PhD Final Thesis April 2013.pdf - Anglia Ruskin Research Online

Thesis Keith Gale 2013CHAPTER 8: FINANCIAL VIABILITY OF FRAMEWORKS ANDPERCEPTION OF VALUE OF FRAMEWORKS WITHIN PROFESSIONALPRACTICE8.1 Introduction and backgroundIn this chapter, financial performance of construction frameworks is examined withincontextual positioning related to data collected through the case study projects. Astandard procedure is used (Flanagan et al, 2007) comprising:• Identification of financial performance indicators• Collection of base data related to the indicators• Calculation of a financial performance indexThe traditional perspective for measurement of financial performance withconstruction projects is often judged by comparing the price of an accepted tenderand final account outcome of construction project costs (Nguyen et al, 2004). It issuggested that this however does not reflect true financial performance during theengagement and construction process because costs vary according to contextualplacement along the project life cycle. Budgetary values for a project flex duringproject development as client demands and design solutions change. Most projectsare financially reviewed during four milestones of development – feasibility, detaileddesign, tender and final account (European Expert Group 2010, p 22). Between eachmilestone, a client will permit variations to a budget according to the need to add oromit elements to a project.Uses of simple comparison between tender and final account values are not reliableindicators of financial performance because these do not highlight permittedvariations with budgets. For example, a significant increase in budget value could bedue to client instructions regarding increased capacity with the project – the projecthas been completed to client requirements and to the revised financial allowance, butthere is a significant statistical variation between tender and completion values.Therefore this research assesses financial performance by comparison of values atthe most significant period of budgetary commitment within a project life cycle,167