External Risk Effect in Infrastructure Design Build Projects with Lump Sum Contracts

Abstract

The increase of fast completion and cost certainty demands of construction projects were encouraging the Provincial Government of DKI Jakarta to use the design-build as a project delivery system. However, the design-build project experienced several constraints. This research aimed to determine the effect of external risks (consist of land acquisition, utility disruption, and third-party risk) on project performance of infrastructure design-build projects with a lump-sum contract system. A mix-method of quantitative and qualitative approaches used in this research, with data collected by using a questionnaire, interview, and documentation study. The questionnaire sent to contractors involved in design-build contracts for the 2015-2018 period, as many as 78 respondents from 39 projects. Fifty responses received within the stipulated time. Quantitative data analysis carried out by using the Structural Equation Model (SEM) based on Partial Least Square (PLS) using SmartPLS and qualitative data used as supporting data. The research findings were as follows. First, land acquisition, utility disruption, and third-party risk had no significant effect on project time performance. Simultaneously, the external risk contributed 11.7% of the time performance variable. Second, the utility disruption and third-party risk requests had a significant negative effect on cost performance, while the land acquisition risk did not have a significant effect on cost performance. Simultaneously, the external risks contributed to 39.3% of the cost performance. Third, time performance has a positive and significant effect on cost performance. Fourth, there was inadequate and inaccurate information related to the existence of the external risk, as well as an inadequate allocation of risk handling costs. Risk identification was vital. Furthermore, working schedules had to synchronize to the risk management schedule in such a way that the effectiveness and efficiency of the work could be maximized by considering all aspects. The response to risk could differ from project to project even between the same types of construction projects. The risk response determined by considering their impact on the project's time and cost performance.