Commercial Management of Projects Defining the Discipline

Transcription

1 Commercial Management of Projects Defining the Discipline Edited by David Lowe University of Manchester Assisted by Roine Leiringer University of Reading

2 2006 by Blackwell Publishing Ltd Editorial offices: Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK Tel: +44 (0) Blackwell Publishing Inc., 350 Main Street, Malden, MA , USA Tel: Blackwell Publishing Asia Pty Ltd, 550 Swanston Street, Carlton, Victoria 3053, Australia Tel: +61 (0) The right of the Author to be identified as the Author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. First published 2006 by Blackwell Publishing Ltd ISBN-13: ISBN-10: Library of Congress Cataloging-in-Publication Data Commercial management of projects : defining the discipline / edited by David Lowe ; assisted by Roine Leiringer. p. cm. Includes bibliographical references and index. ISBN-13: (alk. paper) ISBN-10: (alk. paper) 1. Project management. 2. Industrial management. I. Lowe, David. II. Leiringer, Roine. HD69.P75L dc A catalogue record for this title is available from the British Library Set in 10/12.5 pt Palatino by Integra Software Services Pvt. Ltd, Pondicherry, India Printed and bound in India by Replika Press Pvt, Ltd, Kundli The publisher s policy is to use permanent paper from mills that operate a sustainable forestry policy, and which has been manufactured from pulp processed using acid-free and elementary chlorine-free practices. Furthermore, the publisher ensures that the text paper and cover board used have met acceptable environmental accreditation standards. For further information on Blackwell Publishing, visit our website:

3 Contents Contributors Preface Acknowledgements v vii ix 1 Commercial management defining a discipline? 1 David Lowe and Roine Leiringer Part 1: External Milieu 19 Introduction to Part Competition 22 Hedley Smyth 3 Culture 40 Richard Fellows 4 Procurement in the context of commercial management 71 David Langford and Mike Murray Part 2: Corporate Milieu 93 Introduction to Part Corporate governance and shareholder value 100 Marc Goergen and Luc Renneboog 6 Strategies for solutions 132 Andrew Davies and Michael Hobday 7 The effectiveness of marketing spend 155 Christopher Preece, Krisen Moodley and Michael Brown 8 Trust and commercial managers: influences and impacts 172 Will Swan, Peter McDermott and Malik Khalfan 9 Outsourcing 192 Jan Bröchner

4 iv Contents Part 3: Projects Milieu 207 Introduction to Part Management of uncertainty 211 Kalle Kähkönen 11 Conflict management and dispute resolution 234 Peter Fenn 12 Performance measurement 270 Malcolm Horner 13 Value management of complex projects 298 John Kelly Part 4: Project Milieu 317 Introduction to Part The governance of project coalitions towards a research agenda 324 Graham M. Winch 15 Contract management 344 Will Hughes 16 Bidding 356 David Lowe and Martin Skitmore 17 Strategic purchasing and supply chain management in the project environment theory and practice 390 Andrew Cox and Paul Ireland 18 Signals from site embodied logic and management accounting on construction projects 417 Andrew Ross and David Hugill 19 Afterword identifying and defining a new interdisciplinary research agenda for commercial management 440 David Lowe Index 458

5 Contributors Professor Jan Bröchner Michael Brown Professor Andrew Cox Dr Andrew Davies Dr Richard Fellows Dr Peter Fenn Professor Marc Goergen Professor Michael Hobday Professor Malcolm Horner Dr Will Hughes Dr David Hugill Dr Paul Ireland Dr Kalle Kähkönen Department of Service Management, Chalmers University of Technology, SE Gothenburg, Sweden White Young Green plc, Arndale Court, Headingley, Leeds LS6 2UJ, UK Centre for Business Strategy and Procurement, Birmingham Business School, The University of Birmingham, Edgbaston, Birmingham B15 2TT, UK The Innovation Studies Centre, Tanaka Business School, Imperial College, London, SW7 2AZ Faculty of Architecture, Department of Real Estate and Construction, The University of Hong Kong, Pokfulam Road, Hong Kong School of Mechanical, Aerospace and Civil Engineering, The University of Manchester, Manchester M60 1QD, UK Management School, The University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK The CoPS Innovation Centre, The Freeman Centre, The University of Sussex, Brighton, East Sussex BN1 9QE, UK Department of Civil Engineering, The University of Dundee, Nethergate, Dundee DD1 4HN, UK School of Construction Management and Engineering, The University of Reading, Whiteknights, PO Box 219, Reading RG6 6AW, UK EC Harris LLP, The Royal Exchange, Manchester M2 7EH, UK Centre for Business Strategy and Procurement, Birmingham Business School, The University of Birmingham, Edgbaston, Birmingham B15 2TT, UK VTT Building Technology, Technical Research Centre of Finland, PO Box 1800, FIN VTT, Finland

6 vi Contributors Professor John Kelly Dr Malik Khalfan Professor David Langford Dr Roine Leiringer Dr David Lowe Dr Peter McDermott Mr Krisen Moodley Dr Mike Murray Dr Christopher Preece Dr Luc Renneboog Dr Andrew Ross Professor Martin Skitmore Dr Hedley Smyth Dr Will Swan Professor Graham M. Winch School of the Built and Natural Environment, Glasgow Caledonian University, City Campus, Cowcaddens Road, Glasgow G4 0BA, UK Salford Centre for Research and Innovation (SCRI) in the Built and Human Environment, The University of Salford, Bridgewater Building, Salford, Manchester M7 1NU, UK Department of Architecture, The University of Strathclyde, 131 Rottenrow, Glasgow G4 0NG, UK School of Construction Management and Engineering, The University of Reading, Whiteknights, PO Box 219, Reading RG6 6AW, UK School of Mechanical, Aerospace and Civil Engineering, The University of Manchester, M60 1QD, UK Salford Centre for Research and Innovation (SCRI) in the Built and Human Environment, The University of Salford, Bridgewater Building, Salford, Manchester M7 1NU, UK Construction Management Group, School of Civil Engineering, The University of Leeds, Leeds LS2 9JT, UK Department of Architecture, The University of Strathclyde, 131 Rottenrow, Glasgow G4 0NG, UK Construction Management Group, School of Civil Engineering, The University of Leeds, Leeds LS2 9JT, UK CentER, Faculty of Economics and Business Administration, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands School of the Built Environment, Liverpool John-Moores University, Byrom Street, Liverpool L3 3AF, UK School of Construction Management and Property, Queensland University of Technology, 2 George Street, GPO Box 2434, Brisbane Q4001, Australia Construction and Project Management, Bartlett School of Graduate Studies, University College London, Gower Street, (Torrington Place Site), London WC1E 6BT, UK Salford Centre for Research and Innovation (SCRI) in the Built and Human Environment, The University of Salford, Bridgewater Building, Salford, Manchester M7 1NU, UK Operations, Innovation and Technological Management, Manchester Business School, The University of Manchester, Booth Street West, Manchester M15 6PB, UK

7 Preface The term commercial management has been used for some time, not least in construction, while the job title commercial manager can be found across a spectrum of industries, especially those that are predominantly project based, for example, Aerospace, Construction, IT, Pharmaceutical and Telecommunications. Despite this, to date, these terms have no acknowledged definition and, as a direct consequence, there is a paucity of literature categorised as commercial management; this book seeks to address this omission. Commercial organisations increasingly use projects as tools, contributing to the execution of organisational strategies, to address corporate objectives, goals and missions. Based on the fundamental assumption that the key objective for any commercial organisation is to generate profit, commercial issues, and thus commercial management, play an integral part in this. In particular, the commercial management function is vital in linking operations at the project level and multiple projects (portfolios/programmes) at the organisational level with the organisational (corporate) core of the company. The function, therefore, can be found at the interfaces between organisations as well as between divisions within an organisation. Within the context of this book, commercial management is defined as: The management of contractual and commercial issues relating to projects, from project inception to completion. There are compelling arguments for considering commercial management, not solely as a task undertaken by commercial managers, but as a discipline in itself, which bridges traditional project management and organisational theories. While differences in approach and application both between and within industry sectors have been established, sufficient similarity and synergy in practice have been ascertained to identify a specific role of commercial management within project-based organisations. These areas of similarity encompass contract management and dispute resolution, whereas the areas of divergence include a greater involvement in financial and value management within construction and bid management within defence/aerospace. This book aims to present the current state of knowledge concerning the commercial management of projects. It is not a prescriptive text; rather the book focuses on clarifying and reviewing the current understanding, based upon existing research, of a wide range of issues relevant to commercial management practice in project-based industries. Collectively, the chapters constitute a step in the direction of systematic knowledge building: a step towards the creation of a body of knowledge and a

8 viii Preface research agenda for the development of an underlining theory relevant to commercial management. Thus, the book seeks to contribute to the growing literature that sees the necessity of widening project management research to include also the management of project-based organisations, project-based industries and even project-based careers. The book is divided into four parts: The external milieu: The interfaces between the organisation and the environment within which it is active The corporate milieu: The interfaces between the organisation (at a corporate level) and both the projects milieu (the environment within which individual projects collectively reside) in which it is active and external milieu The projects milieu: The environment within which individual projects collectively reside and the interfaces between the corporate level milieu of an organisation and the individual projects in which it is active The project milieu: This last category deals with the interfaces on the specific project. Whilst all the chapters address topics that are common for project-based organisations regardless of industry, most of the chapters are oriented towards construction and use this industry to illustrate specific points. We make no excuses for this as construction could lay claim to be the oldest project-based industry. Indeed, project management literature in general is heavily influenced by studies undertaken in this industry. David Lowe

9 Acknowledgements I would like to thank all those who have contributed chapters to this book: Jan Bröchner, Michael Brown, Andrew Davies, Andrew Cox, Richard Fellows, Peter Fenn, Marc Goergen, Michael Hobday, Malcolm Horner, Will Hughes, David Hughill, Paul Ireland, Kalle Kähkönen, John Kelly, Malik Khalfan, David Langford, Roine Leiringer, Peter McDermott, Krisen Moodley, Mike Murray, Chris Preece, Luc Renneboog, Andrew Ross, Martin Skitmore, Hedley Smyth, Will Swan, Graham M. Winch. Additionally, Peter Fenn has been my sounding board throughout the process of compiling this book, while Roine Leiringer came to my aid at a crucial time. It has been a pleasure working with all of you in the production of this book. I would like to acknowledge and highlight the work of Roine Leiringer. In particular, Roine introduced me to Jan Bröchner, Andrew Davies, and Kalle Kähkönen; drafted the majority of the chapter synopsises that appear in the links between the Parts of the book; read and commented on all chapters; and took the lead in reviewing Chapter 10: Management of uncertainty. Pam Hyde, sometime administrator of the Project Management Division of the Manchester Centre for Civil and Construction Engineering at UMIST, deserves recognition, having helped with the formatting of the text and for aiding and abetting me while I made time to complete the enterprise. To my wife, Ruth, for her patience, love and encouragement: I am indebted. David Lowe

10 Dedication I would like to dedicate this book to Andrew (my stepson) who died suddenly and unexpectedly while this book was being written. David Lowe