Master thesis Looking at the Public Private Partnerships and the Traditional way of construction of Projects By George Owusu Afriyie The Master’s thesis is carried out as a part of the education at the University of Agder and is therefore approved as such. However, this does not imply that the University answers for the methods that are used or the conclusions that are drawn. Supervisor: Professor Øystein Husefest Meland The University of Agder, Kristiansand 25-05-2010 i Acknowledgements The nature of this work could not be attributed to the effort of the researcher alone. Glory be to God, it would have been next to impossible to write the thesis without the Most High God who gave me the strength, knowledge and wisdom. May His name be praised and glorified now and forever more. I am heartily thankful to my supervisor Professor Øystein Husefest Meland whose encouragement, guidance, moral support and significant role from the initial to the final level enabled me to develop an understanding of the subject and to write this thesis. I really appreciate the advice and services he rendered to me. I could not have imagined having a better advisor like him. I am also indebted to my professors, lecturers, staff and workers at the Faculty of Economics and Business Administration in Agder University for their knowledge sharing and guidance. My deepest gratitude goes to all individual participants who availed themselves to be interviewed in offering their experiences and ideas that made the research a success. Special thanks go to the engineers at Public Roads Administration in Norway and lecturers at the University of Cape Coast in Ghana. I am grateful to my friends and colleagues: Messrs Andrew Mutetu Musau, Kwaku Boateng, Anthony Ansah Asem and Francis Yaw Opoku for their support and for helping me to get through the difficult times. I would like to thank my parents: Owusu Afriyie and Akua Sarpong for providing a loving environment for me. Lastly I owe my deepest gratitude to my dear wife Charlotte Owusu Afriyie and my child Abenaa Owusu Afriyie for their unfailing love, prayers and care. God richly bless you. ii Abstract There has been increasing demand for infrastructure development and service delivery both in developed and developing countries. The traditional way of construction of projects continue to be used in Ghana which results in cost and budget overruns, delays in delivering projects, abandoned projects for lack of finance, lack of quality and increase in the level of corruption among heads and leaders of institutions who see to the implementation of government projects. The study aims to find other possible and relevant alternative in establishing projects and hence look at the Public Private Partnerships (PPP) and the traditional way of construction of projects. The methodology that I used in the research study was more of qualitative approach specifically a case study design in addition to other methods in gathering data which included interviews and documents to obtain enough findings about reasons leading to government projects constructed not within budgets, on time and are of good quality. The theoretical framework of contract model and contracting strategies which dealt with projects delivered on owner`s objectives and goals, guided the data analysis. The study found that the government alone could not deliver effective and valuable deliverables. The traditional construction of projects did not produce deliverables in a timely and cost effective manner. There should be another alternative of construction of project which could reduce the challenges to the barest minimum Hence the research argues for a change in the standard way of construction of projects. With the introduction of Public Private Partnerships in Ghana a developing nation, the private contractor would design, build, finance, operate and transfer the project deliverables to the government. The partner could also supply some public services more effectively, cheaper and more reliably than the public sector. CONTENTS 1. INTRODUCTION ................................................................................................................................................................ 1 1.1 BACKGROUND OF THE PROBLEM ........................................................................................................................................ 3 1.2 STATEMENT OF THE PROBLEM ........................................................................................................................................... 6 1.3 OBJECTIVES OF THE STUDY ................................................................................................................................................ 6 1.4 SIGNIFICANCE OF THE STUDY ............................................................................................................................................. 7 1.5 ORGANIZATION OF THE STUDY .......................................................................................................................................... 7 2. THEORETICAL BACKGROUND .................................................................................................................................... 8 2.1 CONTRACT MODELS AND CONTRACTING STRATEGIES ..................................................................................................... 10 2.1.1 PROJECT DELIVERY AND CONTRACT STRATEGIES NO.1 – PDCS 1: TRADITIONAL DESIGN-BUILD-BID .......................... 11 2.1.2 PROJECT DELIVERY AND CONTRACTING STRATEGIES NO. 7 – PDCS 7: DESIGN-BUILD ................................................. 12 2.1.3 PROJECT DELIVERY AND CONTRACTING STRATEGIES NO. 6 - PDCS 6: CONSTRUCTION MANAGERS @ RISK .................. 13 2.1.4 PROJECT DELIVERY AND CONTRACTING STRATEGIES - PDCS 3: TRADITIONAL WITH PROJECT MANAGER..................... 15 2.1.5 PROJECT DELIVERY AND CONTRACTING STRATEGIES NO. 12 - PDCS 12: FAST TRACK ................................................. 16 2.2 PUBLIC PRIVATE PARTNERSHIPS ...................................................................................................................................... 19 2.2.1 Models of Public Private Partnership ................................................................................................................... 20 2.2.1.1 Service Contracts ........................................................................................................................................... 20 2.2.1.2 Management Contracts .................................................................................................................................. 21 2.2.1.3 Leases ............................................................................................................................................................ 21 2.2.1.4 Build Own Operate Transfer (BOOT) and Build-Operate-Transfer (BOT) ................................................... 22 2.2.1.5 Concessions Contract ..................................................................................................................................... 23 2.2.1.6 Build-Operate-Transfer (BOT) versus Concession ........................................................................................ 23 2.3 HYPOTHESES ................................................................................................................................................................... 24 3. METHODOLOGY ............................................................................................................................................................. 27 3.1 RESEARCH STRATEGY ..................................................................................................................................................... 27 3.2 RESEARCH DESIGN .......................................................................................................................................................... 27 3.3 GAINING ACCESS TO THE FIELD ........................................................................................................................................ 28 3.4 DATA COLLECTION ......................................................................................................................................................... 29 3.4.1. Case Study ............................................................................................................................................................ 31 3.4.2 Interviews .............................................................................................................................................................. 32 3.4.3 Documents ............................................................................................................................................................. 32 3.5 POPULATION AND SAMPLING SIZE.................................................................................................................................... 32 3.6 DATA ANALYSIS ............................................................................................................................................................. 33 3.7 OPERATIONALIZATION OF RESEARCH VARIABLES ............................................................................................................ 34 3.7.1 Dependent Variables and Operational factors ...................................................................................................... 35 3.7.1.1 Delay of project deliverables