1.4 Client Issues, Drivers & Challenges

It is important to understand some of the motivations and drivers to seek new and innovative contracting practices. The subsequent paragraphs provide several explanations or reasons that have led to the use of innovative contracting methods. These are not in any order of preference or significance, but merely to understand the reasons and circumstances for the usage or trials in these newer type methods. It should also be mentioned that they are mainly initiated by the client organizations and they are the main drivers in the process to newer innovative practices.

Probably the most common and most difficult issue to resolve is the lack of sufficient funding to preserve the existing roads in good condition as noted in Short & Kopp (2004). There is also a lack of funding to meet the needs for expansion of the road network. There is significant data demonstrating lower expenditures across the years for roads in many countries and they can be somewhat attributed by meeting the other social needs and costs that have been increasing - for example the health care costs. Therefore, one of the main goals especially for maintenance type contracts is the savings achieved by the newer maintenance type contracts.

Another significant contribution or driver is the lack of experienced staff members, reductions in the staffing levels, and deficiencies in specialized areas of expertise. The lack of staffing resources is not expected to improve and conversely will get worse. In some countries it has become a common practice to hire new employees from other parts of the world. This is a difficult situation because there are no quick fix solutions and this is also true in the client organizations as well as for those providing those services. In many countries there is even a shortage of engineering professionals coming through the educational system that will even further hinder the hiring of future staffing experts. Sometimes innovative contracting arrangements require less management and administration and can explain in fact the reason for moving into these arrangements. Less staff is typically required to manage these innovative contracting arrangements.

Innovations certainly prompt many people's attention and drive the usage of different types of contracting practices. Some objectives are to utilize the innovations by designers/civil engineers, by contractors, and processes that promote innovative practices and systems. It makes practical sense to use those practices and arrangements that promote innovations, but actually achieving them can be a challenge.

Some countries are testing these models to determine if they do in fact produce efficiency in the process. Some contracting models do provide for more efficient approaches and timeliness in the process. Therefore, the efficient models are tested and used. These will be discussed more in their respective locations in the report.

One of the most significant issues encountered in the study and the reason why some countries seek the more innovative practices and why some stay in the traditional areas is in fact the differences in culture and traditional practices in those countries. For example, the Anglo-Saxon countries included in this study seem to have quite similar practices and very progressive approach, especially in the maintenance type contracts. However, even within the Anglo-Saxon countries there are also extreme differences, such as the maintenance contracts in Victoria, Australia versus those in England. Some countries or states may be more pro-active, while others may be more cautious in adapting new practices.

Another driver can be seen within the client organizations and that is the "control issue". Most client organizations desire to continue to make all the decisions or controlling the processes, decisions, and means and methods. This can be seen very clearly in the Design-Build process as well as the long-term performance maintenance contracts that have the contractor making the most of the work process decisions. Those countries not using those innovative processes, are keeping controls of the decision making process. This control issue is a reality and the struggle for control to be released can be even more pronounced when trying to move into the Design-Build process where the most advanced countries plan and design up to conceptual design, which means about 15-30% design development before tendering. This is a strong area of conflict and has been noted in several other countries that take these statutory obligations too far, which are in effect keeping control of the development process. There has also been a similar struggle in long-term performance maintenance contracts, when the client tries to keep control, even though it has been relinquished in the contract. As a personal observation from the first author, this is a sort of cultural and control issue that is difficult to solve and typically cannot be altered overnight. This has an effect whether or not the innovative contracting practices are used and implemented.

Performance specifications have been thought to provide flexibility and to boost innovation by the contractors in Highways Agency (2004), but performance specifications (functional Specifications) have been quite slow to develop. Some have referred to performance specifications as outcome-based or describing the end conditions of the product or services. The development of performance specifications takes a great deal of time and good research to make sure that the performance levels meet the technical and material requirements. Also, there is need of verification and validity through robust data and practices. As the movement toward more innovative contracting practices progresses there should be more and more performance specifications or functional specifications used in the contracts. This sort of goes "hand in hand" with innovative contracting practices as one, more or less, complements the other. In FHWA (2002) the development of performance specifications is needed when moving towards innovative contracting practices and especially when private financing is included. Traditional methods rely extensively on very strict technical and material behavior requirements. Table 1 shows the progression of performance specifications and has a high correlation to the DBOM and DBFO models as opposed to the DBB and DB models. Even in Design Build model there should be more and more development of performance specifications.

                                                                          Source: FHWA (2002)

Table 1 Performance Specifications via Delivery Model

X - First level of consideration

Y - Subsequent level of consideration

Contractor - The "Contractor" may have to translate further details down the supply chain

Since the construction industry has typically been so fragmented, there is an interest or movement toward integration and innovative contracting models. The separation of design and any long-term maintenance and upkeep has been known as a limiting factor when the goal is to adapt to Life-Cycle Costs (LCC). Thus the interest and broadly accepted view that more integration increases the probability for successful project outcomes as mentioned in Courtney e. a. (2005), becomes a driver for the use of integrated and innovative contracting practices. However, as mentioned earlier the relinquishment of design control is a significant barrier which is also discussed in Herder e. a. (2004). This relinquishment of design actually means to provide less detailed design criteria (suggested maximum of 15-30%) before contract award in order to achieve innovative practices and constructability solutions from the contractor.

Copying and learning from one another is another driver, especially if those innovative practices do in fact provide better results. This can be seen in the "Nordic Road Association" and the "Baltic Road Association" where the Nordic and Baltic countries have common exchanges of information and practices, which promotes good practices from abroad. Coping of practices from one country to another is also been studied and reported in De Jong (2002).