Evaluating the project success index of public-private ...

Construction Innovation Evaluating the project success index of public-private partnership projects in Hong Kong: The case of the Cross Harbour Tunnel Robert Osei-Kyei, Albert P.C. Chan,

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Evaluating the project success index of public-private partnership projects in Hong Kong

Project success index of PPP projects in Hong Kong

The case of the Cross Harbour Tunnel Robert Osei-Kyei and Albert P.C. Chan Downloaded by Western Sydney University Library At 05:20 24 May 2018 (PT)

Department of Building and Real Estate, Hong Kong Polytechnic University, Hong Kong

Received 4 August 2017 Revised 3 November 2017 18 December 2017 Accepted 23 March 2018

Abstract Purpose – Since 1960, many public–private partnership (PPP) projects have been implemented in Hong Kong. Some projects have been considered as very successful, whereas others are seen as less successful. Unfortunately, these success outcomes have remained abstract because they are not in quantifiable terms. This paper aims to develop a model that can quantify the success outcome of PPP projects in Hong Kong. Design/methodology/approach – Both quantitative and qualitative research approaches were adopted for the study. First, a questionnaire survey was conducted with PPP practitioners in Hong Kong, and thereafter, the fuzzy synthetic evaluation technique was used to develop a project success index for PPP projects in Hong Kong. The Hong Kong Cross-Harbour Tunnel project was used as a case study to demonstrate the applicability of the pragmatic model. Findings – The success index model developed consists of four unrelated success criteria groupings: cost effectiveness, quality of services and technical specification, environmental impact and long-term partnership. Further, the computed success index for the Cross-Harbour Tunnel project is 4.06, which indicates that the tunnel project has been highly successful. Originality/value – The outputs of this study will enable PPP practitioners in Hong Kong to reliably evaluate the success levels of their projects. In addition, local practitioners can now compare the success levels of two or more PPP projects on the same basis.

Keywords Hong Kong, PPP, Public–private partnerships, Fuzzy synthetic evaluation, Cross-Harbour Tunnel, Project success index Paper type Research paper

1. Introduction During the past couple of decades, the public–private partnership (PPP) concept has gained much popularity in Hong Kong (Cheung and Chan, 2011; Cheung et al., 2012). Although, the PPP ideology is not completely new in Hong Kong, the term may seem unfamiliar among practitioners (Cheung and Chan, 2011). This is because since the early 1960s, build-operatetransfer (BOT) has been the widely adopted form of public–private arrangements for many public facilities (Mak and Mo, 2005). It was until 2000 that the government introduced the PPP concept after its success in the western Europe and America (Cheung and Chan, 2011; Li et al., 2005a). The Efficiency Unit is the official government institution responsible for promoting the PPP concept (Efficiency Unit, 2008). Over the years, the unit has issued many constructive and informing PPP guidelines, which draw experiences from the UK and Australia (Efficiency Unit, 2007). Many public projects have been implemented in Hong Kong using the traditional BOT and the contemporary PPP modalities (Tam, 1999; Shen et al., 2006). In essence, public

Construction Innovation © Emerald Publishing Limited 1471-4175 DOI 10.1108/CI-08-2017-0067


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projects procured using the traditional BOT were implemented between 1960 and 1995 (Mak and Mo, 2005). Some of these projects include the Cross-Harbour Tunnel (CHT), Western Harbour Crossing, Eastern Harbour Crossing and Tate’s Cairn Tunnel (Tam, 1999; Kumaraswamy and Zhang, 2001). Further, public facilities that have been procured using the contemporary PPP models include Hong Kong Disneyland Theme Park, Asia World Expo, Cyber Port project and Kwun Tong rail extension (Chan et al., 2009). Essentially, most of the BOT/PPP projects implemented in Hong Kong have received mixed evaluations from researchers, social and policy commentators and the general public (Kumaraswamy and Zhang, 2001; Shen et al., 2006; Cheung et al., 2012). Importantly, some projects have been evaluated as very successful, whereas others have been seen as less successful (Chan et al., 2010). Unfortunately, these success evaluations have remained abstract because they are not in quantifiable terms. Emphatically, putting into quantifiable term, the success outcome of PPP projects is more beneficial and appropriate because it will ensure reliable comparison of the success levels of two or more projects on the same basis (Osei-Kyei et al., 2017). In this regard, there is the need to develop a pragmatic tool that can quantify the abstract concept of PPP projects success in Hong Kong and developed economies in general. As part of a larger research project that seeks to develop a best practice framework for PPP projects, this paper aims to develop a substantive model that can quantify the success of PPP projects in Hong Kong. Further, to demonstrate how the pragmatic success evaluation model could be used in real-life situation, the Hong Kong’s CHT project is used as a case study. The CHT project is chosen as a case study because it is the first implemented BOT/PPP project in Hong Kong and among the first in Asia-Pacific (Tam, 1999). Also, the CHT project has completed its entire lifecycle as a BOT/PPP project, hence was suitable for demonstration. Finally, it has readily available information compared to other projects in Hong Kong. Practitioners in Hong Kong and other developed economies can use the project success index (PSI) model to reliably evaluate the success levels of their projects. Further, the success levels of two or more PPP projects can now be compared on the same basis for benchmarking purposes. Also, researchers can use the PSI model to quantify the performance of PPP projects in Hong Kong and other developed economies from different stakeholders’ perspective. 2. Review of pertinent literature on developing project success/performance index model Over the years, many studies have developed PSI or performance index models for construction projects by using different methodological approaches. The outputs of these studies seek to enable practitioners to calculate the success/performance index of their projects in a more objective and reliable manner. Unfortunately, many of the past studies have focused on the traditional bid-build projects, with very few, if any, focusing on PPP projects, particularly in Hong Kong or developed economies. For instance, Yeung et al. (2007), by means of a Delphi survey on experts, developed a partnering performance index for construction projects in Hong Kong. The authors adopted the normal weighted method to derive an index in a linear equation form. Their performance index model consists of seven critical performance criteria: time performance, cost performance, top management commitment, quality performance, trust and respect, effective communications and innovation and improvements. Using the same methodological approach adopted by Yeung et al. (2007), Yeung et al. (2009) developed a success index model for relationship-based projects in Australia. Their


model consists of eight critical success criteria (CSC): client’s satisfaction, cost performance, quality performance, time performance, effective communications, safety performance, trust and respect and innovation and improvement. Also, Ahadzie et al. (2008), by means of a questionnaire survey on construction professionals in the housing industry, used the normal weighted method to derive a success index for mass housing building projects in Ghana. In essence, their success index was expressed in a linear equation form for easy application by practitioners. Their model consists of four critical groupings of success criteria for mass housing building projects: environmental safety, customer satisfaction, quality and cost and time. Furthermore, Lam et al. (2007), through a structured questionnaire survey on experts, used the principal component analysis technique to develop a PSI for design and build (D&B) projects in Hong Kong. Similar to previous studies, the authors expressed their index in a linear equation form for easy interpretation and application. Their success model consists of four CSC for D&B projects: time, cost, quality and functionality. Finally, Hu et al. (2016), also through a Delphi survey, developed a program organization performance index for construction megaprojects in China. The authors adopted a fuzzy approach to derive weights and then expressed their index in a linear equation form. Their model consists of four performance criteria: time performance, cost performance, functionality and quality performance and occupational health and safety performance. Apparently, the above brief review of studies on project success/performance index for construction projects shows the wide use of the normal weighted method. Very few researchers adopted advanced and more objective techniques such as the fuzzy synthetic evaluation (FSE) to develop performance/success index. More importantly, very few research studies focused on PPP projects, particularly in Hong Kong. Considering the fact that PPP practitioners need to evaluate the success outcome of their projects, there is a need to develop a success index for PPP projects particularly in Hong Kong and other developed economies where more projects have been implemented. This study therefore seeks to bridge the knowledge gap. 3. Research methodology This study adopted a comprehensive literature review, empirical questionnaire survey and detailed case study. This approach follows a similar method adopted by Hu et al. (2016). Figure 1 shows a flow chart of the research framework for clarification. 3.1 Identifying the success criteria for public–private partnership projects From a thorough and comprehensive review of literature on the performance indicators, performance measures and performance objectives of PPP projects, Osei-Kyei et al. (2017) developed a set of 15 success criteria for PPP projects. This effort formed part of a larger PhD project that aims to develop the best practice framework for PPP implementation in Ghana drawing on experiences from Hong Kong. The set of success criteria was pretested with two experts with adequate industrial and/or research experiences in PPPs from Hong Kong (Osei-Kyei and Chan, 2017a). The experts confirmed the adequacy and applicability of the criteria within the context of Hong Kong (Osei-Kyei and Chan, 2017a). Table I shows the set of 15 success criteria. 3.2 Developing a fuzzy project success index model for public–private partnership projects in Hong Kong 3.2.1 Questionnaire survey. An empirical questionnaire survey was conducted in Hong Kong with experienced PPP practitioners and researchers. The questionnaire requested


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Literature Review: Identifying the success criteria for PPP

Development of the Fuzzy PSI model for PPP projects in Hong Kong

Empirical questionnaire survey in Hong Kong Selection of Critical Success Criteria and Critical Success Criteria Groupings for PPP projects in Hong Kong


Fuzzy PSI model for PPP projects in Hong Kong Application of the PSI model for PPP projects in Hong Kong

Figure 1. Overall research framework of this research study

A case study of the Cross Harbour Tunnel Project

PSI for the Cross Harbour Tunnel Project Conclusions

respondents to rate on a five-point Likert scale (i.e. 1 = least important; 5 = extremely important) the importance of each success criterion as applied in Hong Kong. Experts were selected based on a two-stage sampling approach (Osei-Kyei and Chan, 2017b). First, initial potential respondents were selected using pre-defined criteria (i.e. purposive sampling method). The criteria were that respondents should have general knowledge on PPP practice and should have followed very closely to PPP development in Hong Kong and respondents should have adequate hands-on (at least one project) experience and/or research experience in PPP practice in Hong Kong (Osei-Kyei and Chan, 2017b). In the second stage, the respondents identified were requested to suggest some potential colleagues who may be interested to participate in this study (i.e. snowballing sampling method). Apparently, most of the suggested potential respondents agreed to participate in the study and were therefore added to the final list of respondents (Osei-Kyei and Chan, 2017b). In total, 87 potential respondents were identified from private sector organizations, publications on PPP that focus on Hong Kong and public sector organizations that have expressed strong interest in PPP in Hong Kong (e.g. Housing Authority, Efficiency Unit and Highways Department). Questionnaires were sent to potential respondents by email, with the option of answering the questionnaire through the “Survey Monkey” online questionnaire platform. Overall, 26 responses were received, and this represents a response rate of 29.89 per cent (Osei-Kyei and Chan, 2017a). Essentially, both the response rate and sample size are very low; however, they are considered reasonable and satisfactory for further analysis when compared with past related studies, including those by Cheung et al. (2012, 2009) (34 responses) and Javed (2013) (18 responses). Further, the low response rate and sample size are attributed to the use of online survey, which is known to produce very low response rate compared to other approaches such as face-to-face surveys (Szolnoki and Hoffmann, 2013). These notwithstanding, the respondents possess rich industrial and/or research experience in PPP in Hong Kong (Table II), therefore rendering the authenticity and reliability of the survey responses for further analysis.

Success Criteria

Deftscriptions

Profitability

X A continuous income/profit is received by parties during project operation Cordial relationship and wellestablished coordination are instituted among stakeholders An implemented PPP project satisfies fully the need for a public facility/ service Project is constructed on/before time schedule for commissioning X Project is constructed according to the estimated cost and it is without any operational cost overruns Contract litigations and disputes are X X minimized throughout the project lifecycle Lower cost is incurred by the public X sector in the administration of the project because major project risks are allocated to the private sector Technical knowledge and innovation are effectively shared among stakeholders particularly with local practitioners Project contributes to the economic X development of the community within which the project is developed Project does not affect the health and X X X safety of occupants or the environment Lower life cycle cost is realized, which enhances the project’s value for money Continuous and uninterrupted project X services are provided and according to the satisfaction of users Project meets the expected output X standards/requirements and delivery Risks are properly identified. The risk sharing and transfer mechanism are agreed and effectively implemented by the public and private parties The reduction of agitations and X protests which often arise due to increases in tariffs, lack of transparency, corruption etc

Long-term relationship and partnership Satisfying the need for public facility/service Adherence to time


Sources 1 2 3 4 5 6 7 8 9 10 11 12 13

Adherence to budget Reduced litigations and disputes Reduced public sector administrative cost Effective technology transfer and innovation Local economic development Environmental performance Reduced project life cycle cost Reliable and quality service operations Meeting output specifications Effective risk management Reduced public and political protests

X


X X X X X X

X

X

X

X X X X X

X

Sources: 1 = Lam and Javed (2015), 2 = Chan and Chan (2004), 3 = Meng et al. (2011), 4 = Zhang (2006a), 5 = Cheung et al. (2000), 6 = Chan et al. (2002), 7 = Zhang (2006b), 8 = Dixon et al. (2005), 9 = Liyanage and Villalba-Romero (2015), 10 = Li et al. (2005b), 11 = Mladenovic et al. (2013), 12 = Liu et al. (2015), 13 = Yuan et al. (2009)

Table I. A set of 15 success criteria for PPP projects (Osei-Kyei et al., 2017)


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Table II. Profile of PPP experts from Hong Kong (Osei-Kyei and Chan, 2017b)

Table III. CSC for PPP projects in Hong Kong

3.2.2 Selecting the critical success criteria and critical success criteria groupings (CSCGs) for public–private partnership projects in Hong Kong. The mean score analysis is used to rank the success criteria for PPP projects in Hong Kong. Table III shows the scores and ranking of the success criteria. Further, to determine the CSC among the list, the range normalization method was used (i.e. normalized value = [actual value – min. value]/[max. value min. value]). This is whereby variable/s (i.e. success criterion) with a normalized value equal to or above 0.50 is considered critical (Chan et al., 2014; Osei-Kyei and Chan, 2017c). Importantly, this approach of selecting significant and critical factors has been used by many researchers, including Xu et al. (2010a); therefore, it was considered suitable for selecting the CSC. As shown in Table III, ten success criteria emerged as critical because they have normalized values equal to or above 0.50. They include (descending order); adherence to budget (CSC1), adherence to time (CSC2), effective risk management (CSC3), meeting output specifications (CSC4), reliable and quality service operations (CSC5), reduced project lifecycle cost (CSC6), reduced public sector administrative cost (CSC7), satisfying the need for public facility/service (CSC8), long-term relationship and partnership (CSC9) and environmental performance (CSC10). After identifying the CSC, they are then put into various categories based on their related characteristics and features in PPP projects. Apparently, the factor analysis technique would have been the appropriate method for grouping the ten CSC into major unrelated

Characteristics

No.

(%)

Sector of PPP Industrial practitioners Academic Total

20 6 26

76.92 23.08 100

Years of industrial and/or research experience 5 years and below 6-15 years 16 years and above Total

9 13 4 26

34.60 50.00 15.40 100

Success criteria

N

Mean

Normalization values

Adherence to budget Adherence to time Effective risk management Meeting output specifications Reliable and quality service operations Reduced project life cycle cost Reduced public sector administrative cost Satisfying the need for public facility/service Long-term relationship and partnership Environmental performance Profitability Reduced public and political protests Reduced litigations and disputes Effective technology transfer and innovation Local economic development

26 26 26 26 26 26 26 26 26 26 26 26 26 26 26

4.42 4.35 4.27 4.15 3.88 3.69 3.54 3.46 3.42 3.38 3.31 3.08 2.58 2.38 2.23

1.00 0.97 0.93 0.88 0.76 0.67 0.60 0.56 0.54 0.53 0.49 0.39 0.16 0.07 0.00


categories; however, the sample size is not sufficient and adequate for conducting the factor analysis technique (Osei-Kyei et al., 2014; Li et al., 2005a). In this regard, drawing on literature (for e.g. Chan and Chan, 2004; Ahadzie et al., 2008; Lim and Mohamed, 1999; AlTmeemy et al., 2011), the ten CSC are grouped into four unrelated categories: environmental impact (CSCG1), cost effectiveness (CSCG2), quality of service and technical specifications (CSCG3) and long-term partnership (CSCG4). Each major grouping consists of one or more CSC: CSCG1 consists of CSC10, whereas CSCG2 consists of CSC1, CSC7, CSC6, CSC3 and CSC2. CSCG3 also comprises CSC5, CSC4 and CSC8. Finally, CSCG4 consists of CSC9. Importantly, the four major groupings are believed to be suitable and appropriate to represent the ten CSC for PPP projects in Hong Kong. 3.2.3 Application of the fuzzy synthetic evaluation modeling. FSE is a branch of fuzzy set theory which has been used by many researchers in different disciplines, including human resource management, health assessment, construction megaprojects, risk assessment in PPP projects and partnering construction projects, to quantify multi-evaluations and multiattributes (Zadeh, 1965; Hsu and Yang, 1997; Hu et al., 2016; Xu et al., 2010a; Sadiq and Rodriguez, 2004). It is an analytical tool that objectifies the subjective judgement inherent in human decision-making (Ameyaw and Chan, 2015). For more basic details of FSE and fuzzy theory, interested readers should refer to Li et al. (2013), Ameyaw and Chan (2015) and Liu et al. (2013). Essentially, the FSE technique was used as the main tool in this study to derive indices for the CSCGs, which are then used to formulate a PSI for PPP projects in Hong Kong. This tool was considered more appropriate and suitable to derive indices (i.e. weightings) for the CSCGs because it takes into consideration the fuzziness in the assessment of the success criteria by the experts (Osei-Kyei and Chan, 2017c). Further, it produces a more objective index (i.e. weighting) compared to the normal weighted method often used by many researchers (Yeung et al., 2009; Xu et al., 2010b; Ahadzie et al., 2008). Drawing on the explanation given by Xu et al. (2010b) and Liu et al. (2013), the FSE modeling is demonstrated in subsequent sections. 3.2.3.1 Determine the appropriate weightings for each critical success criteria and critical success criteria groupings for public–private partnership projects in Hong Kong. In FSE modeling, the first step is to determine the weightings of factors/groupings. To determine the weightings, the following equation is used (Xu et al., 2010a): Wi ¼

X Mi ; 0 # Wi # 1; Wi ¼ 1 5 X Mi

(1)

i¼1

where Wi is the weighting; Mi is the mean score of a particular criterion or factor component; X and Wi is the summation of mean ratings. Using equation (1), the weightings for each CSC and CSCG are calculated and are shown in Table IV. 3.2.3.2 Determine the membership functions of each critical success criteria and critical success criteria groupings for public–private partnership projects in Hong Kong. In a fuzzy environment, membership function refers to the degree or extent of an element’s membership in a fuzzy set, and they fall within the range of 0 to 1 (Ameyaw and Chan, 2015). In most situations, it is appropriate to label the levels at which membership functions are


CI ID

Success criteria

CSC1 CSC7

Adherence to budget Reduced public sector administrative cost Reduced project life cycle cost Effective risk management Adherence to time

CSC6 CSC3 CSC2


CSCG2 CSC5 CSC8 CSC4 CSCG3

Table IV. Weightings for CSC and CSCGs for PPP projects in Hong Kong

CSC10 CSCG1 CSC9 CSCG4

Cost effectiveness Reliable and quality service operations Satisfying the need for public facility/service Meeting output specifications Quality of service and technical specifications Environmental performance Environmental impact Long-term relationship and partnership Long-term partnership Total CSCGs

MS for CSC

Weightings for each CSC

4.42 3.54

0.22 0.17

3.69 4.27 4.35

0.18 0.21 0.21

3.88

0.34

3.46

0.30

4.15

0.36

3.38

1.00

3.42

1.00

Total MS for each CSCG

Weightings for each CSFG

20.27

0.53

11.50

0.30

3.38

0.09

3.42 38.58

0.09

derived. In this study, the membership functions are derived from Levels 2 to 1. Level 2 represents the CSC, whereas Level 1 represents the CSCGs. Therefore, the membership functions of the CSC are derived first, before calculating for the membership functions of the CSCGs. The membership functions at Level 2 (i.e. CSC) are derived from the ratings furnished by the experts given the grades of selection (i.e. e1 = least important; e5 = extremely important). Using CSC10 as an example, its ratings by experts are 0, 8, 46, 46 and 0 per cent for e1 (least important), e2 (fairly important), e3 (important), e4 (very important) and e5 (extremely important), respectively. Therefore, the membership function for CSC10 is computed as follows: MFCSC10 ¼

0:00 0:08 0:46 0:46 0:00 þ þ þ þ e1 e2 e3 e4 e5

(2)

This function is also expressed as (0.00, 0.08, 0.46, 0.46, 0.00). In a similar manner, the membership functions for the remaining CSC are determined (Table V). After deriving the membership functions at Level 2, the membership functions at Level 1 (i.e. CSCGs) can now be calculated. To derive the membership functions at Level 1, the following equation is used (Xu et al., 2010a): D ¼ Wi Ri

(3)

where Wi is the weightings of all CSCs within each CSCGs and Ri is the fuzzy evaluation matrix. Using quality of service and technical specifications (CSCG3) as an example, its membership function is calculated as:

1.00 1.00

CSCG4 Long-term partnership CSC9 Long-term relationship and partnership

0.34 0.30 0.36

Quality of service and technical specifications Reliable and quality service operations Satisfying the need for public facility/service Meeting output specifications

CSCG3 CSC5 CSC8 CSC4

CSCG1 Environmental impact CSC10 Environmental performance

0.22 0.17 0.18 0.21 0.21

Cost effectiveness Adherence to budget Reduced public sector administrative cost Reduced project life cycle cost Effective risk management Adherence to time

CSCG2 CSC1 CSC7 CSC6 CSC3 CSC2

Weightings for CSC

CSC and CSCGs

ID

0.00

0.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.04

0.08

0.00 0.00 0.04

0.00 0.04 0.00 0.00 0.00

0.50

0.46

0.27 0.04 0.46

0.15 0.46 0.35 0.04 0.12

0.46

0.46

0.58 0.77 0.50

0.27 0.42 0.62 0.65 0.42

0.00

0.00

0.15 0.19 0.00

0.58 0.08 0.04 0.31 0.46

Membership Functions for Level 2

0.00

0.00

0.00

0.00

0.04

0.08

0.01

0.01

0.50

0.46

0.27

0.21

0.46

0.46

0.61

0.47

0.00

0.00

0.11

0.31

Membership Function for Level 1(CSCGs)



Table V. Membership functions for all CSC and CSCGs for PPP projects in Hong Kong

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MFðCSCG3Þ

0:34 ¼ 0:30 0:36

0:00 0:00 0:00

0:00 0:27 0:58 0:00 0:04 0:77 0:04 0:46 0:50

0:15 0:19 ¼ ð0:00; 0:01; 0:27; 0:61; 0:11Þ 0:00


Using the same approach, the membership functions for the remaining CSCGs are calculated and are shown in Table V (last column). The final step in the FSE modeling is to defuzzify the membership functions at Level 1 (i.e. CSCGs) to aid in decision-making (Ameyaw and Chan, 2015). Further, the defuzzification of membership functions of the CSCGs produces the PSI for each grouping, which is then used to derive the overall PSI for PPP projects in Hong Kong. To defuzzify the membership functions of each CSCG, the following equation is used (Hu et al., 2016): PSI for each CSCG ¼

5 X

De

(4)

i¼1

where e is the set of grade alternatives (i.e. 1: least important; 5: extremely important). For example, the PSI for cost effectiveness (CSCG2) is calculated as: CSCG2 ¼ ð0:00; 0:01; 0:21; 0:47; 0:31Þ x ð1; 2; 3; 4; 5Þ ¼ 4:08 In a similar approach, the PSIs for the remaining CSCGs are determined as follows (Table VI): PSIðCSCG3Þ ¼ ð0:00; 0:01; 0:27; 0:61; 0:11Þ x ð1; 2; 3; 4; 5Þ ¼ 3:82 PSIðCSCG1Þ ¼ ð0:00; 0:08; 0:46; 0:46; 0:00Þ x ð1; 2; 3; 4; 5Þ ¼ 3:38 PSIðCSCG4Þ ¼ ð0:00; 0:04; 0:50; 0:46; 0:00Þ x ð1; 2; 3; 4; 5Þ ¼ 3:42

3.3 Developing overall project success index model for public–private partnership projects in Hong Kong To develop the overall PSI model, a linear and additive approach was adopted. This is whereby the PSIs of the CSCGs are used to formulate a linear equation model. A linear approach was adopted because it allows different measurement scales (i.e. five or seven points) to be adopted when evaluating the success index of PPP projects. More importantly, ID CSCG2 CSCG3 CSCG1 CSCG4

CSCGs

Cost effectiveness Quality of service and technical specifications Environmental impact Table VI. Long-term partnership PSI for CSCGs for Total PPP projects in Hong P Kong Note: *Coefficient = (PSI for CSCG/ PSI for CSCG)

PSI

Coefficients*

4.08 3.82 3.38 3.42 14.70

0.278 0.260 0.230 0.233 1.00

a linear equation model is simple and easily understandable, thus allowing practitioners to use it with ease (Yeung et al., 2009; Hu et al., 2016). However, before expressing the overall PSI for PPP projects in Hong Kong in a linear equation form, the PSIs of the CSCGs are normalized so that they sum up to one/unity. Table VI (last column) shows the normalized indices. Drawing on the coefficients of the CSCGs, the PSI for PPP projects in Hong Kong is expressed as: Project Success Index for PPP projects in Hong Kong ¼ ð0:278 cost effectivenessÞ


þ ð0:260 quality of services and technical specificationÞ þ ð0:230 environmental impactÞ þ ð0:233 long term partnershipÞ

(5)

As shown in the equation, “cost effectiveness” emerged as the most CSCG with coefficient value of 0.278, followed by quality of services and technical specification, environmental impact and long-term partnership. Apparently, this outcome is not surprising considering the high cost of public construction projects in Hong Kong. Generally, construction projects are very costly to procure in Hong Kong because of the high cost of land reclamation and underground works. Many PPP projects in Hong Kong are constructed on lands reclaimed from the sea (Shen et al., 2006), and this substantially increases the cost of PPP projects. Notwithstanding, the rock barriers and numerous unforeseen underground changes often require highly skilled expertise and professionals, which cause an increase in the overall cost of PPP projects. In this regard, ensuring cost effectiveness in PPP projects has become a major concern to stakeholders and local practitioners in Hong Kong in recent years (Osei-Kyei and Chan, 2017a). Essentially, the evaluation model presented in equation (5) is beneficial to local practitioners in Hong Kong and other developed countries such as Singapore. This model will allow practitioners to reliably evaluate the success index of their projects. More importantly, it will enable them to compare with more accuracy the success levels of two PPP projects on the same basis for benchmarking purposes. To appreciate the usefulness of the fuzzy PSI model and to enhance practitioners’ understanding on the applicability of the model, Hong Kong’s CHT project is used as a case study to demonstrate how the success index model could be used in real-life situation. 4. Case study 4.1 Brief background of the Cross-Harbour Tunnel project The CHT project is Hong Kong’s first BOT/PPP project (Cheung, 2009). It is actually considered as one of the early BOT/PPP projects implemented in the Asia-Pacific region (Tam, 1999; Kumaraswamy and Zhang, 2001). CHT project was initiated in 1969 (Cheung, 2009). This project was signed between the Hong Kong Government and the Cross Harbour Tunnel Company Limited (Legislative Council, 1999). The private partner was to build and operate the underwater tunnel project over a 30-year concession period, after which the facility will be transferred to the government (Tam, 1999). The project was completed in 1972, and the estimated cost was around HK$350m (US $56m) (Kumaraswamy and Zhang, 2001). It has four lanes of about 1,852 m. The CHT was constructed across the Victoria Harbour, spanning between Hong Kong Island and Kowloon Peninsula. Essentially, before the construction of the tunnel, passengers had to travel between the two districts with ferry; therefore, it was in no doubt that the completion of the



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tunnel would enhance economic activities between the two districts (Cheung, 2009). The CHT project was transferred to the Hong Kong Government in 1999 after the 30-year concession period expired. Currently, the Serco Group Limited is responsible for managing the tunnel. 4.2 Success criteria for the Cross-Harbour Tunnel project This section reviews and assesses the CHT project to assign a score to the extent to which each of the ten CSC presented in the evaluation model has been achieved in the CHT project. The assessment is conducted drawing on information from government websites, interviews in newspapers, stakeholders’ websites, institutional magazine and academic literature. Essentially, this approach of assessing the performance of PPP projects has been widely used by many past related studies, including those by Cheung and Chan (2011); Kumaraswamy and Zhang (2001) and Osei-Kyei and Chan (2015). Therefore, it was considered appropriate and reliable to use similar approach in assessing the performance of the CHT project. The scores for the CSC are given according to a five-point Likert scale: 1: not achieved; 2: fairly achieved; 3: moderately achieved; 4: highly achieved; and 5: very highly achieved. 4.2.1 Cost effectiveness. As shown in Table IV, this category consists of five success criteria, namely, adherence to budget, reduced public sector administrative cost, reduced project lifecycle cost, effective risk management and adherence to time. Adherence to budget implies that the PPP project is completed according to the estimated cost, and that there exist no operational cost overruns (Osei-Kyei et al., 2017). Essentially, Walker and Smith (1995) reported that after the completion of the CHT project, no construction cost overrun was recorded. They explained that it is primarily because of the innovative design and engineering strategies adopted by the private investor. Importantly, the engineering team, which was led by Scott Wilson Kirkpatrick and Partners, and Freeman Fox and Partners adopted and tried and tested construction techniques. In this regard, they were able to avoid delays and major variations which enabled them to achieve construction cost efficiency (Walker and Smith, 1995; The Hong Kong Cross Harbour Tunnel, 1972). In PPP projects, operational cost overrun is mostly caused by fall in demand, technology change and improper projection of operational cost (Osei-Kyei and Chan, 2017b. Since the opening of the CHT project on October 21, 1972, no operational cost overruns have been recorded compared to other tunnel projects in Hong Kong such as the Western Harbour Crossing (Transport Bureau, 1998). This is because the high volume of traffic/demand for the CHT provides more revenue as against the cost of maintenance, repairs and other security services (The Industrial History of Hong Kong Groups, 2017a). As at 2006 (i.e. 34 years after completion), the traffic flow on the CHT was 123,000 vehicles per day, making it one of the busiest underwater tunnels in the world; meanwhile, the design capacity of the tunnel is 80,000 vehicles per day (The Industrial History of Hong Kong Groups, 2017a). Clearly, this shows the huge operational profit generated from the CHT, and therefore, operational cost overrun was not a cause for concern. Drawing on these observations, a score of 4 is given to “adherence to budget.” This implies that this criterion has been highly achieved in the CHT project. Reduced public sector administrative cost refers to a significant reduction in the cost of administration of PPP projects by the public sector because of the significant amount of risks transferred to the private investor (Osei-Kyei et al., 2017). Traditionally, costs incurred by the public sector in procuring public facilities include the cost of hiring consultants, engineering and services design costs, costs of mitigating project-specific risks and


maintenance and repair costs. These administrative costs are supposed to be reduced drastically when the PPP procurement approach is used (Osei-Kyei et al., 2017). Essentially, procuring the CHT through the PPP scheme has significantly reduced the public sector administrative costs. This is because it was the private investor (i.e. Cross Harbour Tunnel Company Limited) who took the initiative to conduct both the pre-feasibility and full feasibility studies of project led by Scott Wilson Kirkpatrick and Partners in 1959. Normally, it should be the government’s responsibility to conduct feasibility studies and bear the costs associated. However, in the CHT project, the private investors rather promoted the project with no or little cost from the Hong Kong Government (The Hong Kong Cross Harbour Tunnel, 1972). Notwithstanding, the cost of designs which included electrical installation and ventilation, as well as the unit fabrications, were also borne solely by the private consortium (The Industrial History of Hong Kong Groups, 2017b; The Hong Kong Cross Harbour Tunnel, 1972). Moreover, the process of selecting contractors and subcontractors was administered by the Cross Harbour Tunnel Company Limited. This implies that it was the Project Company that incurred all the costs involved in conducting such activities (Walker and Smith, 1995). Considering that many of the administrative costs including cost of designs and feasibility studies were borne by the private partner, a score of 4 is given to “reduced public sector administrative cost.” This suggests that this criterion has also been highly achieved. Reduced project lifecycle cost has a direct relation with value for money (Osei-Kyei et al., 2017). Very often, projects that provide value for money have a much lower lifecycle cost. Indeed, indications and commentaries on the CHT project greatly attest to the fact that value for money has been achieved (Mak and Mo, 2005). Importantly, the benefits gained for procuring the CHT through PPP is far more than if it has been procured using the traditional bid-build system. Aside constructing and operating the tunnel, the concessionaire contributed around HK$12m toward the construction of other new government roads. Further, a 12 per cent royalty on gross operating receipts was paid by the Project Company within the first 10 years (The Industrial History of Hong Kong Groups, 2017b). Apparently, these are additional benefits obtained by the Hong Kong Government from the partnership at a relatively little or no cost. Moreover, the innovative construction and engineering techniques adopted by the contractors led to a drastic reduction of the maintenance and management costs of the tunnel, therefore resulting in very high net revenue at the end of the concession period (Transport Bureau, 1998). Specifically, the CHT project had a turnover of around HK$526m in 1997, and it was further projected that it will have net revenue of around HK$427m per annum in subsequent years (Transport Bureau, 1998). The design capacity of the tunnel is 80,000 vehicles per day; however, its current traffic volume has exceeded the initial design capacity of about 50 per cent (The Industrial History of Hong Kong Groups, 2017b), and this is a clear indication of how beneficial the facility is to the general public. Based on these observation, “reduced project lifecycle cost” is considered to be highly achieved; thus, a score of 4 is given. Effective risk management refers to the proper identification, allocation and complete transfer of risk among stakeholders in a PPP project (Osei-Kyei et al., 2017). This criterion is considered to be very highly achieved in the CHT project. The key potential risks that could be identified in the CHT project include market/demand risk, construction changes, construction cost overrun, high financing cost, legal risk, political and public unrest, design deficiency and delay in project completion (The Industrial History of Hong Kong Groups, 2017b; The Hong Kong Cross Harbour Tunnel, 1972; Walker and Smith, 1995). These key risks were appropriately shared among the key parties and mitigated properly. Essentially,



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the demand risk, construction changes, construction cost overrun, high financing cost, design deficiency and delay in project completion were retained by the private investor and were properly mitigated. For example, to avoid a fall in demand, the private partner set reasonable toll fees which range from HK$2 to 25 for both private and public vehicles. Indeed, this contributed to the constant increase in the traffic flow on the tunnel compared to other underwater tunnels in Hong Kong (Tam, 1999). To mitigate construction changes, delay in project completion and design deficiency, the private partner adopted and tried and test construction techniques, as well as engaged very experienced construction and engineering experts (Walker and Smith, 1995). This resulted in a faster delivery of the project. The other key risks including legal, political and public unrests were allocated solely to the government. The Hong Kong Government ensured that proper legislations were established for the project (Transport Bureau, 1998). Further, an inter-departmental government committee was set up to seek the concerns of the general public on the tunnel development (The Industrial History of Hong Kong Groups, 2017b). Considering the evidence available, a score of 5 is given to “effective risk management.” Adherence to time implies meeting the estimated construction time schedule (Osei-Kyei et al., 2017). Importantly, the anticipated construction period for the CHT project was 47 months. However, the private consortium took only 36 months to complete the tunnel for commission (Mak and Mo, 2005). This suggests that the tunnel was completed 11 months ahead of the anticipated schedule. The timely completion of PPP projects actually enables the private investor to recoup their investment returns earlier. Apparently, this was seen in the CHT, just within three and half years of operation, the revenue accrued was enough for the Project Company to pay back the construction cost (Mak and Mo, 2005). Base on this evidence, a score of 5 is given, indicating that adherence to time has been very highly achieved. 4.2.2 Quality of service and technical specification. This category consists of three CSC, namely, reliable and quality service operation, meeting output specifications and satisfying the need for public facility/service. Reliable and quality service operation implies a continuous service delivery according to user satisfaction (Osei-Kyei et al., 2017). Importantly, the quality of service for the CHT project has been very impressive over the past decades (Mak and Mo, 2005). In spite of the high volume of traffic, the Project Company continued to provide reliable and uninterrupted services to motorists. It is therefore not surprising that after the expiry of the 30-year concession period in 1999, the Hong Kong Government granted another 10-year concession to the Cross Harbour Tunnel Company (Transport Bureau, 1998). Notwithstanding, despite introducing a passage tax as a measure to curb the congestions on the tunnel, the number of vehicles kept increasing from 100,500 per day in 1984 to117,000 per day in 1987 (Transport Bureau, 1998). This clearly shows the quality of service offered by the concessionaire. Moreover, as part of the quality services offered by the private partner, advanced automatic toll equipment, CCTV monitoring cameras, traffic light monitoring and fire alarm monitoring were installed at toll booths and strategic positions (The Hong Kong Cross Harbour Tunnel, 1972). In essence, the evidence available shows that the private partner provided a very reliable and quality service operation to its users during the concession period; thus, a score of 5 is given. This suggests that this criterion is very highly achieved in the tunnel project. Meeting output specifications refers to compliance with output standards of the proposed project (Osei-Kyei et al., 2017). This criterion also implies the adherence to technical specifications. In most cases, before a PPP project is implemented, the public partner sets out the output requirements and the private investor has to comply with


them (Lam and Javed, 2015). Importantly, the major output specification provided by the Hong Kong Government was an immersed tube tunnel with a single lane in each direction after rescinding on the option of a bridge in 1963 (The Industrial History of Hong Kong Groups, 2017b; Mak and Mo, 2005). Therefore, the private partner had to construct the tunnel using an immersed tube construction technique. However, in the early 1960s, two immersed tubes were commonly used globally: the concrete and steel tubes. The type of immersed tube was not prescribed by the government, and this allowed the consortium to choose the most cost efficient type, which was the immersed steel tube (The Industrial History of Hong Kong Groups, 2017b, The Hong Kong Cross Harbour Tunnel, 1972). Further, instead of a single-lane tunnel, the consortium also opted for a two-lane tunnel with anticipation that the traffic volume will increase in subsequent years. Importantly, the output specifications given by the government were met using advanced and cost efficient construction techniques (The Hong Kong Cross Harbour Tunnel, 1972). In essence, the output specifications were expanded by the private partner to cater for future demands. It is therefore not surprising that the constant increase in traffic flow on the tunnel has not affected the quality and standard of the tunnel. Based on these observations, a score of 4 is given. This suggests that “meeting output specifications” is highly achieved. The last success criterion in this group is “satisfying the need for public facility/service.” Before, the CHT project was implemented, many people estimated around six million had to travel between Kowloon District and Hong Kong Island by ferry every year (The Industrial History of Hong Kong Groups, 2017b). Therefore, the idea of a tunnel project was to reduce the traveling time and enhance communication between people in these two districts (Mak and Mo, 2005). Further, considering that the ferries offered very low charges, it was expected that the tunnel project will also offer reasonable charges to allow more people to travel between the two districts (Mak and Mo, 2005). Indeed, the PPP project (i.e. CHT) has fully satisfied the need for a public facility. By procuring the tunnel project through PPP, reasonable toll fees have been offered, and this has allowed many people to travel with ease and faster between the two districts. Apparently, the need for a tunnel may not have been fully achieved if the traditional bid-build procurement system had been used. Considering these observations, a score of 5 is given, implying that “satisfying the need for public facility/service” has been very highly achieved. 4.2.3 Environmental impact. This category consists of one CSC, “environmental performance.” Environmental performance implies that the implemented PPP project does not affect the health and safety of users or environment (Osei-Kyei et al., 2017). Essentially, despite the considerable measures put in place by the Project Company, a high number of accidents, both fatal and non-fatal, have been recorded on the CHT over the past decades. The CHT records a high rate of road accidents than other tunnels in Hong Kong. As at 2000, 34 road accidents have been recorded; 4 were serious and 30 were less serious (Transport Department, 2009). Further, as at 2014, 42 road accidents have been recorded in which 3 were serious and 39 were less serious (Transport Department, 2015). Notwithstanding these, because of the huge traffic congestion on the CHT, emission of gases and fumes are very high. Specifically, Chow (2009) reported that between 2003 and 2004, a record of 797 m g/m3 of air pollutant was recorded at a measuring station on the CHT. Clearly, the environmental hazard inside and around the CHT is very high, and this therefore reduces the project’s environmental performance. Considering the evidence available, a score of 2 is given. This suggests that environmental performance has been fairly achieved.



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4.2.4 Long-term partnership. This category also consists of one CSC, “long-term relationship and partnership.” This criterion implies that a well-established relationship and coordination has been instituted among stakeholders particularly between the government and the private partner (Osei-Kyei et al., 2017). The relationship between the Cross Harbour Tunnel Company and the Hong Kong Government has been wellcoordinated and long-lasting (The Industrial History of Hong Kong Groups, 2017b). Because of the good relationship existing between the two parties, other tunnel projects including the Western Harbour Crossing and Tate’s Cairn Tunnel were awarded to the Cross Harbour Holdings (formerly Cross Harbour Tunnel Company). Furthermore, upon the expiry of the 30-year concession period, another 10-year concession was granted to the Cross Harbour Tunnel Company (Transport Bureau, 1998). Clearly, these are indications of the cordial relationship and partnership existing between the Cross Harbour Tunnel Company and the Hong Kong Government. Based on these observations, a score of 5 is given. This implies that long-term relationship has been very highly achieved. 4.3 Project success index of the Cross-Harbour Tunnel project The PSI model [equation (5)] is used to calculate the success index of the CHT project by using the scores derived for the ten CSC in previous section. However, the index of each CSCG has to be determined first; subsequently, the indices are then substituted into equation (5). The index of each CSCG is calculated using simple mean average. For example, the index of CSCG1 (cost effectiveness) is calculated as: 4:00ðCSC1Þ þ 4:00ðCSC7Þ þ 4:00ðCSC6Þ þ 5:00ðCSC3Þ þ 5:00ðCRC2Þ ¼ 4:40 5 Using the same approach, the indices for the remaining CSCGs are calculated (Table VII). After calculating the average index for each CSCG, the PSI of the CHT project is determined using equation (5):

Table VII. Average success index for each CSCG for PPP projects in Hong Kong

No.

CSC

CSC1 CSC7 CSC6 CSC3 CSC2 CSCG2 CSC5 CSC8

Adherence to budget Reduced public sector administrative cost Reduced project life cycle cost Effective risk management Adherence to time Cost effectiveness Reliable and quality service operations Satisfying the need for public facility/ service Meeting output specifications Quality of service and technical specifications Environmental performance Environmental impact Long-term relationship and partnership Long-term partnership Total average index of CSFG

CSC4 CSCG3 CSC10 CSCG1 CSC9 CSCG4

Scores

Average index of CSCG

Total index for each CSCG

4.40

22

4.67

14

2.00

2

5.00 16.07

5 43

4.00 4.00 4.00 5.00 5.00 5.00 5.00 4.00 2.00 5.00

Project Success Index of CHT project ¼ ð0:278 4:40Þ þ ð0:260 4:67Þ þ ð0:230 2:00Þ þ ð0:233 5:00Þ


¼ 4:06 Using the PSI model, the success index of the CHT project is 4.06, which is interpreted as highly successful. Essentially, this output concurs with assertions by many researchers and practitioners that the CHT project is a legendary and represents a typical successful PPP project in Hong Kong and Asia in general (Mak and Mo, 2005; Cheung, 2009; Tam, 1999; The Industrial History of Hong Kong Groups, 2017a). The PSI model has made it possible to quantify the abstract concept of the CHT project’s success. It is therefore hoped that practitioners in Hong Kong and other developed countries/ economies will adopt this pragmatic tool to evaluate the success level of their implemented projects and, more importantly, compare the success levels of two or more PPP projects on the same basis for benchmarking purpose. Researchers can also use the PSI model to quantify the performance of PPP projects in Hong Kong and other developed economies from different stakeholders’ perspective in a given project. 5. Conclusion This paper has developed a pragmatic tool for evaluating the success levels of PPP projects in Hong Kong. A structured questionnaire survey was conducted with experienced PPP experts from Hong Kong, and the fuzzy set theory was used to derive a PSI equation. The PSI model consists of four CSCG, namely, cost effectiveness, quality of service and technical specification, environmental impact and long-term partnership. Further, to demonstrate how the PSI model could be used in real-life situation, Hong Kong’s CHT project was used a case study. Using the PSI model, the success index of the CHT project is 4.06. This suggests that the tunnel project has been highly successful as a PPP project. Importantly, this outcome supports assertions that the CHT is one of the most successful PPP project in Hong Kong and is considered as an exemplary to other projects (Cheung, 2009; Mak and Mo, 2005). The outputs of this study contribute to knowledge on the best practices for PPP implementation in Hong Kong and other developed economies in general. The PSI model will enable local practitioners to reliably evaluate the success levels of their projects. More importantly, they can compare the success outcomes of two or more PPP projects. The CSC in the evaluation model will inform practitioners of the few key areas to focus when implementing successful PPP projects. One of the major limitations of this study is the low sample size. However, the rich industrial and/or research experience of experts render the reliability of the survey responses for further analysis (Osei-Kyei and Chan, 2017b). The second major limitation is that the success criteria scores for the CHT project are mainly derived based on secondary data. Essentially, first-hand data such as interviews and experts survey would have strengthened the reliability of the scores. However, authors take consolation from the fact that the information obtained to appraise the performance of the tunnel are from very reliable sources and therefore render the authenticity of the scores for further analysis. More importantly, the main aim of the case study is to demonstrate the use of the PSI model in real-life situation; thus, the results are still relevant for future reference and practice. Notwithstanding these, considering the fact that the CHT project was completed more than two decades ago, it was very challenging to identify experts who were actively involved in the project.



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About the authors Robert Osei-Kyei is a Postdoctoral Research Fellow at the Department of Building and Real Estate, The Hong Kong Polytechnic University, Hong Kong. Robert Osei-Kyei is the corresponding author and can be contacted at: [email protected] Albert P.C. Chan is Professor and Head at the Department of Building and Real Estate, The Hong Kong Polytechnic University, Hong Kong.

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