Contractual Portfolio Approach in Civil Engineering

Abstract

The Dutch construction sector is confronted with a complex and challenging situation. The majority of the infrastructural elements in the Netherlands were built in the 1950s and 60s, which means they are approaching the end of their lifespan. This state, in combination with backlogged maintenance and budget cuts, created a significant and urgent renovation and replacement wave that the sector is now facing. Additionally, other challenges like the tightness of the labour market, increasing material prices, the sector’s substantial emissions of CO2 and nitrogen and it’s limited learning capacity only exacerbate the complexity of the situation.

One of the key solutions emerging in this context is the implementation of the contractual portfolio approach (CPA), where multiple works are bundled into one tender. This approach shows potential to efficiently tackle the renovation and replacement task, while at the same time creating a healthier situation in the sector. However, it is a very novel strategy about which both stakeholders and researchers possess limited knowledge. Therefore, this research fills this gap by exploring the implementation of CPA for the civil engineering sector. This exploration is done by analysing what CPA exactly entails, the objectives clients pursue when implementing a CPA and the choice options they have when doing so.

Out of this study, a clear definition of CPA emerges, which is:

The bundling of a logical set of similar works into one initial tender, with the purpose of reaching certain work-transcending objectives.

Next to this, eight main objectives are identified, accompanied by eleven key choice options that clients have at their disposal. These objectives include enhancing standardisation, increasing efficiency and stimulating a learning curve. The choice options, among others, are the selection and award criteria of the initial tender, the composition of the bundling of works and the implementation of performance management. Clients tend to lack a concise list of objectives while at the same time having a shortage of an overarching view on available choice options. Next to this, the links between choice options and objectives bring about certain dilemmas. This happens when a specific choice has a positive effect on one objective, but a negative one on another. As an example, the implementation of performance management provides the client with a certain degree of control over the quality of the portfolio, while at the same time decreasing the contractor’s willingness to invest. Next to these dilemmas, certain situational factors prove to be influential for the effectivity of choice options. For instance, a high complexity of the environment of a work hampers the workflow within a portfolio.

Concluding, clients can adopt the contractual portfolio approach as a way to achieve a variety of objectives. From sustainability to efficiency, and from risk reduction to standardisation. To effectively do this, it is important to explicitly define objectives and limit these to the most important ones. Furthermore, it is important to consider all the available choice options and to position the buttons in a way that it aligns to both the portfolio situation and the specific objectives. Then, it is vital to consider the circumstances of the specific case and to carefully weigh the trade-offs associated with certain dilemmas. Ultimately, clients are advised to use the CPA Decision Guideline that is constructed in this research as a tool that supports the decision-making.