Proposal on Hybrid Risk Evaluation Method (HREM) for bidding decision in international infrastructure project

Abstract

This paper describes a proposal on a new method that enables the appropriate and practical decision making in bidding before submitting a proposal to participate in the bidding for a large-scale international infrastructure project. Such a method has been demanded by potential bidders in order to overcome the recent trend that Japanese companies have given up in participating in such projects in spite of opportunities to extend their business in highly potential overseas market. For this, we have established a comprehensive evaluation method for risk assessment with reference to actual experiences of one of the leading Japanese consultants in establishing the basis of the proposed method, and conducted a post-evaluation to verify and validate the proposed method based on assumptions for the Suvarnabhumi Airport Rail Link (ARL) construction project in Thailand. Based on the assessment, we have obtained a positive result to ensure the effectiveness and the validity of the theory assumed as well as the proposed method, with suggestion for further improvement. Keywords IntroductionThe Japanese Government has been keen on exporting the Japanese Technology in infrastructure as a package, which has been the core of the strategy for sustainable development of Japanese industries. One of the main components of the said package is the railway systems that comprise rolling stock, train control system, power supply system, automatic fare collection system, etc. for urban mass transits and high speed railways, which Japanese railway industries have spent years to accomplish safe, international competitive and highly reliable system. The Japanese high speed railway technology, well known as Shinkansen, has been successfully introduced in Taiwan and the mass transit systems by Japanese technologies have been widely adopted in various countries, which were financed by the Japanese ODA and with the management by Japanese consulting firms, e.g. Delhi Metro in India, Purple Line in Thailand, etc. These projects were bid through the International Competitive Bidding (ICB) and the contractors wishing to win the project have to participate in the bidding process. Although the projects were partly or entirely financed by the Japanese Government, there were some projects in which no Japanese firm has participated in the bidding due to high risks residing in the bidding process and in the contract conditions, e.g. non-familiarity with modern practice of project implementation (Niraula et al., 2008), unfair modification of FIDIC based conditions (Matsuba et al., 2011). Disputes at the court in case the arbitration on the claims by the contractor is not successful could bring about serious financial impacts on the business model of the contractor due to the increase of the project cost by the result of disputes (Onishi, et al., 2002). Upon these cases, the Overseas Construction Association of Japan (OCAJI) has submitted a request to Japan International Cooperation Agency (JICA) to improve the bidding conditions in order to avoid h...

Risk Causation Model to Capture and Transfer Knowledge in International Construction Projects

“…However, international construction projects manifest more complex web of project systems given the multinationalization of participants, diversity of currency and payment, internationalization of technical specifications, and standardization of contract performance procedures. Thus, contracting international construction projects is universally considered "high-risk business" (Akgul et al, 2017;Bu-Qammaz et al, 2009;Chang et al, 2018a;Hastak & Shaked, 2000;Isaka et al, 2017;Lee et al, 2016;Zhu et al, 2019). It is reported that global contractors have suffered heavy losses in the international market due to poor risk management (Lee & Han, 2017).…”