A Design Method of the Joint Venture Formation in EPC Projects

Nobuaki Ishii (), Yuichi Takano () and Masaaki Muraki ()
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Nobuaki Ishii: Kanagawa University
Yuichi Takano: University of Tsukuba
Masaaki Muraki: Tokyo Institute of Technology

A chapter in Intelligent Engineering and Management for Industry 4.0, 2022, pp 137-146 from Springer

Abstract: Abstract Today’s engineering contractors face increasing uncertainty with EPC (Engineering, Procurement, Construction) projects because of increased project complexity and scale. Due to these circumstances, the number of joint venture contracts has increased among EPC contractors to reduce risks and increase profits. In this chapter, a method to design a competitive joint venture formation in consideration of cost and risk reduction by complementary effects among joint venture partners is developed. In the design method, the 2D-WBS (Two-Dimensional Work Breakdown Structure), which is associated with the work packages of the project to the potential partners carrying out the work packages, is used to structure project data of each partner organizing the joint venture formation. The design method uses a mathematical model to identify the candidates of the joint venture formation that minimizes the variance of the estimated project costs under the constraints of the expected project costs. The method then selects a joint venture formation that maximizes the expected profits by using a simulation model of competitive bidding. The effectiveness of the joint venture is demonstrated via simulation experiments using a simulation model of competitive bidding. As a result, it has been found that the joint venture contract can improve profits of contractors as well as reduce investment costs of clients.

Keywords: Contract design; Risk management; Project management (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-94683-8_13

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DOI: 10.1007/978-3-030-94683-8_13

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