
the residual variables [obtained from column
(3) column (4)], i.e. those that were not found
to be suitably correlated (and therefore not
chosen for the factor analysis ).
For example, in the case of the rst attribute of
client characteristics : 16 of the 29 initially
postulated variables were found to be correlated .
Six representative factors were derived by factor
analysis from the 16 correlated variables. These
were combined with the 13 (i.e. 29 16) un-
correlated variables, to yield 19 representative
independent variables (including the derived
factors ) for the regression analysis as shown
in column (6).
As described in the previous paragraph, the
representative factors [in column (5)] together
with the residual independent variables [column
(3) column (4)], were nally taken [as in
column (5)] to represent each of the correspond-
ing attributes. Multiple regression exercises were
next carried out with the objective of discerning
any signicant underlying relationships between
these attributes and each performance outcome
in turn. If signicant relationships were dis-
cerned in these cases, it would be possible to
both (a) predict time (or cost ) overruns on
projects where the signicant variables were
known in advance and (b) control these variables
to reduce the potential for such time (or cost)
overruns . It may also be noted that multiple
regression was chosen as a suitable technique in
view of the many variables that were still needed
to represent each attribute.
For example, the initial exercise, sought to
discern relationships between the foregoing ve
sets of attributes and time overruns and cost
overruns respectively , in turn. However, the
results from these two initial exercises indicated
low R-square (coefcient of correlation) values
236
in the multiple regression 0.44 in the time
overrun relationship and 0.23 in the cost overrun
relationship . The low predictive capabilities of
the foregoing attributes, in explaining a major
component of the time and cost overruns have
conrmed the need to seek alternative explana-
tions for the major part of these performance
shortfalls . For example, based on the foregoing
results the authors identied the need to focus
the next stage of research on assessing the
impacts of (1) the different procurement sub-
systems compared to (2) the performance levels
attained by different teams. The latter can
arguably also be related back to improving
prediction capabilities (relating to potential per-
formance) during selection of the different teams,
since this in itself relates to one of the ve
identied sub-systems in this study. More data
from a larger project sample would also be
useful.
Conclusions arising from this survey
The hierarchy of procurement options , as devel-
oped in this study, is a useful representation of
the choices facing contemporary construction
clients and their advisers ; while the proposed
model of basic linkages between procurement
systems and project outcomes is a viable and
valuable framework for deriving the signicant
relationships . The proposed matrix of compari-
sons between a range of potential project prio-
rities and a set of shortlisted prospective
procurement systems is another useful tool devel-
oped to help in gearing the procurement system
to suit the project-specic priorities . These models
which have been developed on the basis of the
literature review , the experiences of the authors
and the initial interviews in this research exercise ,
provided the basis for the initial survey in Hong
Kong, that was described herein.
The results from this Hong Kong-based survey
indicate: (1) the perceived general importance of
all ve sub-systems of procurement (as depicted
in Fig. 1); (2) the absence of any strong
perception of the superiority of a particular
functional grouping in meeting principal project
targets in general; (3) the general agreement
between client and contractor groups on the
foregoing two aspects; (4) the collective percep-
tions of the lack of a predominant impact on cost
and time overruns, of client, contractor and
 LINKING PROCUREMENT SYSTEMS TO PROJECT PRIORITIES
design team characteristics , project parameters
and external conditions; and (5) the consequential
need to analyse the impacts on project outcomes
of the performance levels of each team, the
inuence of the corresponding team selection
sub-systems and of the other procurement sub-
systems themselves, in more depth.
It was conrmed that the detailed quantitative
analysis of the data obtained from the survey,
should be supplemented by: further interviews
with experts and experienced practitioners , to
probe specic aspects emerging as signicant in
different projects; and specic case studies in the
next stage of the research. The problems encoun-
tered in making sense of the multitude of
interactive contributors to performance outcomes
in each project, were in fact anticipated and the
consequential blend of quantitative and qualita-
tive approaches that have been designed to
discern the underlying patterns have yielded
interesting interim results that encourage the
researchers to probe deeper.
Comparative studies in other contractual regimes
will also help to validate the general relation -
ships identied in the model although the
relative strengths may vary with differing condi-
tions. The validated models in each contractual
regime would then assist clients and their
advisers in selecting procurement systems that
will be geared to their particular project priorities
after incorporating allowances for the contextual
conditions of a particular scenario. This should in
turn lead to higher performance levels in
achieving desired project outcomes.
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