Working Papers

Comparing international construction performance

Craig Langston — Wed, 28 Nov 2012 18:32:37 PST

The measurement of construction performance is a vexed problem. Despite much research effort, there remains little agreement over what to measure and how to measure it. The problem is made even more complicated by the desire to benchmark national industry performance against that of other countries. As clearly construction cost forms part of the analysis, the mere adjustment of cost data to an ‘international currency’ has undermined past attempts to draw any meaningful conclusions. This paper proposes a new method for comparing international construction performance, and in so doing integrates cost with time and quality to determine ratios capable of ranking projects, building contractors, cities and even entire industries – not only today, but retrospectively over time.

The aim in this paper, therefore, is to outline the new model and test it using what is understood to be one of the largest samples of construction project data ever assembled across two sample countries: Australia and the United States. The research comprises 337 high-rise projects of 20 storeys or more, completed between 2003 and 2012, throughout the five largest cities in Australia and the United States and representing two-thirds of the known population of such buildings in these locations. The ensuing analysis not only demonstrates the practical application of the model, but provides new insight into the efficiency track-record of the construction industry in Australia and the United States by city over the last decade.

Cost is measured as the number of standard ‘citiBLOC’ baskets necessary to construct a project, where a standard basket comprises common and globally-applicable construction items priced in each city in local currency, removing the need to apply currency exchange rates that otherwise introduce volatility and erroneous outcomes. Time is measured as the quantity of finished gross floor area completed per month, inclusive of delays related to the construction process on site. Quality is measured as a function of unit price and implicitly includes factors such as complexity, innovation, building height, extent of fit-out, environmental performance, compliance, standard of finish and supervision levels. Construction efficiency is extracted and defined as the ratio of construction cost per month, and is used to comment on the relative performance of the procurement process in different locations.

It is concluded that, based on data from the largest five cities in each country, efficiency on site is improving in both countries. The growth in baseline cost/m² suggests a possible rise in project complexity over time. While the trend in efficiency improvement is similar, there is evidence that base costs in Australia have outstripped the United States, meaning that ‘real’ construction efficiency in Australia is relatively less. If Australia held an advantage in the past, then it seems that advantage might be disappearing. Notwithstanding the larger number of projects found in the United States (251) compared to Australia (86), the top 10 US performers in terms of construction efficiency have higher scores that the top project found in Australia, and the reasons underpinning this clearly demand future project-level investigation.

Public private partnership units

Michael Regan — Wed, 13 Jun 2012 22:20:20 PDT

Public private partnerships (PPPs) are an alternative method for government procurement of infrastructure and are employed widely throughout the world to delivery better procurement performance and improved delivery of public goods and services. As a specialised form of procurement for delivering large, complex and highly networked infrastructure assets, PPPs require enabling policy frameworks, expertise in the selection, analysis, negotiation and delivery of projects and a good understanding of long-term contract management. In developed and developing countries, PPP policy is managed by PPP units formed within a central policy-making agency of government. PPP units require experience and technical skills across a number of disciplines, personnel must possess a good understanding of commercial issues and capital markets, and the unit must work collaboratively with line agencies to achieve PPP policy objectives.

This paper surveys international best practice for PPP units and finds that the effectiveness of PPP programs is improved with a well-designed PPP unit located in Treasury or a major agency of government and which is equipped with a wide charter, highly-skilled procurement specialists with strong transactional experience. The major challenges for the PPP unit include building capacity within government, cultivating a competitive bid market, developing a project pipeline, provide oversight and assistance to agencies and serve a technical support role within government. Countries that can design their PPP agencies to meet these objectives are more likely to have an effective PPP program than those countries that do not.

Contextual assessment of women empowerment and its determinants: Evidence from Pakistan

Safdar Ullah Khan et al. — Sun, 18 Dec 2011 18:11:15 PST

The main objective of this study is to evaluate women empowerment in different contexts of family planning and economic decision making within the household. Further this paper investigates its appropriate determinants sifting through sociology resource control theory and economic bargaining theory by controlling for socio-cultural intervening factors. We examine this empirically by utilizing extensive micro level data information (15,453 households) from ‘Pakistan Social and Living Standards Measurement Survey’ (PSLM) for the year of 2005-06. Results suggest the presence of highly constrained and largely dichotomous empowerment within the household. Interestingly, we find that the number of children however not the sex of a child relevant in enhancing women’s empowerment. Further, the common determinants of empowerment depict varying degree of effectiveness depending on the specific context of empowerment. Moreover, socio-economic, level of education and employment status of a woman depict as effect modifier factors across the empowerment contexts and regions. Furthermore, geographic divisions within Pakistan, significantly explain the contextual empowerment of women.

Increasing serving size increases amount consumed: Catch-22.

Natalina Zlatevska et al. — Thu, 15 Dec 2011 22:33:16 PST

The effect of serving size on consumption is well-established (see Chandon and Wansink, 2011 for a review). The larger the serve, the greater the amount consumed. However, little attention has been given to quantifying the serving size effect. We know that size influences volume consumed, but by how much? The present research used a meta analysis of 67 studies, and a combined N of 2792 respondents, to determine the relative effect of serving size on consumption volume (d=.47). More importantly, we extended our analysis to determine the absolute size of the effect: we found that a doubling of serving size increases consumption by 22%. Finally, we show that the serving size effect is larger among adults than children.

Sharpening the blue pencil in Australian Consumer Law: The striking out of unfair contract terms in land transactions

Annette Greenhow — Wed, 06 Jul 2011 16:54:24 PDT

In Australia, like many other jurisdictions, principles of fairness and transparency underpin modern consumer protection laws applying to traditional consumer transactions. These laws had, until recently, focused on those transactions involving the supply of goods or services for personal, domestic or household use, and in the case of the supply of goods, to personal property transactions. An overriding objective of consumer protection law is to shore up the bargaining position so that the perceived weaker party has access to greater rights of redress should the stronger party seek to exploit that weakness.

The commencement of the new Australian Consumer Law (ACL) on 1 July 2010 has introduced a single generic consumer law applying across Australia and has extended the blue pencil principle to Unfair Contract Terms (UCT) in land transactions. The ACL interferes with the contractual terms between the parties involved in a standard form consumer contract by declaring void those terms that fail to meet the ‘fairness test’, severing the unfair term from the contract.

This paper questions whether such an extension is justified in circumstances where existing protection is already provided under the common law, in equity and transparency principles integrated in real property laws supporting those ‘consumers’ involved in land transactions. It also questions whether the new UCT provisions could be open to abuse by unmeritorious parties seeking to avoid otherwise binding contractual obligations.

A comparative study is undertaken of the current consumer protection and real property laws of Singapore and whether the standard form consumer land contracts in those jurisdictions would meet the UCT ‘fairness test’ under the ACL.

The growth effects of corporate and personal tax rates in the OECD

Norman Gemmell et al. — Sun, 29 May 2011 17:22:09 PDT

Recent aggregate tests of the impact of taxes on long-run growth rates in the OECD countries remain vulnerable to two important criticisms. First, they typically use 'an aggregate average rate, or constructed marginal rate, that probably does not affect the rate that any particular economic decision maker is facing' (Myles, 2007, p.89). Second, despite increased testing of corporate tax effects, the models examined are essentially 'closed economy' in nature, yet corporate tax effects appear increasingly to operate via international competition for firms, profits and investment. This paper confronts both these criticisms with new data and new methods. Based on an open economy model, we propose a method for testing how far both domestic corporate tax settings, and those in competitor countries, affect individual countries' aggregate long-run growth rates. This predicts asymmetric effects between 'high tax' and 'low tax' competitor countries. We then use annual panel data on statutory tax rates (both personal and corporate), and effective average and marginal corporate tax rates, to test for these tax-growth effects in a small sample of similar OECD countries. Unlike most previous studies, these are not constructed from data on tax revenues. We find evidence that:
(i) using the best available exogenous tax rates, there is evidence of statistically robust, but economically small, GDP growth effects from changes in marginal rates of both personal and corporate income tax;
(ii) domestic and foreign corporate tax rates (statutory and/or effective) have affected OECD growth rates in the asymmetric manner predicted by theory;
(iii) 'bucking the OECD trend' towards lower corporate tax rates is likely to be growth-retarding, but joining it is likely to be approximately growth-neutral.
(iv) tax effects on growth appear to operate largely via impacts on factor productivity rather than factor accumulation.

A diagnosis of inherent problems in implementing internal marketing in Macau and Singapore casino companies

Sudhir H. Kale et al. — Sun, 29 May 2011 16:54:31 PDT

With spectacular growth in demand since opening the market to foreign competition, executives within the Macau casino industry seem to have focused their attention to enhancing capacity and opening new casino properties. Meanwhile, the Singapore casino market is expected to overshadow that of Las Vegas in the very near future. Despite such optimistic prognosis, the long-term scenario for the casino industry in both jurisdictions could spell trouble. It seems most casino operations in major Asian markets have not devoted adequate thought to their service culture and internal marketing strategy. With overall capacity in Asia slated to increase significantly in the next couple of years, the labour shortage for casino companies in Macau and Singapore will get more acute. Current impressive revenues notwithstanding, increased capacity will also put pressure on marketing to attract and retain valued customers. In light of these developments, we review five key challenges to internal marketing practices for casinos in Macau and Singapore: culture, climate, recruitment, compensation and training.

The role of culture on new product development decisions

Sudhir H. Kale — Sun, 29 May 2011 16:27:33 PDT

This study investigates the effect of culture on the evaluation of new products. We contrast decision-making outcomes between East Asians and Westerners. East Asians tend to view the future as dynamic, nonlinear, and changeable and do not emphasize immediate gain and loss. In contrast, Westerners believe that the future is static, linear, and predictable and pay more attention to the past and present. We hypothesize that given a poor performance forecast, East Asians are more likely than their Western counterparts to continue a new product whereas Westerners are more likely to halt development. However, providing future market demand information moderates the cultural biases in new product development (NPD) decisions. Participants are more likely to continue a new product when informed that the future market demand would be good and tend to stop a new product when informed that the future market demand would be bad.

Cultural differences in imagery generation: the influence of abstract versus concrete thinking

Beichen Liang et al. — Sun, 29 May 2011 16:11:41 PDT

Past research suggests that concrete ad stimuli generate more imagery than abstract stimuli. However, this finding may not be culturally universal. Our research suggests that East Asians tend to generate more imagery than Westerners when exposed to abstract advertising messages, but these differences in imagery generation tend to subside when both cultural groups are exposed to concrete stimuli. Exposure to abstract stimuli while limiting mental resources results in narrowing the differences in number of images generated by Westerners and East Asians as does providing subjects with instructions to imagine.

How an export boom affects unemployment

Noel Gaston et al. — Tue, 01 Feb 2011 20:59:23 PST

Does trade affect the equilibrium rate of unemployment? To theoretically examine this question, we incorporate firm-union bargaining considerations into a model with a booming external sector and a stagnating manufacturing sector. In the model, a sustained improvement in the terms of trade lowers unemployment. To empirically investigate the predicted determinants of the unemployment rate, we use data for Australia, a country whose prosperity has always depended on the value of its exports. Both the reduced form and the structural estimates reveal strong evidence that higher export prices, capital accumulation in tradeable goods industries and lower unemployment benefits reduce the equilibrium unemployment rate.