Causes of contractors’ claims in international engineering-procurement-construction projects

Abstract

Abstract. Engineering-Procurement-Construction (EPC) method has increasingly been applied in international markets. In this research, the causes of contractors' claims in international EPC projects are modeled and empirically tested with industry survey, structural equation modeling and case studies from the perspective of Chinese contractors. The established model outlines the causes of contractors' claims as: external risk (sociopolitical risks, economic risks, and natural hazards), clients' organizational behavior (untimely payment, change orders, and inefficient processing), and project definition in contract (unclear scope of works, and unclear technical specification). The structural equation modelling validates that these causes have direct influences on claim respectively. Besides, clients' organizational behavior acts as a partial mediation between external risk and claim, demonstrating that external risk can also exert influence on claim through affecting clients' organizational behavior. Seven case studies further confirmed and interpreted the substantive meaning of these relationships. This study establishes interdisciplinary linkages among knowledge areas of contracting, risk management, organizational behavior, and international EPC project delivery, which has important primary contributions in both theory and practice. Understanding how the fundamental factors interactively lead to claims can help contracting parties to develop effective claim strategies, proactively mitigate project risks, and ultimately improve EPC project performance.

Improving Design Performance by Alliance between Contractors and Designers in International Hydropower EPC Projects from the Perspective of Chinese Construction Companies

“…Design-related contract management mainly includes design responsibility specification and claim management in hydropower EPC project delivery [34,54]. Design management of international hydropower EPC project starts from reviewing conceptual design for contractor-designer alliance to win EPC contracts [15].…”

“…It is difficult to agree on whether clients' orders have changed the scope of work or not [57]. Unclear project definition in contracts prepared on the basis of conceptual design and clients' organizational behaviors, such as change orders, are main causes of claims in international hydropower EPC project delivery [34]. Timely process of claims caused by the implementation of owners' orders for variation should be an emphasis of design-related contract management of hydropower EPC projects [58].…”

“…A five-point Likert scale was adopted to evaluate international hydropower EPC project design problems, alliance, design management, and design performance in a quantitative manner. As Chinese contractors account for about 50% of market share in the global hydropower industry [34], we decided to collect data from Chinese construction companies who have delivered international hydropower EPC projects. To avoid the low response rate of postal surveys [71], four fieldtrips had been conducted to survey four Chinese construction companies (one trip to one firm).…”

“…International hydropower EPC projects are typically large and complex with many design challenges [15,34]. Extant studies on design problems in international hydropower EPC projects mainly regard: (1) causes of uncompetitive preliminary design in bidding, such as inadequate design information collection, technically uncompetitive design option, high construction cost of project, and unclear project scope [31,32]; (2) unfamiliarity with project-related standards or laws, especially for the differences in project standards or HSE laws at home and abroad [9,33]; (3) problems on design quality and time, e.g., design errors or defects, difficulty in obtaining approval from consulting engineers, design rework, and design delays [34,35]; (4) lack of incentives for promoting designs, mainly involving insufficient design optimization and low design fee causing inadequate design inputs [15]; (5) design-related interface management problems, including insufficient depth of design causing procurement delay, poor constructability of design option, inefficient coordination among EPC activities, ineffective communication with consulting engineers, poor management of design variation processes, and unstandardized information management of design [36].…”

Gestão de projetos em empreendimentos de infraestrutura: estudo comparativo de construtoras brasileiras e construtoras internacionais atuando no Brasil.

“…Portanto, é mais difícil para as empresas de construção tornarem-se globais e realizarem seus objetivos de internacionalização do que para as empresas de outros segmentos. Como resultado, os problemas envolvidos na melhoria do processo de internacionalização desse setor têm atraído mais atenção nas últimas duas décadas; por exemplo: Ofori, 2003;Low e Jiang, 2003, 2004Mutti, 2004;Gunhan e Arditi, 2005a, 2005bBest e Langston, 2006;Ling e Kwok, 2007; Javernick-Will e Scott, 2010; Shen et al, 2017). (FLANAGAN, 1994;MUTTI, 2004;ARDITI, 2005a;LING et al, 2005), redes internacionais (GUNHAN; ARDITI, 2005b), reputação e história (FLANAGAN, 1994;LING et al, 2005;SHEN, 2008), recursos humanos bem treinados FLANAGAN, 1994;ARDITI, 2005a;LING et al, 2005;SHEN, 2008), fatores culturais e geográficos, legais, fiscais, econômicos e produtivos (MUTTI, 2004) e conhecimento dos sistemas e políticas dos países estrangeiros (FLANAGAN, 1994;DENG et al, 2014;KADRY;OSMAN;GEORGY, 2017).…”