Critical Challenges in Execution of Hybrid Annuity Model Construction Projects: Understanding the Contractor’s Perspective

Abstract

The hybrid annuity model (HAM) is an innovative procurement mode that combines elements from build–operate–transfer and engineering procurement and construction approaches. Because of its novelty, there is a limited understanding of the challenges being faced by the contractors. Therefore, this study identified the challenges that contractors face while working on HAM projects. Variables and their measures were identified from the literature, and a survey instrument was developed. The survey was administered to contractors and professionals working with contractors, and 400 responses were received. The resulting data set was analyzed using exploratory factor analysis (EFA) and second-order confirmatory factor analysis (SCFA) approaches. The SCFA results based on the effect sizes (ES) of variables showed that operational factors (ES=0.81) and contract administration factors (ES=0.78) were critical challenges faced by the contractors. Financial factors (ES=0.71) and external factors (ES=0.58) ware moderately critical challenges. The study fills the gap in body of knowledge about the challenges that contractors face in HAM projects, and provides guidelines to practitioners for managing these challenges. The findings of the study also demonstrate the importance of HAM, indicating that it is a crucial model for public–private partnership projects for infrastructure sector of developing economies.