International joint venture between ASEAN and Gulf: bidding and delivering Bahrain International FORMULA-1 Circuit.
Abdul-Rahman, Hamzah ; Wang, Chen ; Wood, Lincoln C. 等
1. Introduction
It is interesting to note that international contracting firms
manage to secure sufficient workload that makes their initiatives
worthwhile (Yeet al. 2013). International joint ventures are mostly
project-specific in nature (Kim et al. 2009, Hung et al. 2002, Chou and
Yang 2013). The Bahrain FORMULA-1 Circuit is considered as one of the
best international racing car track in terms of technical aspects and
architectural quality (an aerial shot in Fig. 1). Two FORMULA-1 races
have been hosted in the Kingdom of Bahrain, in 2004 and 2005. The
FORMULA-1 Circuit had recently won the award of the best international
racing car circuit. The Bahrain FORMULA-1 Circuit (as illustrated in
Fig. 2) has a total capacity for 50,000 spectators. The racing circuit
includes amongst others, a 9-storey VIP tower (Sakhir Tower as shown in
Fig. 3); a main grandstand for 10,000 spectators and first-class
hospitality suites; dedicated buildings for 18 international racing
teams; a technical resource centre; administration buildings and
broadcast centre; a second pit building with lounges and grandstand for
3,000 spectators, under track pedestrian and vehicle tunnels and a
medical centre. Fig. 4 shows the picture of the Oasis Complex.
[FIGURE 1 OMITTED]
In the initial stage, 34 contractors from the Middle East, Europe,
United States of America, China and Australia submitted their bids to
secure the project. This number was then shortlisted to 9 international
contractors and lastly the project was awarded to a Bahrain-Malaysia
joint venture construction company. The project was considered
successful because it was completed earlier than the allotted time and
has attained the stringent quality control of race-track and building
construction. This paper focuses on the reasons in which a construction
firm from a developing economy can penetrate the international market in
terms of securing the project and subsequently delivering the project
deliverables successfully, in which case, a rare feat and not by
accident.
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2. Determinants for success in international construction projects
The definition of international project has evolved for the past
twenty years (Halawa et al. 2013). Strassman and Wells (1988) defines an
international construction project as one undertaken by an enterprise
outside its home-country, for example, firms from one country building
under contract in another country. However, this definition is not
appropriate nor is it sufficient to depict the workings of the global
market today. This definition should include projects in home-country
but involving foreign firms as competitors (West 1992, El-Sayegh 2008,
Momaya and Selby 1998). There exists a construction market where
construction work is undertaken by the international construction system
comprising firms operating throughout the world (Adams and Fuss 2010,
Drewer 2001, Li 2013). Due to the location specificity of construction
outputs, construction industry is 'local' by nature in terms
of climate, regulations, political, institutional and social conditions
that exist in a particular locality (Ozorhon et al. 2007, Hillerbrandt
2000). This inadvertently gives competitive advantage to home-grown
firms over foreign contractors in terms of language, culture, taxation
charges, currency restrictions and project logistics in terms of
securing networks of local suppliers and sub-contractors (Flanagan
1994). The global construction market has been estimated to be about USD
3, 000 billion annually and around one-third of this figure has been
undertaken by the international construction system (Bon and Crosthwaite
2000).
2.1. International players
The international construction market has been dominated by
contractors from a few developed countries (ENR 1991, 1992, 2000, World
Bank 2000). An analysis was done on the figures depicted in the annual
Engineering News-Record (ENR) survey on the top 30 international
contractors during 1999 to 2000 worldwide. Fifty-eight contractors were
listed at least once in this group during the period; the highest number
were American contractors, followed by Japanese, French, British, and
German. Some firms which do not belong to developed countries have also
made significant participations in the international market. Five firms
from Korea (middle-income) and China (low-income) were among the 30 top
international firms in 1990-2000. During the period of 1990 to 2000,
only one construction firm from Malaysia has been ranked in the top 225
contractors in ENR. This Malaysian firm was Pilecon Engineering Berhad,
ranked 180th in 1993. The number of international firms from
middle-income and developing countries such as Brazil, China, Cyprus,
Korea and Turkey has increased from year 2000 onwards. Their
firm-specific advantages are access to inexpensive, highly skilled
labour proficient in available technology and close geographical,
cultural, and language proximity to their markets (Kim 1988, Strassman
and Wells 1988, Adams 2008, Rashid 1990). In addition, some authors
highlight the support from their governments including credits, export
guarantees, preferential taxes, and other export development incentives
(Han et al. 2010, Quak 1990, Betts and Ofori 1994, Abdul-Rahman and
Berawi 2002).
2.2. Prerequisites for competitiveness
In order to succeed in the international market, there are certain
criterions for a construction firm to develop beforehand. Kindleberger
(1969) suggests that for foreign firms to break down local
companies' advantages there must be some imperfection in the local
markets for goods or factors of production, or interference in
competition by governments or firms, which separates markets
(Kindleberger 1969). The typically large, complex and one-off nature of
construction projects means privileged access to key inputs, in
particular, skilled labour and capital, are crucial. The United Nations
Centre for Transnational Corporations (UNCTC 1989) observes that
technical knowledge rather than capital investment is the most important
barrier to entry and competitiveness in international construction.
Access to the most efficient means of production, cheapest and best
building materials and engineering knowledge that may have not been
proprietary but had not yet been appropriated by others were
instrumental in the early international success factors of European and
US contractors (Linder 1994, Dikmen, Birgonul, and Han 2007). Like other
business enterprises, construction companies choose oversea markets
where they have competitive advantage based on firm and national
advantages (Adams and Fuss 2010, Seymour 1987, UNCTC 1989). Firm
specific advantages include: the firm's name, which embodies its
reputation, experience and expertise; and firm size, which relates to
its resources. National advantages include: national currency;
geographical proximity to market(s); historical, political, language,
cultural and economic relationships between the home and the host
countries; foreign direct investment by home-country enterprises; and
strengths of inter-sectoral linkages within the home country's
economy (Seymour 1987, UNCTC 1989). Internationalizing contractors must
possess certain prerequisites, which include the firm's track
record, corporate knowledge, communication structures, resources, and
risk management capability. Some authors (Flanagan 1994, Ustinovichius
et al. 2010, Rashid 1990, Ofori 2003, CSSC 1989) categorized the key
factors contributing to competitiveness in international construction,
namely: human resources and their management; technology; and
government's incentives and disincentives. Management expertise is
considered the most important because of the peculiarities and problems
of overseas projects.
2.3. Determinants of success for international construction
There are models available to analyse international construction
from the perspective of the construction firm itself; the country in
which the construction firm originate from; and from the countries that
host the international construction projects, respectively (Zhao et al.
2013). In such analysis it would be relevant to consider the four
determinants in Porter's diamond (Porter 1985) as well as culture
and institutional arrangements and government's influence
("chance" would be an exogenous variable) as a starting point
for both the firm and the host country's construction industry.
This type of study is commonly done at the macro level, whereby the
aggregate total of works procured from international contractors
residing in a particular country is tabulated and analysed, and the
micro level, which is at each firm's competitiveness. Oz (2001) and
Yates et al. (1991) have used the Porter's Diamond model in
analysing the performance of international Turkish contractors and the
US construction industry with regard to future international
competition, respectively. The study in Turkey shows that Turkish
contractors have comparatively low labour costs in the markets that they
penetrated. Turkish contractors also had geographical and cultural
proximity to these markets and religious advantage in countries like the
Middle East and North Africa. On the other hand, problems encountered
included financial and administrative difficulties; lack of coherent
government policies and excessive bureaucracy in the respective
countries where the construction work is done.
Other models that have been used in analysing international
construction include the classic product-market matrix for strategy
formation proposed by Ansoff (1965); core competences concept by
Pralahad and Hamel (1990); and the engineering idea of Hammer and Champy
(1993). Several authors have also borrowed concepts from behavioural
models, which focus on the motivations and decision-making including:
management, which is exemplified by the work of Aharoni (1966);
industrial organization theory, which argues that the multinational
enterprise (MNE) possesses features enabling it to overcome entry
barriers into foreign markets and giving it comparative advantages, as
exemplified by Kindleberger (1969) and Hymer (1976); the internalization
theory of business enterprises applied to MNE by Buckley and Casson
(1976); and general theories such as Dunning's (1977) eclectic
paradigm. On the other hand, some authors (Hasegawa 1988, Han et al.
2010, Momaya and Selby 1998) have analysed issues surrounding
international construction without much reference to the existing
models. This was done by Hasegawa (1988) when he considered the
international strategies of Japanese construction firms and identified
two sources of competitive forces: the level of domestic and
international construction, and the threat of new entrants to industry
through diversification. Momaya and Selby (1998) quantified the
international competitiveness of the Canadian construction industry and
compared it with those of its Japanese and United States counterpart.
Most of the analytical frameworks used in explicating the reasons
for international competitiveness recognize the difference between
international construction and multi-national manufacturing by
encompassing the specific features of construction in general and
international construction projects in particular (Ofori 2003, Dikmen,
Birgonul, and Gur 2007). One example of specific features in
construction would be the project-based nature of construction which
renders medium-term alliances within a cluster of firms possible.
Another example is the location specificity of construction projects,
which makes it necessary for firms to have strong abilities in logistics
and communications; to develop means of shortening the learning curve of
acquiring knowledge regarding the domestic working practices, and also
to secure the commitment of the suppliers in the materials supply chain.
Third, the construction process is fragmented and each project involves
several firms with different corporate objectives and experiences (Jia
et al. 2013). In short, the risks and difficulties facing firms in
construction projects are vast and varied, but these adversities are
exacerbated when these firms enter the international market arena.
2.4. Earned Value Analysis (EVA) project monitoring methods
Project performance monitoring and forecasting are supported by
project learning activities and the level of lesson learned is related
to inter-project learning (Kerzner 2001). Abba (1996) stated earned
value analysis (EVA) is a management technique that relates the learning
to technical performance. However, Czarnigowska (2008) defined earned
value (EV) as a well-known project management tool that uses information
on cost, schedule and work performance to establish the current status
of the project. One reason for EVA method not being widely accepted in
construction is because project managers lack in understanding the
concept of EVA (Kim et al. 2003). Anbari (2003) mentioned that there
might be important lessons to learn from each step or formulas in terms
of estimating, budgeting, performance management, and cost control in
EVA. Reallocation of organizational resources might be another outcome
from EVA (Lewis 2001).
The basic concept of EVA has not changed for three decades since
its inception (Brandon 1998, Daniel 1985, Fleming and Koppelman 2002,
Howes 2000). EVA is used for forecasting of project cost and schedule at
completion and highlights the possible need for corrective action (Kim
et al. 2003). According to Anbari (2003), the inputs of EVA are
periodically monitored actual expenditures and physical scope
accomplishments such as the planned value, earned value, and actual
cost. On the other hand, the outputs of EVA are cost and schedule
predictions along with performance indices such as the schedule
performance index and cost performance index. EVA is also defined as a
management technique that relates resource planning and usage to
schedules and to technical performance requirement and to bring cost and
schedule variance analysis together to provide managers with a more
accurate status of a project (Kim et al. 2003). EVA is the methods used
to measure and communicate the real physical progress of a project
taking into account the work complete, the time taken, and the costs
incurred to complete that work (Fleming and Koppelman 2002, Iranmanesh
and Mokhtari 2008).
3. Bahrain FORMULA-1 Circuit in Literatures
Alnaser et al. (2006) studied the energy and environmental
considerations in Bahrain FORMULA-1 Circuit. The noise level emitted
from vehicles on the circuit during the Formula-1 event, on April 4th
2004, was acceptable and caused no physical disturbance to the fans in
the VIP lounges or to scholars studying at the University of
Bahrain's Shakeir Campus, which is only 1.5 km away from the
circuit. The sound-intensity level (SIL) recorded on the balcony of the
VIP lounge was 128 dB(A) and was 80 dB(A) inside the lounge. The
calculated SIL immediately outside the lecture halls of the University
of Bahrain was 70 dB(A) and 65 dB(A) within them. Thus racing at the
FORMULA-1 circuit can proceed without significantly disturbing the
academic-learning process. The purchased electricity demand by the
circuit complex peaked (at 4.5 MW) during the first FORMULA-1 event on
April 4th 2004. The reverse-osmosis (RO) plant at the BIC provides 1000
m3 of desalinated water per day for landscape irrigation.
Renewable-energy inputs, (i.e., via solar and wind power), at the
FORMULA-1 circuit could be harnessed to generate electricity for water
desalination, air conditioning, lighting as well as for irrigation. If
the covering of the FORMULA-1 circuit complex was covered by adhesively
fixed modern photovoltaic cells, then 1.2 MW of solar electricity could
be generated. If two horizontal-axes, at 150 m height above the ground,
three 75m bladed, and wind turbines were to be installed, then the
output could reach 4 MW. Furthermore, if 10,000 Jojoba trees (a species
renowned for having a low demand for water, needing only five
irrigations per year in Bahrain and which remain green throughout the
year) are planted near the circuit, then the local micro-climate would
be improved with respect to human comfort as well as the local
environment becoming cleaner.
Alnaser et al. (2007) studied the architectural, construction and
environmental matters in Bahrain FORMULA-1 Circuit. This is what makes
the project very special and appropriate for different car race
functions and activities. The roofing system of tents and construction
details show how modern materials have been mounded to achieve buildings
with indigenous Bahraini characteristics. Employing tents above the
stands and some buildings satisfies not only functional and climatic
requirements, but also achieves a pleasing visual appearance. The
circular 8-storey VIP tower, with increasing floor area, the higher the
story, acts as a prominent landmark. The inclinations of the walls of
the media centre and race tower make them appear to grow elegantly out
of the ground, while the colours of their cladding ensures they
integrate well with their surroundings. The variety of shapes of the
buildings, and especially of their roofs, provides an interesting
skyline. Using a Teflon membrane to cover 10800[m.sup.2] of roofing
provides shading and hence decreases the insulation (the incident solar
radiation) input, which otherwise could reach 1100W/m2 on a horizontal
surface in mid-June, with 80% direct and 20% diffuse solar radiation.
This lowers the interior-cooling load: such a design has been employed
successfully in the King Fahad Stadium in Saudi Arabia.
4. Research methods and procedures
4.1. The procedures
A 12-month case study was conducted as a qualitative process to
identify the international competitiveness of a Malaysian construction
firm performed in the Bahrain FORMULA-1 Circuit project. The objectives
of this case study are to determine the specific pre-requisites of
securing workload from the international market, to explore the
criterions that ensured smooth delivery of the project deliverables of
time, cost and quality, within the context of performing in an
international environment, and to understand the interplay of these
criterions in the context of adversity and risks associated with large
projects and international markets. The research team worked as a
technical consulting team attached to the Malaysian main contractor. The
data collected for this research are primary data. The method of case
study was selected due to the specialized nature of the construction of
Formula One tracks and the rich detail of data that was made accessible
to the researchers. The case study method can investigate different
kinds of evidence: evidence which is there in the case setting and which
has to be abstracted and collated to get the best possible answers to
the questions (Yin 1994, Creswell 1994, Bryman 2004). Open discussions
were performed on both parties of the International Joint-Venture (IJV)
entity, on matters regarding project management and the strategic
decisions that were made in the course of the project. Key members of
the design and construction team such as the race-track architect, the
internal project manager, and senior engineering members of the IJV
entity were working together with the research team. Documents and
records of the construction project provided sufficient correspondence
with the client. The time and cost monitoring flow charts used in the
project has been studied. Document retrieval were conducted in both
countries of Bahrain and Malaysia.
4.2. The project profile
The brief information of this project is listed in Table 1. The
track (its top view is shown in Fig. 5) was built on a 400-acre sandy
plot of land in Sakhir 19 miles southwest of the island's capital,
Manama. The site is between Al-Areen Wild Life Park and The University
of Bahrain. The desert racing track was built on a 1.7 square km area.
Designed by a German track specialist, the 70,000 spectator track is the
first of its kind in the Middle East. The buildings surrounding the
track, mainly the Sakhir Tower (Fig. 6 shows its photo in construction),
the Oasis Complex and the Main Grandstand are based on Arab
Architecture. Fig. 7 captures the construction site while the FORMULA-1
circuit project was under construction. Table 2 and Table 3 list the
major facilities and quantities in Bahrain FORMULA-1 Circuit project.
Table 4 lists the six different individual tracks in this project.
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5. Research findings and discussions
The findings concentrate on the salient features that helped both
the host contractor and the foreign contractor win the tender in the
Bahrain construction market and the success factors toward the
challenges in international joint venture.
5.1. Winning the tender: the pre-requisites for entering the
international market
The host contractor, an established medium-sized Bahrain
construction company, was interested in participating in the
construction of the Bahrain FORMULA-1 Circuit. However, the Bahrain
contractor (the 'Host Contractor' in this partnering) has no
experience in building race tracks, so that they did a preliminary
survey on race track specialists contractors. They found that the
Malaysian contractor (the 'Foreign Contractor' in this
partnering) had completed the Sepang FORMULA-1 Circuit in Malaysia
successfully with recorded savings from the initial contract sum and was
also appointed as a consultant in an FORMULA-1 circuit project in China.
Based on the Foreign Contractor's track record and experience, the
Chief Executive Officer (CEO) of the Host Contractor initiated
preliminary discussions to the Managing Director (MD) of the Foreign
Contractor in order to explore the possibilities of working together for
the BFC project.
The Host Contractor's commitment and knowledge of the incoming
BFC project brought the Foreign Contractor's key personnel to
Bahrain to perform a market analysis and a risk analysis on the salient
features of the local construction operating environment. Both sides
exchanged views and information on supply-chain issues including:
sub-contracting practices, labour force and the materials supply-sector;
financial feasibility and the financial sector's support system;
and the government's requirements regarding joint ventures
specifically. Both the Foreign Contractor and the Host Contractor
performed a two-way compatibility and capacity analysis of their
respective technical expertise, experience, knowledge and relationships
with the local construction environment before a final agreement between
them was made. The Foreign Contractor had confirmed that the local
conditions were politically and financially stable. Both sides were
satisfied and confident that the risks are manageable and that the
partnership would produce a positive outcome so that they decided to
sign a joint-venture agreement. Upon satisfaction of the fact that the
local conditions were politically and financially stable and that the
Host Contractor's technical expertise, experience, knowledge and
relationships with the local construction environment is commendable,
the Foreign Contractor concluded that the initiative to work together
with a local partner for the BFC project is predicted to be successful.
The joint venture was formulated based on equal shareholding and
sharing of profits. This International Joint Venture (IJV) entity
qualifies them to enter the pre-qualification exercise done by the
Government of Bahrain to those companies who want to enter the bidding
process. One of the conditions put forward by the Government of Bahrain
was that the entity must have home-country contractors'
participation in the consortium or IJV. From the outset both parties
have agreed mutually the specific goals of the project, namely: 1)
maximize cooperation and mutual trust to develop a win-win culture, 2)
reduce the administrative costs and contractual conflict through less
adversarial relationships, 3) reduce errors and wastage on site by
exploring superior project planning and construction methods, and 4)
reduce the overall project costs and time but maintain good quality of
constructed items, as shown in Table 5.
The first task for the IJV was to put forward a bid for the BFC
project which formed part of a pre-qualification exercise of Contractors
performed by the Client. Table 6 listed the major tendering documents
used in the bidding stage. The pre-qualification exercise brought the
number of Contractors qualified for the final bid down to nine. At this
stage the client imposed a stricter condition of raising the bid bond by
USD 40 million. It was at this stage that the knowledge of the Host
Contractor on the country's policies, regulations and practices
became very valuable. After considering the new condition, the
Contractor took a calculated risk to bid in for the work for about USD
150 million. It was a calculated risk because a bid of USD 150 million
will not cover all risks that a Contractor might encounter while working
in an international context; it is a relatively low bid.
Table 7 lists competitive bidding records on the public tendering
day. Without the experience and knowledge from the Host Contractor on
the institutional working practices and procedures of their own country,
the Contractor would have wanted to insure himself against most elements
of project risks and this would have led to a higher bid price. The
Contractor was awarded the BFC project because they were the lowest bid.
The high level of trust in each other's competence between the two
main protagonists (the MD of the Foreign Contractor and the CEO of the
Host Contractor) was one of the main reasons the bid was successful.
5.2. Leadership and team structure in WCT
The main contractor applied the matrix structure in its team
organization, which owned advantages such as being efficient, strong
project focus, easier post-project transition, and flexible. The matrix
project team structure of WCT (Main-Con) is illustrated in Fig. 8.
Leadership, human resources and their deployment has been cited as one
of the main determinants of competitive advantage in international
construction (CSSC 1989, International Construction Task Force 1993,
Flanagan 1994). The two main protagonists of the IJV were leading the
construction project with a clear project clarity and demarcation of
work. The level of trust in each other's ability to manage their
own respective skills and resources was reflected very well during the
course of the project. This type of mutual dependency has created a
workable and efficient business structure offering mutual benefits for
both parties.
[FIGURE 8 OMITTED]
Speed of delivery was of high priority to the project so that the
fast track construction mode was adopted. The challenges and
difficulties of doing work on fast track was exacerbated when the
project handover date was brought forward from August 2003 to April 2003
as the actual FORMULA-1 race was brought forward to an earlier date.
Construction work had to be accelerated and more general workers were
taken on board to manage the acceleration order. The full commitment by
the top management made sure that all decision making on site was done
as quickly as possible and this was crucial in developing the much
needed sense of urgency in the whole project environment.
The project was not only done at accelerated time but also the
magnitude of work production involved was high, averaging up to USD7 Mil
monthly and at its peaked of USD18 Mil. However, the contractors have
managed to deliver the BFC project within the reduced time of 16 months
with 400 variations. Instead of adhering rigidly to the contract and
getting the entitlement of extension of time (EOT) with the 400
variations order, the contractors have agreed mutually with the client
to convert the EOT into monetary incentives. These factors of the
reduction of the construction period and the incomplete design submitted
by the consultants have motivated the contractors to take extra
precaution of stocking up construction materials. Instead of estimating
the quantity of material needed at 5% wastage, a percentage of 20% was
adopted in order to eliminate the risk of material shortages. In terms
of manpower, a decision was made that extra labourers will be hired to
reduce the risk of workforce shortage. This exercise was deemed
necessary by the Contractors, because extra precaution was needed in
order for newly hired labour to increase their efficiency by way of
interaction with the more knowledgeable and existing workforce.
These strategic decision-making and tactical moves by the
Contractors in solving problems as these problems surfaced was
detrimental to their financial commitment in the project. However the
Contractors understood the importance of working within the stipulated
time frame and was transparent to the Client in terms of the extra
financial risks that they have taken to facilitate the needs of the
Client. The importance of the client's objectives was made as
priorities of the Contractors' organizations as well. This
direction from the top management of the Contractors' entity made
the construction side very flexible in their work routine and material
procurement much to the benefit of the client. Due to the fact that the
Contractors are consistently pro-active in trying to solve problems on
site; albeit technical problems or materials management, the work of the
project management team on behalf of the Client becomes more efficient.
In this sense the gap between the project management day-to-day
decision-making by the Client's representative and the strategic
decisions of the Contractor to facilitate the site facilities and
project logistics were bridged.
5.3. The flexibility of the IJV's project management structure
The Foreign Contractor's technical expertise and efficient
decision-making on site were their main strengths in most projects that
they have worked in (Abdul-Rahman and Mohd-Rahim 2006). Their
accumulated experience working in major infrastructure and building
projects in Malaysia have equipped them with highly dedicated and
trained personnel. All of these critical personnel: planning engineers,
site engineers, civil and structural engineers, quantity surveyors,
construction and project managers, were transported to Bahrain for the
BFC project. The IJV formed the top level of construction and project
managers incorporating both entities' personnel.
In designing and structuring the BFC project organization, the IJV
identified and formalized project members into effective teams, and
linking the processes and teams to manage on-site operations. It was a
relatively flat organizational structure where only three main tiers of
organizational levels were created. The system of formal authority
within the organizational structure was facilitated by a continuous
system of informal communication flow. There were frequent site meetings
and updating on the project progress to all the work groups on site.
A substantial amount of specialist work was done by foreign
sub-contractors that came from outside of Bahrain, such as from
Malaysia, Germany and Saudi Arabia. Major sub-contractors involved in
this project are listed in Table 8. Due to these complex procurement
practices, the construction site had multi-national and diversified
gangs of labourers at any one time. This was a new challenge to the IJV
as they had to coordinate all activities efficiently so that no imported
specialist gang came at the inappropriate period that renders their
arrival redundant due to the fact that the previous work has not been
completed. The IJV's project planning and tracking software system
was critical in helping them plan the project logistics with some
measure of accuracy and efficiency.
The Contractors paid particular attention to project coordination
and planning in order to minimize the risks of material and labour
shortage. The planning of construction activities provided the basis for
the estimation of time period and costing for each work activity; and
also a basis for claims evaluation for any extension of time
entitlements. All work activities were coordinated in the appropriate
sequence and proper lag time was given if some work is depended on
foreign sub-contractors. The Contractor also contacted the
sub-contractors and invited their feedback in terms of making sure that
the schedule put forward was an achievable target for each
sub-contractor respectively.
5.4. Construction and managing the supply chain
Table 9 lists the suppliers involved in Bahrain FORMULA-1 Circuit
project. In the construction process, the IJV identified three main
challenges that they had to overcome during the duration of the project.
The first challenge is the site condition of the project. Due to the
nature of the race track project, there will be an extensive amount of
earthworks and rock blasting due to the fact that the site was
predominantly covered with big rocks. A reduction of the excavation
level from the original design was executed due to an error in the
design, which resulted in a changed order of 1,500 cu meters of rocks
blasted, leading to a total of 1 million cu m of rock excavated. There
is only one rock blasting company in Bahrain and the Host Contractors of
the IJV negotiated efficiently so that the former will not behave
opportunistically in the advert of unforeseen events. The weather had
also affected the performance during hot summer periods. Productivity
was low due to very hot weather that warrants longer resting hours. This
was overcome by employing more workers to work in shifts and overtime
when the temperature was cooler.
The second challenge was the specification of materials by both the
Client and the FORMULA-1 race track requirement. The project specified
the usage of steel, special polished stone, polymer modified bitumen
that are not readily available in Bahrain. This then needed the
facilities of the IJV to procure materials and the specialist
contractors from other countries. Large amounts of steel, up to 8,500
tons were needed for the building works. Due to the construction boom in
Bahrain, there was a shortage of steel, which had to be overcome by
importing over 1,000 tons of steel from Malaysia. Steel for steel
structures were sourced from Korea, Malaysia and United Kingdom and sent
to subcontractor steel plant in Malaysia to be fabricated before being
sent back to Bahrain.
In terms of technological complexities, the Federation
Internationale de l'Automobile (FIA) ordered special polished high
quality aggregates to be used for the wearing course of the tracks. Not
being available locally, an amount of 10,000 cu m of the aggregates had
to be imported from Malaysia and 2,000-3,000 cu m were imported from
Wales. The Bahrain track surface also saw the first time use of styrene
butadiene styrene (SBS) polymer modified bitumen with a mix of
aggregates and incorporating a calcined bauxite powder. This had also
posed a challenge to the construction team. The bitumen had to be
imported from Singapore in drums. By the time they reached Bahrain, they
had hardened and had to be decanted and melted down. A special plant was
constructed to decant and boil the bitumen. Adding to the challenge, the
project consultants found the bitumen substandard despite confirmation
from the supplier that all was in order prior to export. Special
additives, calcined bauxite powder had to be ordered from Singapore to
improve the quality of the bitumen to the consultant's
satisfaction.
The delivery of bitumen was delayed due to logistics problem caused
by the Iraq War. Cargo ships were difficult to get and ports were
congested. Deliveries were rerouted and the cargoes were not covered by
insurance. The total risks were borne by the contractors. Most of the
project's materials were sourced from outside Bahrain such as from
the Middle East, Korea, United Kingdom, Malaysia and Singapore. The same
goes for the building fabrics, which had to be sourced from Europe and
sent to Malaysia before the Malaysian subcontractor constructed them in
Bahrain. Other works such as the internal partitions, guardrails and
mechanical and electrical works were also subcontracted to Malaysian
subcontractors.
The third challenge for the project was manpower. As mentioned
above, most specialist work was procured from outside of Bahrain. The
number of foreign general workers from India, Pakistan and Sri Lanka
totalled to about 1000 people. The supervision of both specialist
workers and general workers went well despite there being 3,000-5,000
workers on site at peak times. The inability of workers from India,
Pakistan and Cyprus to understand the English or Arab language forced
the project leaders/managers to be present on-site most of the time to
resolve conflicts and other site issues.
5.5. Project monitoring and other salient factors
Project management is a process which consists of planning,
organizing, scheduling and controlling all aspects of a project and the
motivation of all those involved in it to achieve specific project goals
and objective on time and to the specified cost, quality and
performance. Amongst major problems in construction projects are the
cost overrun and delay. For instance, cost overruns of 25-33% are common
in the construction industry. In order to mitigate the overrun cost and
delay in construction project, project managers need to use effective
and powerful tools and techniques to forecast the status of project
during construction stage. One such method believed to be effective is
the earned value analysis (EVA). According to Fleming & Koppelman
(2002), EVA is the best indicator of future performance and therefore by
using trend data it is possible to forecast cost or schedule overruns at
quite an early stage in a construction project. EVA addresses many
project management areas including project organizing, planning,
scheduling and budgeting, accounting, analysing, reporting and change
controlling (Anbari 2003). The Bahrain FORMULA-1 Circuit project team
applied the EVA methods for project monitoring, by which an EVA flow
chart the project team had attempted to use is illustrated in Fig. 9.
[FIGURE 9 OMITTED]
Cultural differences between partners of an IJV entity can reveal
different management styles and tolerances, which could lead to
misunderstandings, create ambiguities and also mistrust in the
relationship (Daniels and Radebaugh 1998). The Foreign Contractor,
though not Muslims themselves, originated from Malaysia where the
official religion is Islam. In this sense, they were already privy with
the knowledge and subtleties of working within the context of Islamic
practices. For example, meetings will not interfere with the praying
times and small temporary praying facilities were built on site. The
Foreign Contractor's high level of sensitivity for their
partner's religious practices gained the trust and respect from the
Host Contractor's personnel and this consequently produced a good
working relationship between the two parties.
The recognition that the project was on a fast track motion
prompted the Contractors to resort to some tactical decisions in order
to minimize the risks of not delivering the project to the Client on
time. The Contractors announced to the critical materials suppliers that
if they can deliver 75% of the contracted material on time, then they
will be paid in full at that stage. This was a good incentive for the
materials-supply companies to quickly deliver all the required materials
in order to get full payment. In this sense the Contractors needed
strong financial backing from the banks to maintain sufficient working
capital during the course of the project. Financial support was
forthcoming and not a problem due to the fact that both contractors of
the IJV have had a sound and good relationships with the banks during
their previous work in other projects.
6. Conclusions and recommendations for future research
International Joint Ventures (IJVs) are mostly project-specific.
The case study revealed that the success of the BFC project was the
product of several factors, namely: 1) advanced technical and
engineering expertise 2) selection of a committed partner 3) management
expertise 4) creating and sustaining a good working environment 5)
appropriate risk management 6) maintaining a reliable international
materials supply chain, and 7) efficient project planning and tracking
system. Management expertise is considered to be the most important
factor because of the peculiarities and problems of international
projects. This calls for flatter organizational structure implying less
bureaucracy, time and confusion, enabling the IJV to act quickly to
solve problems during the course of the project. The BFC project has
witnessed direct involvement by the top management of the IJV from the
pre-qualification until the commissioning stage. The high levels of
commitment and trust within the top management personnel have given a
positive influence to the working relationship of both parties'
personnel of the joint venture outfit. Apart from the financial gains of
participating in international construction projects, the BFC project
has provided the opportunity for the two contractors to work together
for the first time. This successful endeavor has enabled the IJV to
continuously seek projects within the Middle-East region that is fast
developing in its infrastructure and building projects. Future
researches are recommended to study the universality of those success
factors and the EVA decision flow chart discovered for IJV in
international partnering projects.
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Hamzah Abdul-Rahman (1), Chen Wang (2), Lincoln C. Wood (3), and
Suraya Ismail (2)
(1) International University of Malaya-Wales, Malaysia, (2)
University of Malaya, Malaysia, and (3) Auckland University of
Technology, New Zealand
Addresses:
Hamzah Abdul-Rahman
CEO/President Office
International University of Malaya-Wales
50408, Kuala Lumpur, Malaysia
E-mail:
[email protected]
Chen Wang
Faculty of Built Environment
University of Malaya
50603, Kuala Lumpur, Malaysia
E-mail:
[email protected]
Tel.: +603 7967 6860
Fax: +603 7967 5713
Lincoln C. Wood
Faculty of Business and Law
Auckland University of Technology
Private Bag 92006, Auckland 1142, New Zealand
E-mail:
[email protected]
Suraya Ismail
Faculty of Built Environment
University of Malaya
50603, Kuala Lumpur, Malaysia
Email:
[email protected]
Table 1. Brief information of Bahrain FORMULA-1 Circuit project
Constitute Total of 14
buildings consisting
of Main Grandstand,
Pit Building,
Team Building, Multi
Purpose Building,
Media Centre,
Medical
Centre, VIP-Tower,
Workshop, and other
miscellaneous
buildings.
Total Floor Area 50,526 [m.sup.2]
([m.sup.2])
Roadworks and Paved 302,722 [m.sup.2]
areas Asphalt Pavement
73,166 [m.sup.2]
Concrete Pavement
36,3856 [m.sup.2]
Parking Area (Bricks
and Aggregates)
Electrical Works Main installation of
wires, power
installation,
lighting, power
distribution, fire
alarm system, sound
installation,
telephone
installation and
earthing for all the
buildings and
related external
works.
Mechanical Works Plumbing, drainage,
sanitary fittings,
storm water
disposal, storage
tanks, fire fighting
installation, lift
installation, A/C
installation for all
the buildings and
associated external
works.
Special Electronics Fibre optic network,
UPS, video
surveillance,
digital video
storage, camera
tracing, public
address system,
signalling system,
information
displays, SMATV,
time keeping, race
control management,
access control,
telecommunication,
fault indication
system, security
management system
including all
necessary cabling
and controlling.
Planned Contract Value 56,200,000 Bahrain
Dinars
Actual Contract Value 62,506,728 Bahrain
Dinars
Client Ministry of Works,
Kingdom of Bahrain
Main Contractor WCT Engineering
Planned Duration Berhad, Malaysia
Actual Contract 8th November 2002 to
Duration 5th March 2004 (16
months)
Consultant Tilke and Partners
W.L.L.
Table 2. Facilities in Bahrain FORMULA-1 Circuit project
Facilities Areas ([m.sup.2])
Main Grandstand 20,000
Pit Building 18,000
Multi-Purpose Building 12,000
VIP Tower 7,500
Team Buildings 5,000
Media Centre 1,750
Medical Centre 450
Workshop Building 850
Plant Building 1,000
Entrance Gates (3 buildings) 150
Workers' Lodging Building 450
Table 3. Major quantities of Bahrain FORMULA-1 Circuit project
Major Parts Quantities
Total built up area 65,000 [m.sup.2]
Concrete 70,000 [m.sup.3]
Rock excavation 730,000 [m.sup.3]
Soft excavation 120,000 [m.sup.3]
Track asphaltic works 104,000 [m.sup.2]
Services road asphaltic works 154,000 [m.sup.2]
Asphalt run off 70,000 [m.sup.3]
Gravel run off 65,000 [m.sup.3]
Tensile roofing 31,000 [m.sup.2]
Triple guardrail 12,000m
Single guardrail 6,000m
Table 4. Six different individual tracks in Bahrain FORMULA-1
Circuit project
No. Track Length Width(m) No. of
(km) Turns
1 Grand Prix Track 5.41 14-22 16
(main racing
track)
2 Inner Track 2.55 13-15 8
3 Outer Track 3.664 13-17 10
4 Drag Strip 1.2 18.5 n/a
5 Test Oval 2.5 14-22 n/a
6 Paddock Circuit 3.6 14-22 9
Table 5. Specific goals agreed by Host Contractor and Foreign
Contractor for BFC project
Focus Goals
Cooperation To maximize
cooperation and
mutual trust to
develop a win-win
culture
Conflict To reduce the
administrative costs
and contractual
conflict through
less adversarial
relationships
Errors & To reduce errors and
Wastage wastage on site by
exploring superior
project planning and
construction methods
Time, Cost To reduce the
& Quality overall project
costs and time but
maintain good
quality of
constructed items
Table 6. Constitute of tendering documents
Volumes Items Included
Volume 1 Instructions to
Tenders, Forms of
Contract Agreement,
Conditions of
Contract, and Form
of Tender
Volume 2A Measurement
preamble,
Preliminaries and
Schedule of rates
(Architectural/
Structural and Civil
Works)
Volume 2B Schedule of Rates
for
Electro-mechanical
works
Volume 3A Particular
Specification of
Architectural,
Structural works and
Civil engineering
works
Volume 3B Particular
Specification for
Electro-mechanical
works, special
equipment and spares
Volume 4A Schedule of Drawings
Volume 4B Contract Drawings
Table 7. Competitive bidding records on the public tendering day
No Bidders Basic Basic+C.T.
(Bahrain (Bahrain
Dinars) Dinars)
1 Bidder 1 58,500,000 59,981,174
2 Bidder 2 75,227,475 77,901,761
3 Bidder 3 71,879,237 74,483,770
4 Bidder 4 69,138,122 71,138,122
5 Bidder 5 (win) 56,200,000 58,280,000
6 Bidder 6 64,210,748 65,530,748
7 Bidder 7 59,162,029 61,330,317
8 Bidder 8 78,979,775 81,864,775
9 Bidder 9 61,188,275 63,794,602
No Alt.Addendum- Comments Nation
6 (Bahrain
Dinars)
1 n/a With 10% AP Bahrain
2 57,382,251 With 10% AP UAE
3 n/a n/a Malaysia
4 n/a With 10% AP UAE
5 52,200,000 With 10% AP Malaysia
6 n/a With 10% AP UAE
7 58,473,317 With 10% AP Saudi Arabia
8 n/a With 10% AP Germany
9 61,914,602 With 10% AP Saudi Arabia
Table 8. Sub-cons in Bahrain FORMULA-1 Circuit project
Sub- Sub-Con Work Port of
contractor description Origin
Sub-con 1 Palisade Fencing Bahrain
Sub-con 2 Aluminium & Glazing Bahrain
Works
Sub-con 3 Special Road Works Bahrain
Sub-con 4 Precast Work Bahrain
Sub-con 5 Earthworks, Tyre Bahrain
Barrier
Sub-con 6 Metal Roofing & Stl Bahrain
Cladding, Pit Wall
Gates, Sandwich
Roofing & ISO Clad
Sub-con 7 Track Cleaning Bahrain
Sub-con 8 Miscellaneous Steel Bahrain
Works
Sub-con 9 Ceiling & Partition Bahrain
Works, Wooden Doors,
Supply of Carpet
Sub-con 10 Electro Mechanical Malaysia
Works
Sub-con 11 Steel Door, Supply Bahrain
of Steel Door Frames
Sub-con 12 Drilling of Bore Bahrain
Well, Guardrail
Holes
Sub-con 13 Aluminium & Glazing Bahrain
Works
Sub-con 14 Water Proofing Works Bahrain
(Built Up Roof)
Sub-con 15 Drainage & Sewerage Bahrain
Work
Sub-con 16 Moveable Partition Bahrain
Sub-con 17 Grid Blasting of Bahrain
Concrete Surfaces
Sub-con 18 Landscaping Saudi Arabia
Sub-con 19 Traffic Barriers Bahrain
Sub-con 20 Thermoplastic Bahrain
Seatings
Sub-con 21 Membrane Roofing Malaysia
Sub-con 22 Special Electronics Germany
Package
Sub-con 23 Sectional Overhead Saudi Arabia
Doors, Balustrade &
Railings
Sub-con 24 FIA & Spectators Bahrain
Fence
Table 9. Suppliers in Bahrain FORMULA-1 Circuit project
Supplier Supply Work Port of
description Origin
Supplier 1 Supply & Fabricate Bahrain
of Temporary Toilet
Supplier 2 Supply & Bahrain
Installation of
Guardrail
Supplier 3 Supply & Bahrain
Installation of
Signage
Supplier 4 Supply & Bahrain
Installation of Fuel
Depot
Supplier 5 Supply of Medical Bahrain
Gases & Electrical
Works
Supplier 6 Supply & Bahrain
Installation of
Advertising Panel
Supplier 7 Supply & Erection of Bahrain
RO Plant Steel
Structure
Supplier 8 Supply & Bahrain
Installation of
Chlorinated
Rubberized Road
Marking
Supplier 9 Supply of Carpet Bahrain
Supplier 10 Supply of Steel Door Bahrain
Frames
Supplier 11 Supply & Bahrain
Installation of RO
Plant
Supplier 12 Supply & Bahrain
Installation of
Elevators
