Megaprojects And Standard Contracts Comparison

Megaprojects opposed to conventional projects:

Large projects, also known as megaprojects, are complex, large scale and long durational projects that can affect multiple stakeholders, and they usually cost more than a 1 billion dollars (Yzer et al., 2014). According to Turner (1998), megaprojects have been described as multibillion-dollar mega-infrastructure projects, usually commissioned by governments and delivered by private enterprise; and characterised as uncertain, complex, politically-sensitive and involving a large number of partners. Thus, it would be safe to assume that megaprojects are not just magnified versions of smaller projects or, in other words, megaprojects are not scaled up from conventional projects in accordance with Flyvbjerg (2017). Megaprojects are entirely different than conventional projects in terms of their lead times, level of aspiration, stakeholder involvement and complexity. In turn, Megaprojects are completely different compared to conventional projects in managing (Flyvbjerg, 2017).

Megaprojects has been widely and increasingly used as a delivery model for services and goods in multiple sectors, such as water and energy, infrastructure, supply chains, enterprise systems, information technology, infrastructure, mining, banking, industrial processing plants, mergers and acquisitions, urban regeneration, defence, air and space explorations, governmental systems and major events (Biesenthal et al., 2018). Some examples of megaprojects include airports( King Fahd international airport), high speed rail lines( Madrid-Barcelona high speed rail line), motorways( M4 extention),seaports(Port of shanghai), hospitals(Royal London hospital), major events( London Olympics), offshore oil and gas extractions(Petrobras’s floating production), wind farms( Greater Gabbard wind farms), Dams( Aswan dams), logistic systems used in massive corporation like Amazon and several more.

According to flybjerg(2017), Megaprojects are getting intensely big to the point they can affect a whole country’s economy if not the world’s economy. To the point where the combined cost of just two of the world's largest megaprojects – the Joint Strike Fighter aircraft program and China's high-speed rail project – is worth more than 700 billion dollars. The McKinsey Global Institute (2013) approximate international infrastructure expenditure will be 4% of the total global gross domestic product mainly delivered as megaprojects. Megaprojects are not only large projects that keep getting larger, but also the quantities of them are relatively increasing. The Economist (2008) correspondingly projected construction expenditure in emerging economies at USD 2.2 trillion annually for the period 2009-2018.

However, what is driving the flourishing of megaprojects? According to Flyvbjerg (2014), the reason for this boom can relate to the “four sublimes” of megaproject management presented by Flybjerg. The first of these sublimes is the technological sublime, which is a term that was firstly adopted by Miller (1965) to illustrate the optimistic historic reaction of technology in the USA throughout the nineteenth and early twentieth century. However, the term was only introduces to Megaproject management in 2008 by Frick. Frick (2008) defined the technological sublime as the satisfaction engineers and technologists achieve from constructing huge and innovative projects while pushing the limits of technology in practice, such as constructing the tallest building, longest bridge or first in anything. Frick applied his theory in practice and concluded that the technological sublime can affect design, public debate, project outcomes and lack of accountability for cost overruns, this theory was applied to the multibillion-dollar New San Francisco-Oakland Bay Bridge. Giezen(2012) simply described the term as a fixation on the latest technology in construction.

Even though the technological sublime term was not firstly identified by Flybjerg, however the remaining sublimes were introduced and heavily influenced by Flybjerg. The first proposed sublime by Flybjerg(2014) was the “political sublime”, which describe the satisfaction politicians achieve from constructing monuments to themselves or buildings to support their causes, such as winning elections. Megaprojects can be considered as media magnets that are manifest, attract attention and induce pro-activeness to their promoters (Shane et al., 2009). The second term proposed was the “economic sublime”, which refers to the pleasure business representatives and trade unions achieve from earning significant amounts of money and jobs through megaprojects. Due to the huge budgets provided or megaprojects, there is an abundant of funds for a variety of workers rom contractors to labours, which in turn is beneficial to the economy (Gemünden and Hans, 2015). The final sublime Proposed by Flybjerg(2014) is the “aesthetic sublime”, which refers to the pleasure and satisfaction designers and design enthusiasts acquire from constructing, using and observing something that is so large and striking, such as Sydney’s Opera house and Burj Khalifa. All of the above mentioned sublimes are influencing the scale and frequency of megaprojects and can be related to the heavy attraction towards megaprojects in the recent past.

As it was mentioned earlier, Megaprojects are complex, large scale and long durational projects that can affect multiple stakeholders, and they usually cost more than a 1 billion dollars (Yzer et al., 2014). However, once compared to conventional projects more specified characteristics might be needed to fully comprehend the differences between megaprojects and conventional projects.

Based on the literature provided on megaprojects which is achieved from the researches and works of (Flyvbjerg et al., 2003, Greiman, 2013, Flyvbjerg, 2014, Grűn, 2004, Merrow, 2011, Oliomogbe and Smith, 2012, Miller and Lessard, 2000, Altshuler and Luberoff, 2003, Morris and Hough, 1987, Flyvbjerg, 2017 and Biesenthal et al,2018) it can be deduced that there are several defying specification that sets megaprojects apart from conventional projects and these specifications or characteristics include:

1- Duration: Time traverses of megaprojects regularly stretch out past the political life cycle of a national government; and any longer future when benefits are likewise incorporated into their completion and assessment.

2- Cost: Megaprojects generally but not necessarily cost between 500 million to 1 billion USD. Furthermore, financing of megaprojects is relatively complex requiring various arrangements and in several cases demand huge loans from international funding agencies, dictating in a way the management of the project due to their enforced restrictions.

3- Range: Megaprojects require substantial financial, technological and human resources, and can cause critical environmental impacts which can lead to effects beyond national borders.

4- Risk and uncertainty: Megaprojects generally involve untested technologies and process that can cause threats to personnel involved in the project alongside communities affected by the project. Furthermore, megaprojects demand consistent and careful risk allocation, where the risk are not managed properly they can have serious impact on the careers and reputation of involved personnel.

5- Arenas of controversy: Megaprojects are usually exposed to media and public critical exposure, where success criteria are misrepresented and unclear. Furthermore, megaprojects are generally affected by politics and power and can face changes in priorities and objectives due to external agencies. In addition, more and more megaprojects are being constructed in spite of their poor reputation (creating the megaproject paradox).

6- Widely desperate actors: Megaprojects frequently set aside a long opportunity to emerge because of the hugeness of good data required from political, financial and ecological perspectives; and include a wide assortment of dissimilar on-screen characters that regularly have clashing interests.

7- Legal and regulatory issues: Megaprojects involve several concerns in that matter, such as legal claims and litigation, insurance claims, wellbeing and safety, security, clashes bringing about broad debate determination exercises, tax assessment impacts after some time, disturbances because of new directions by government and statutory authorities and face various governance regimes over the length of the venture.

8- Value destruction: Megaprojects can raise serious concerns in relation to value destruction. These concerns arises from social, monetary and biological pulverization of significant worth because of the size and cost of the work compel required, the prerequisites of anchoring and keeping rare specialists and particular providers, getting to generous wellsprings of budgetary credit and gigantic relocation issues, both socially and bio-geophysically, all obliterating value.

It could be contended that a portion of these focuses might be applicable to any complex or substantial venture. What separate megaprojects is their range and the wide effect they could have on the general public and environment— confronting dissident gatherings and unfriendly media restricted to the undertaking, overseeing political weights from key stakeholders and managing adequately with public supposition. All the more mentally, as far as organization hypothesis, it can be seen that megaprojects need to be proficient, they should consolidate actors from fields administered by dissimilar rationales and have them work together and bode well(Biesenthal et al,2018).

Standard form of contracts:

A contract is a” written or spoken agreement, especially one concerning employment, sales, or tenancy, which is intended to be enforceable by law” (the balance small business, 2018). According to Banica(2013) , over the recent years, construction contracts has been addressed from a legal perspective and also as a part of the management tools package attached to the project. Thus, this ideology inspires the use of standard form of contracts that are generally provided by several professional organizations, such as the contract suites: NEC and FIDIC. According to FIDIC (2006) and Bubshait and Almohawis (1994), standard form of contracts consist of several advantages and is largely braced by professional and scientific communities and also recognized by international financial institutions and development banks.

A comparison between traditional and standard contracts was conducted by Broome and Hayes (2007). They deduced that traditional contracts reveal structural weakness due to lack of clarity , while standard contracts provide more clarity making it easier to understand which helps define procedures, contractual roles and methods of solving potential disputes. However, Murdoch and Hughes (2008) argue that standard forms of contracts pose concerns generally arising from the complexity of these forms of contracts and the difficulty of tracking possible contract amendments.

Sweet (1994) illustrates that there are three vital roles for the standard forms of contracts and they include:

1- Provide an agreement stage between contracting parties to distribute risks, obligations, and mitigations and address managerial techniques

2- Enhance the effectiveness and efficiency and reduce the finances of negotiations

3- Valuable link and connection among the involved contracting bodies within a venture.

Furthermore, according to Li (2006), standard forms of contractual agreements tackle complex legal contractual provisions and offer the tools to improve industry practices and unsatisfactory legal rules. In any case, the proficiency of these standard types of agreements may be endangered if acquainted with megaprojects.

Standard form of contracts poses several advantages that prioritise them against traditional and other forms of contracts. According to Li (2006), standard forms of agreements or contracts are broadly utilized everywhere throughout the world and in various businesses including building, development, structural designing, electrical, mechanical, chemical, oil and gas works and considerably more. This wide utilize is a solid pointer of the advantages conveyed as perceived by contracting parties. By institutionalizing the conditions and utilizing them over an extensive stretch of time, the proficiency, decency, lucidity and conviction of significance will be tried and in this way any feeble, obscure, or absurd regions or provisos which need changes will be distinguished and enhanced (Li, 2006). Another favourable position is that institutionalization brings familiarity and familiarity is frequently held out to be profitable to the contracting parties. This recognition will lessen the time, cost, and exertion required to ponder and set up the agreement records which eventually prompts diminished bid value (Bubshait and Almohawis, 1994). This is a win-win circumstance since newness comes about a misuse of cash which neither of the parties profits by. Likewise, familiarity makes it less demanding to consent to the form. Furthermore, Smith (2009) added that the familiarity of standard forms of contracts within the industry (clients, consultants, contractors) alongside the legal and judicial systems enables a more efficient dispute resolution among involved parties and enhances communication and efficiency o contract administration. According to Bianca (2013), Standard contracts can be a very effective tool in controlling the moral hazard inherent in construction projects, which is the assurance of the client that the contractor will perform under the contract the specified objectives with good faith and avoid dishonesty (Winch, 2010). Furthermore, standard forms of contracts are highly efficient in balancing the relationship between the client and contractor (Bell, 2009). Standard form of contracts consists of clear procedures and repetitive content and are easy to understand, making them practical and useful instruments regardless of the client's experience in construction procurement (Perry, 1995). To conclude, according to Ramazdeen and Anushi (2014), standard forms of contracts embodies industry practice and customs, provide fair allocation of risk between parties, provides a uniform basis for pricing without the fear of hidden costs, and reduces transaction costs in negotiating a contract .

However, there are still limitations or disadvantages to the use of standard form of contracts that needs to be addressed. One disadvantage relating to the use of standard form of contracts relates to the vast number of contracts available. According to Abrahamson (1988), the vast variety of contracts induces difficulties on the contractor to assess their legal and contractual implications. Furthermore, this causes the contractors to have reduced understanding of the conditions of the contracts (Li, 2006). Another main disadvantages relating to the use of these contracts is the amendments and modification performed on these contracts to accommodate the specificity of the venture.

The far reaching utilization of standard forms of contracts in development and construction ventures shows that their focal points exceed their burdens. However, customers in the construction business have an abnormal state of disappointment towards the usage of these contracts (Thompson et al., 1998).