Impact of Owners’ Early Decisions on Project Performance and Dispute Occurrence in Public Highway Projects

Abstract

Disputes are common in the construction industry and lead to unnecessary cost and schedule overruns in projects. It is commonly believed that owners’ early decisions regarding the selection of delivery methods, procurement methods, and contract types affect the frequency and severity of project disputes; however, no previous study has empirically tested this hypothesis, particularly in highway public projects. Therefore, this study empirically investigated the effect of owners’ early decisions regarding project organization (i.e., delivery methods, procurement, and contract types) on performance measures (e.g., cost and schedule growth), specifically dispute performance metrics (e.g., frequency and severity of disputes), in public highway projects. A comprehensive literature review was conducted to identify factors that affect disputes in construction projects. This review was used to develop a survey instrument capturing both independent factors, including type of delivery methods [e.g., design-bid-build (DBB)], procurement methods (e.g., open bid), and contract types (e.g., lump sum), and dependent factors, including the frequency and severity of disputes as well as other project performance metrics (e.g., cost, time, and satisfaction measures). Then, the survey was distributed to procurement personnel in state DOTs across the United States. Data on 6 projects from 22 DOTs were received. The data obtained were analyzed to find any statistically significant differences between dispute frequency and severity; relevant performance metrics; and the various types of delivery methods, procurement methods, and contract types. The results of the analysis showed that in the case of project delivery methods, (1) construction management at-risk (CMR) outperformed DBB in terms of design satisfaction and construction satisfaction, (2) projects delivered using design-build (DB) had lower schedule growth compared with DBB projects, and (3) using alternative delivery methods can lead to lower cost and schedule growth. As far as the selection process was concerned, the results showed that (1) projects procured using qualifications-based selection had significantly less-severe claims (i.e., lower cost and lower severity for the largest disputes) compared with projects procured using open bid; and (2) procuring a project using best-value selection (i.e., through one-stage or two-stage requests for proposals) increases the chances of finishing a project with fewer claims, lower claim costs, and lower severity for the largest disputes. Appropriate team selection can ensure a smooth project delivery process, provide more a collaborative environment, and help achieve success. Finally, based on the study results, it can be inferred that contract types significantly affect schedule growth in highway projects. The effect of project organization decisions is presented to assist DOTs in selecting the appropriate project delivery methods, procurement methods, and contract type for their project goals and expected performance.