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M. Molaei

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Network risk allocation between EPC contractor and subcontractors

Master thesis (2023) - M.C.M. Kok, M. Molaei, A. Straub, L.P.I.M. Hombergen
Engineering, Procurement, and Construction (EPC) projects have become an internationally popular model for construction projects, where large risks are bore by the EPC contractor and the subcontractors [Galloway, 2009; Guo et al., 2010]. Risks are inherent to all construction projects, however, the high uncertainties of the international EPC markets, and the complex EPC processes, create for abundant risks which often make it unfeasible for EPC contractors to manage the risks by relying solely on their own capabilities [Wang et al., 2016]. These projects are often of large scale, financially and technically, in
a competitive environment where subcontractors have tight margins and even unrealistic budgeting [Yeo and Ning, 2002]. Furthermore, the concept of risk management is a widely discussed topic in construction literature. However, the effective allocation of these risks to certain parties down the supply chain is
not a popular subject. EPC project environments are known for their adversarial relationships between stakeholders, where subcontractors have demonstrated a certain feeling of distrust within the supply chains [Dainty et al., 2001]. The status quo of these large and complex EPC projects is that the number of subcontractors willing and able to take on the risks of EPC projects is shrinking. There is a need for a more effective risk allocation within the supply chain.

To address this problem statement, this research focuses on analyzing how the risk allocation within the supply chain can improve, in order to improve the project performance for all parties involved. This problem statement is answered through the viewpoint of the contracting strategy used in EPC projects since the contracting strategy is a tool for allocating risks. The final output of this research is a Network Risk Allocation model and recommendations for both EPC contractors and subcontractors. This is attained by conducting exploratory research, consisting of quantitative data gathering, in order
to answer the main research question:

How can risks within EPC projects effectively be allocated among the EPC contractor and subcontractors, to improve project performance through strategic contracting?

This research is divided into three phases. The first phase includes the theoretical background, including a literature review, document review, and exploratory interviews. Phase one dives into the theory around risk allocation, risks in EPC projects, and the supply chain network. Here it is concluded that an effective risk allocation for EPC projects is in the form of a network risk allocation. Phase 2 continues by conducting empirical research in the form of a Case Study analysis. Two projects are analyzed on the basis of their risk allocation. This led to recommendations for effective risk allocation. Phase 3 dives into the development of the solution model: the network risk allocation model. It is found that collaboration in the network is an important element to effective risk allocation, amongst other factors. ...
This thesis investigates the role of uniqueness bias in the acceptance of innovation based on standardization within construction programs, using the Programma Bruggen en Kademuren (PBK) as a case study. The research aims to bridge the gap in the literature regarding uniqueness bias and the acceptance of standardized innovation in the construction industry. Initially, a literature review was conducted, leading to the formulation of two hypotheses. These hypotheses were tested through semi-structured interviews, after gaining insights into the innovation acceptance process within the programme. This involved both document reviews and exploratory interviews with individuals involved in the development of innovation in PBK. The findings reveal that PBK fosters innovation through internal development and external innovation partnerships. This information guided the creation of criteria and questions for the semi-structured interviews. The interviews were analysed using thematic analysis, revealing factors that influence the acceptance of standardized innovation, categorized into preconditions, barriers, and enablers. Specifically, three preconditions, eight barriers, and two enablers were identified. Upon comparing the interview results with the initial hypotheses, no supporting evidence was found for either hypothesis. The identified factors were then used to develop three intervention plans aimed at enhancing innovation acceptance within a programme. These interventions include establishing a clear baseline direction, creating an Innovation section within the programme forum, and implementing contractual flexibility for innovation integration. Each intervention plan is designed to address identified barriers and enhance enablers, thereby fostering an optimal environment for innovation acceptance in public construction programmes ...