Improving Project Performance In The Public Sector: The Case Of Thailand

Prior to the economic crisis that started in 1997, Thailand’s economy experienced sharp growth compared with other developing countries in South-East Asia. During the economic boom of 1986-1996, domestic and foreign companies invested heavily in the country. The investors were interested in starting or expanding businesses. In addition, the country’s population continued to grow; fueling the need for new buildings and offices. This resulted in expansion in the real estate sector. The construction industry flourished both the public and private sectors. The need for public infrastructure also tremendously increased in order to support the population and communities. Consequently, government investment in infrastructure development increased sharply. Unfortunately, the public construction budget seemed to be used without a systematic consideration regarding value for money. Ogunlana et al. (1996) stated that since the boom in Thailand’s construction industry was unanticipated, the participants in the industry were not adequately prepared for the project management problems that followed.

In the wake of the economic crisis, most of the government divisions in the public sector, whose main duty was to build the necessary facilities, (such as roads, bridges, dams, schools and civic buildings), received less funding. This was also true with the private sector. In fact, many business companies either postponed their investments or stopped putting money into construction business. Commercial banks also became stricter in giving bank loans to their customers. As a direct consequence, many project developers lacked money and a lot of construction projects had to be abandoned or suspended.

The contractors and designers were also affected because of the competitive construction market during and after the crisis. For example, there was increased uncertainty regarding the ability of their owners to pay for the completed works. As a result, growth in the construction industry stunted and the management of the construction projects became more complex and difficult.

The need to improve the performance on the construction projects has become obvious to all the involved parties in the construction industry. All parties now seek efficiency in project implementation. Each project participant is supposed to identify and develop effective management practices that contribute to higher performance in their relevant involvements in the construction process.

Public owners need to be informed and to realize that the process of construction is as important as its final product. Walker (1996) stated that working with the public sector usually causes more constraints and difficulties than with the private owners, because of many bureaucratic rules. Elinwa and Joshua (2001) noted that, in the Nigerian construction industry, the majority of public construction projects end up with delay because of economic instability, greed, insincerity in formulating policies and incompetence. Ofori (1991) commented that the construction industry in the developing countries should give more efforts to improve contractors’ operating environment. However, this will be less effective if the public clients lack the support of contractor development programs, especially in relieving the financial constraints on their projects.

Such professional comments suggest that, in order to receive a satisfactory finished product, owners in public organizations should be advised on how to go through the process of constructions with new attitudes and work practices that should be different from those in the past. They also need to be informed and to realize that the process of constructions is as important as its final product. The question then concerns what actions should be improved and how the involved parties should accomplish them during the construction process by the involved parties. Moreover, as a client has an important role to play in developing the construction industry, clients need to know what factors account for the differences between their successful and unsuccessful projects in the implementation stage. These are the factors that should be given more attention, if the clients wish to improve their project performance.

Mr. Suphachoke Meeampol addressed these needs in his research, where three major research questions are raised and considered to help address this deficiency in improving project performance in highway construction projects.
1. What factors affect project performance in the construction process?
2. What critical success factors are most predictive of project performance?
3. What factors account for the improvement in project performance?

His study addressed the problems of how project performance can be better achieved in public construction projects through an integrated approach to improve the efficiency of the construction process.

His study aimed to give suggestions regarding how to improve project performances on construction projects in the public sector and attempts to gain better general knowledge in the construction area related to project management. Specific objectives were needed to achieve the aims of the study. These were to: (1) identify the success factors affecting project performance in the construction process; (2) examine the relationship between critical success factors and project performance; and (3) determine what factors account for improvement in project performance.

Conclusions

Success factors affecting project performance in the construction process

It was initially thought that cost and time performances are affected by the thirteen success factors identified from literature; which are: internal complexity, external complexity, supervision and control, owner involvement, design effectiveness, schedule management, budget management, quality management, human resource management, construction resource management, construction method, communication and report, and team relationship. However, the results from the two analytical methods used showed that, factors such as internal complexity and external complexity, do not contribute significantly to project success or failure.

Regarding the perception of owners, factors related to owners’ characteristics, namely supervision and control, owner involvement and design effectiveness, are not significant predictors of cost performance on projects. However, better supervision and control and less owner interference can reduce construction duration.

The most important factors in discriminating between success or failure on projects are the eight factors grouped under managerial practices, which are under the direct control of the contractor. Only six managerial factors are important contributors to improved cost performance. The management of construction resources, budget management, construction method, and communication and report should reduce the chance of cost overrun. However, reduced emphasis on schedule performance and human resource management can reduce cost overrun.

All the eight factors are significant in discriminating between successful and unsuccessful projects in time performance. Improvements in construction method, construction resource management, schedule management, human resource management, supervision and control, schedule management, and communication and report, can reduce project delays. By contrast, project delays are associated with increased quality management, budget management, human resource management, owner involvement, and team relationships.
Regarding the data from final reports, only three managerial factors are important contributors to improve cost performance index. The management of quality, and team relationship should reduce the chance of cost overrun. However, reduced emphasis on communication and report can reduce cost overrun.

Five success factors are significant in predicting time performance index. Improvements in owner involvement, human resource management, and construction resource management can reduce project delays. By contrast, project delays are associated with increased quality management, and communication.

The relationship between critical success factors and project performance

Regarding the subjective measures of project performance, two sub-hypotheses were tested using discriminant analysis.

Sub-Hypothesis 1A: Perceived cost performance of the public construction projects can be clarified through the general managerial practices in response to the challenges created by the environment and the characteristics of the project.

Sub-Hypothesis 1B: Perceived time performance of the public construction projects can be clarified through the general managerial practices in response to the challenges created by the environment and the characteristics of the project.

The relationship between critical success factors and perceived cost performance was modeled through discriminant analysis and was shown to have a cross validation value of 71.0%. While the relationship between critical success factors and perceived time performance was modeled through discriminant analysis and was shown to have a cross validation value of 83.9%.

Regarding the objective measures of project performance, the following two study sub-hypotheses were tested using multiple regression analysis.

Sub-Hypothesis 2A: Cost performance index of the public construction projects can be clarified through the general managerial practices in response to the challenges created by the environment and the characteristics of the project.

Sub-Hypothesis 2B: Time performance index of the public construction projects can be clarified through the general managerial practices in response to the challenges created by the environment and the characteristics of the project.

The relationship between critical success factors and cost performance index was modeled through regression analysis and was shown to have an R-Squared value of 46.9%. While the relationship between critical success factors and time performance index was modeled through regression analysis and was shown to have an R-Squared value of 63.2%.

What factors account for improvement in project performance?

As a positive consequence of the economic crisis that affected Asia in 1997, the Thai government has attempted to increase the efficiency and effectiveness of managerial procedures on construction projects. However, most managers in the public sector do not know what to improve in order to boost cost and time performance. Identifying the sources of performance variations is the first step in dealing with the problem and corrective action is the logical second step. In this study, an investigation of owners’ management was done to distinguish between success and failure in perceived cost and time performance and to determine the effect on cost and time performance indexes. The focus was on construction management of public highway projects. The study sheds new light on successful project performance on public projects.

By establishing the objective and subjective measures of cost and time performance, and evaluating each against success factors, some improvement areas can be made. The areas that should be improved are those where there are disagreements in results between the perceptions of owner and the data from final reports. Regarding cost performance, quality management and team relationship need to be improved because they show positive effect on cost performance from the final reports, though owners perceived that they do not affect project time and cost performances. At the same time, communication and report should be reduced or make consistent because the data from final reports show that more communication and report can reduce success in cost performance, though owner perceived that it can increase cost performance. It would therefore seem that quality, rather than volume, of communication is important to performance. Regarding time performance, owner project managers should involve more in construction process than they did in the past because they always perceive that the construction process is not their responsibility. Human resource management should be understood that it can improve time performance, although it does not directly contribute to the physical achievement on projects. At the same time, communication and report should be also reduced or make consistent because the data from final reports show that more communication and report can reduce success in time performance, while owners perceived that it can improve time performance.

General conclusions relating to the hypothesis

The main conclusion that can be drawn from this study is whether project performance in the public sector can be clarified through the general managerial practices, in response to the challenges created by the project’s environment and the characteristics. Also, based on the research results, the relationships between success factors and project performance can be quantified through the four equations. Given the lack of previous research in this area, these findings are significant to the improvement of construction management in the public sector.

The results of the discriminant models show that success in perceived cost performance depends on the management of construction resources, budget management, construction method, and communication. By contrast, schedule management and human resource management inhibit perceived cost performance. Success in perceived time performance depends on choice of construction method, management of construction resources, schedule management, supervision and control, and communication. Quality management, budget management, human resource management, owner involvement, and team relationships impede time performance.
Accordingly, the results of the regression models indicate that cost performance index depends on team relationships and quality management. On the other hand, increasing the volume of communication is detrimental to cost performance index. Confirmation with time performance depends on choice of construction method, human resource management, and owner involvement. Meanwhile, increased quality management is detrimental to time performance.

His thesis abstract is copied and posted.

Abstract

This study investigates cost and time performance of highway projects from the viewpoint of the public owner. It differs from previous studies which focused on the contractor’s perspective on project performance. A total of 13 success factors were identified from literature and the opinions of experienced engineers. Data from 99 projects handled by the Department of Highways (DOH) in Thailand were used to develop and test discriminant and regression models of cost and time performance. Discriminant analysis was used in this study to build the perceived cost and time predictive models, which were generated from samples of cases, which had already been grouped and known as successful and unsuccessful projects. The models were then applied to new cases with measurements for the predictor variables, to predict that the projects were either successful or unsuccessful. Meanwhile, regression analysis was also used to build cost and time performance models, which were generated by regressing 13 success factors against the indexes of cost and time performance which were referred to as the actual construction budget and duration, which varied from the plan.
The results of the discriminant models show that success in cost performance depends on the management of construction resources, budget management, construction method, and communication. By contrast, schedule management and human resource management inhibit cost performance. Success in time performance depends on choice of construction method, management of construction resources, schedule management, supervision and control, and communication. Quality management, budget management, human resource management, owner involvement, and team relationships impede time performance. Accordingly, the results of the regression models show that cost performance index depend on team relationships and quality management. On the other hand, communication restrains cost performance index. Confirmation with time performance index depends on choice of construction method, human resource management, and owner involvement. Quality management and communication impedes time overrun.