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Benchmarking: An International Journal

A Fuzzy Synthetic Evaluation Analysis of Operational Management Critical Success Factors for Public-
Private Partnership Infrastructure Projects
Robert Osei-Kyei, Albert P.C. Chan, Ernest Effah Ameyaw,
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Robert Osei-Kyei, Albert P.C. Chan, Ernest Effah Ameyaw, "A Fuzzy Synthetic Evaluation Analysis of Operational
Management Critical Success Factors for Public-Private Partnership Infrastructure Projects", Benchmarking: An International
Journal, https://doi.org/10.1108/BIJ-07-2016-0111
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A Fuzzy Synthetic Evaluation Analysis of Operational Management Critical Success
Factors for Public-Private Partnership Infrastructure Projects

Abstract

Purpose: This paper identifies the factor groupings of a set of 19 critical success factors
(CSFs) associated with managing PPP projects at the operational stage and examines the
most significant factor grouping using fuzzy synthetic evaluation technique (FSE).

Design/methodology/approach: The paper adopted a comprehensive review of pertinent


literature and an empirical questionnaire survey geared towards targeted international PPP
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experts. Survey responses were analyzed using factor analysis and FSE modelling.

Findings: The results from factors analysis show five CSF groupings (CSFGs) for managing
operational PPPs. These are proficient service delivery and adequate legal structures,
simplified payment mechanism and consistent project monitoring, effective contract
variations management, suitable stakeholder management mechanism, and environmental
health and safety control. The FSE modelling shows that ‘simplified payment mechanism and
consistent project monitoring’, is the most critical CSFG. The operational management CSFs
under this grouping are acceptable level of user fee charges, efficient and well-structured
payment mechanism, consistent project performance monitoring and long term demand for
public facility.

Research limitation: The major limitation lies in the low sample size that was used for
analysis; however the years of research and/or industrial experience of respondents and the
wide coverage of different cultural background (18 countries from 5 regions globally)
contribute to the authenticity of the survey responses. Future research should adopt a more
locally focused interviews and case study analysis to unravel CSFs in managing operational
PPPs.

Originality/value: The findings of this study are considerably beneficial to both public
authorities and private operators. They inform practitioners of the strategic procedures and
measures to employ in optimizing the operational performance of PPP projects. Further, the
methodology employed allows project management experts to reliably select the operational
management CSFs for their projects.

Keywords: Public-Private Partnerships, Factor analysis; critical success factor; operational


management; international survey; Fuzzy Synthetic Evaluation Model

Article Classification: Research paper

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1.0 Introduction

Since the early 1990’s, the idea of adopting public-private partnership (PPP) as an innovative
procurement approach in developing public infrastructure has increased among governments
in both developed and developing regions (Chou and Pramudawardhani, 2015). This concept
is now perceived by governments as efficient means of developing ‘value for money’ public
infrastructure and providing modernised public services (Akintoye et al., 2003; Cheung et al.,
2009). Indeed, PPP procurement policy has offered many governments the opportunity to
focus on other economic sectors to enhance infrastructure development. Most importantly,
this innovative procurement method has relieved governments of their financial burden in
meeting the increasing demand for public facilities and services (Ismail, 2013; Chan et al.,
2009). Similarly, private investors are ardent to enter the PPP market because it offers them
the opportunity to benefit from government’s guarantees, tax exemptions and reduction, and
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long term investment returns (Chan et al., 2010, Osei – Kyei et al., 2014). Considering the
zeal of governments and the private sector to partner in delivering public infrastructure,
researchers have also played their role by exploring the best management techniques and
practices that could enable project participants achieve a successful PPP implementation (Ke
et al., 2009). Elements such as political support (Abdul-Azizi and Kassim, 2011; Jacobson
and Choi, 2008), strong private consortium (Hwang et al, 2013), appropriate risk allocation
and sharing (Li et al., 2005a; Zhang, 2005), public/community support (Gannon and Smith,
2011) and transparent procurement (Tang et al., 2012) have been reported as the key factors
for successful PPP projects.

During the last couple of decades, past studies on the critical success factors (CSFs) for PPP
projects have profoundly focused on either the general lifecycle of PPP projects or the
planning and preparatory stages of the project (Osei-Kyei and Chan, 2015a). Very few
researchers, if any, have undertaken empirical work and discussed comprehensively on the
underlying factors that contribute to the operational efficiency of PPP projects. However, the
operational phase of PPP projects takes larger portion of the project’s lifecycle, whereas the
planning and preparatory stages cover a smaller section (Liu et al., 2014). Essentially, high
operational efficiency of PPP projects facilitates a high overall performance (Partnerships
UK, 2006); likewise, a poorly managed PPP project at the operational period undermines its
objectives and subsequently erodes its value for money (EPEC, 2014). Additionally, most
PPP projects initiated in the early 90’s are currently at the operational phase. For instance,
over 500 private finance initiative (PFI) projects initiated in early 1990s in the U.K. and 121
PPP projects initiated across the six provinces in Canada are currently in operation
(Yescombe, 2011; Partnerships U.K., 2006; CCPPP, 2013). Also, there are many other PPP
projects in operation in some developing countries including South Africa, Brazil, China,
Nigeria and India (World Bank, 2013). These notwithstanding, most reported problems on
PPPs are predominantly confined at the operational stages; these include complex payment
mechanisms, toll hikes, unstable economic indicators, lack of transparency and financial
accountability etc. (Edwards et al., 2004).

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These therefore call for the need to critically examine the factors that are influential in the
effective management of PPP projects at the operational stage. The current paper, which is
part of a broad research study that aims to develop a best practice framework for PPP
implementation in Ghana drawing on international experiences (Osei-Kyei and Chan, 2016),
explores our understanding of the factors that contribute to successful management of PPP
projects at the operational period. Specifically, it aims to (1) categorise the CSFs for
operational management of PPPs using exploratory factor analysis technique; and (2)
determine the significance and ranking of the operational management CSF categories using
fuzzy synthetic evaluation technique.

It is hoped that the research output would inform PPP practitioners (government departments
and private service providers) on the appropriate measures and management techniques to
adopt in order to expedite the performance of PPP projects at the operational stage. Also, the
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methodology employed would enable management experts to reliably select the operational
management CSFs for their projects.

2.0 Literature review

2.1 Overview of research studies on CSFs for PPPs

Rockart (1982) defined CSFs as “the few key areas of activity where favourable results are
absolutely necessary for a manager to achieve his/her goal”. The CSF model has widely been
adopted for management measures in different disciplines since the 1970’s (Mohr and
Spekman, 1994; Berube and Swanson, 2005; Mahanti and Evans, 2012)). Similarly in PPP
research, studies on the CSFs for PPPs have been extensively covered since the inception of
PPP (Tang et al, 2010; Ke et al., 2009). Different research approaches including case studies,
questionnaire survey and mix of research methods have been employed to unravel the factors
which contribute to the success of PPP projects (Osei-Kyei and Chan, 2015a). However, a
thorough examination of previous studies suggests that despite the wide coverage of PPP
CSFs, very little attention has been given to the CSFs relevant to the operational management
of PPP projects.

For example, Li et al. (2005a) by means of a questionnaire survey grouped 18 CSFs into five
major components. These include; “effective procurement”, “project implementability”,
“government guarantees”, “favourable economic condition” and “available financial market”.
This study however focused on the overall implementation of PPPs and contributes
marginally to the operational management of PPP projects.

Similarly, Chan et al. (2010), Cheung et al. (2012) and Ismail (2013) adopted the
questionnaire template developed by Li et al. (2005a) and explored the CSFs for PPP projects
in China, Hong Kong and Malaysia respectively. The commonly reported CSFs in these
studies include transparent and efficient procurement process, good governance, favourable
legal framework, stable macroeconomic conditions, shared responsibility between public and
private sectors and sound economic policy. Like previous studies, research outputs of these

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studies contribute much to the general implementation of the PPP concept but offer a trivial
contribution to the proper management of PPP projects at the operational period.

Focusing on the feasibility stages of PPPs, Ng et al. (2012) by means of a questionnaire


survey on PPP experts in Hong Kong identified “the existence of long term demand”;
“project alignment with government strategic objectives” and “strong private consortium” as
the key successful ingredients at the initial stages of PPP project implementation.
Additionally, Tang et al. (2012) through a questionnaire survey grouped CSFs at the early
briefing of PPP projects into four major categories with several sub factors. The categories
include procurement, stakeholder, finance and risk factors. Obviously, the findings inform
practitioners of the early briefing of PPP projects but offer little practical understanding on
the operational management of PPP projects.

The foci of previous studies on the general implementation and preparatory stages of PPP
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projects are quite understandable. This is because most construction management researchers
may have found it challenging to conceptualise issues relating to the operational phase of PPP
projects especially when most of the PPP projects globally were at the early implementation
stages (Dixon et al. 2005). However, the emerging problems of PPP projects which have
begun operation, have made it possible to envisage the techniques and issues which are
essential in the proper management of operational PPPs.

2.2 Operational management CSFs for PPP projects

Operational management encompasses activities arising from responsibilities retained by


parties and day-to-day administration of the PPP contract (EPEC, 2014). Practically,
operational management covers the operation and maintenance of the project (Liu et al.,
2014). Though operational management CSFs for PPPs have received little attention in the
normative literature, this section briefly reviews relevant institutional and academic literature.

A study conducted by the Partnerships U.K. (2006) on the operational management of 105
PFI projects revealed some important CSFs. Their study aimed at assessing the impact of pre-
defined factors on the performance of operational PFIs. Some of the factors assessed include
the payment mechanism adopted, user satisfaction, variations in contract management,
stakeholder management and dispute resolution mechanism. Essentially, their findings
indicate that 78% of private operators attest to the large effect of payment structure on the
operational efficiency of PPP/PFI projects. The study concluded that simplified and well-
structured payment mechanism reduces resource requirement and improves contractor
relations which therefore enhance operational efficiency of PFI/PPP projects.

Also, Edwards et al. (2004) evaluated the performance of operational PFI projects in the road
and hospital sectors. Their study focused on the first eight transport design, build finance and
operate (DBFO) projects in England and the first 13 PFI hospitals implemented in the U.K.
The study reveals three broad categories of CSFs namely: partnership and contract
management, value for money and risk transfer, and financial reporting and accountability.

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Additionally, other CSFs such as reliable service delivery, project performance monitoring,
acceptable user fee charges, open and constant communication, performance payment
deduction, long term demand for project facility and minimizing contract variations have
been reported as relevant in managing PPP projects at the operational stage (Robinson and
Scott, 2009; Abdul-Aziz and Kassim; 2011; Meng et al., 2011; Jacobson and Choi, 2008;
Oyedele, 2012; Doloi, 2012; Abdel Aziz, 2007).

Following the thorough review of related literature, 19 nominated CSFs for operational
management of PPP projects were identified (Osei-Kyei and Chan, 2016). Table 1 shows the
CSFs with their detailed descriptions for clarity.

[Please Insert Table 1 here]

3.0 Research methodology


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3.1 International expert survey

The study adopted a questionnaire survey approach. The international expert survey was
conducted in April, 2015. Questionnaire survey is one of the widely used methods in PPP
research to measure and evaluate the relationship existing in practitioners’ perceptions and
opinions (Osei-Kyei and Chan, 2015a; Spector, 1994). In this study, respondents were
requested to rate on a seven point Likert scale the CSFs for operational management of PPPs
(Osei-Kyei and Chan, 2016). The measurement scale adopted is considered adequate because
it eliminates the problems of leniency and central tendency often associated with ordinal
scales (Chan and Tam, 2000). Additionally, the seven point Likert scale has been used for
similar studies in construction management research (e.g. Ameyaw et al., 2015a; Ameyaw et
al., 2015b).

A purposive sampling approach employing pre-defined criteria was used in selecting experts
worldwide. Generally, an expert refers to an individual with special skill/knowledge in a
profession or a person holding a higher office in a professional institution (Ameyaw and
Chan, 2015a). The experts were selected based on these pre-defined criteria: 1) the
respondent should have extensive working or research experience in PPP project delivery, the
respondent should also have in depth knowledge or practical experience on the operational
management of PPP projects and lastly the respondent should have in-depth knowledge on
PPP project success (Osei-Kyei and Chan, 2016). In total, 310 potential experts were sourced
and identified from dedicated PPP private organizations, state agencies (including
Partnerships Victoria, Partnerships UK, The Canadian Council for PPP), international
development banks (including World Bank, International Finance Corporation, Asian
Development Bank) and PPP related publications in top-tier peer-reviewed academic journals
and books (Osei-Kyei and Chan, 2016). Following the identification of potential experts,
questionnaires were then sent out by e-mails with a given option of responding through the
“Survey Monkey” online questionnaire platform. After sending series of reminders within the
four weeks period given to respondents, a total of 45 responses were received. However,
three of the responses were found to be incomplete and therefore were discarded remaining

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42 valid responses for further analysis (Osei-Kyei and Chan, 2016). Though a low response
rate of approximately 14% is recorded, the sample size of 42 is considered reasonable when
compared with similar studies (Zhang, 2004, 2006, 2005 (46 responses)) (Osei-Kyei and
Chan, 2016). However, despite the methodological limitations of the small number of
responses (42), small samples are not rare in an international e-mail/web-survey based
research in PPP studies (e.g. see Ameyaw and Chan, 2015a (35 responses out of 326);
Salman et al., 2007 (15 out of 188 for first survey and 12 out of 128 for second survey);
Sachs et al., 2007 (29 responses)) (Osei-Kyei and Chan, 2016). Notwithstanding, the number
of years of industrial and/or research experience of experts (Table 2) render the richness and
authenticity of the survey responses of this study.

The background information and geographical distribution of respondents are presented in


Tables 2 and 3 (Osei-Kyei and Chan, 2016). From Table 2, it could be realised that there is
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quite balanced view for the study because 43% of respondents came from the academic sector
who often acts as project management consultants/advisors in PPP project delivery, whereas
57% of respondents came from the industrial sector (public and private sectors) who are also
exposed to the technicalities of PPP projects. As previously emphasized, most of the
respondents have extensive industrial/ research years of experience with 86% having more
than 6 years of experience.

[Please Insert Table 2 here]

[Please Insert Table 3 here]

It is also noticed that though the study captures responses from different countries, more
responses came from Australia and the U.K. This is not surprising because more PPP
projects at the operational phase are found in these countries compared with others. This in
fact reaffirms the validity and reliability of the findings from this research study (Osei-Kyei
and Chan, 2016).

3.3 Statistical analysis methods adopted.

The Statistical Package for Social Sciences (SPSS) 21.0 was used to perform statistical
analysis including factor analysis and fuzzy synthetic evaluation (FSE) modelling on the
questionnaire survey data.

Factor analysis technique is often used to reduce a set of many inter-related variables to a
relatively small number of individual groupings (Brown, 2015). It is a widely adopted
multivariate statistical technique in construction management research to identify and
interpret non correlated clusters of elements (Fang et al., 2004). Similarly this technique was
adopted in this study to regroup the large number of CSFs to a smaller and critical one.

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The FSE technique was also adopted in this study purposely to establish the criticality/
importance level of each CSFG (factor structure) in managing operational PPP projects. The
fuzzy evaluation tool has been used in different research fields to assess multi-criteria
decision making including health risk assessment (Sadiq and Rodriquez, 2004), risk
assessment and allocation (Ameyaw and Chan, 2015b; Liu et al., 2013; Xu et al., 2010a) and
project performance measurement (Yeung et al., 2007).

This modelling tool has the ability to handle complicated evaluations with multi-levels and
attributes (Xu et al., 2010b). Moreover, the method has the potential to objectify the
subjective opinions and perceptions provided by experts (Sadiq and Rodriquez, 2004). Hence,
the FSE was considered very appropriate in this study to ascertain the most critical factor
groupings (CSFGs) for managing PPP projects at the operational stage. For more basic details
of FSE, interested readers should refer to Ameyaw and Chan (2015b); Liu et al. (2013) and
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Xu et al. (2010a).

According to Liu et al. (2013) and Xu et al. (2010b), the procedure for carrying out the FSE
modelling is as follows:

1. Determine a basic set of criteria or factors. Π={f1, f2, f3 ,…,fm}. Where m is the number
of criteria.

2. Establish a set of grade alternatives. E= {e1, e2, e3, …en}. The set of grade alternatives
are the scale measurement adopted for the study. In this regard, the 7 point Likert
scale is the set of grade alternatives. For example, e1=extremely low important,
e2=very low importance, e3=low importance, e4=moderate, e5=important, e6=very
important and e7= extremely important.

3. Establish the weightings for each criterion or factor. The weightings (w) for each
criterion can be computed from the mean scores. Wi = {w1,w2,…,wm} where (0 ≤ w1
≤ 1)

4. Compute for the fuzzy evaluation matrix for each criterion (factor). The matrix is
expressed as R= (rij)mxn, where rij is the degree to which alternative e satisfies the
criterion fm.

5. Determine the results for the evaluation by considering the weighting vector and the
fuzzy evaluation matrix using equation:

D = Wi o R i (Eqn 1)

Where, D is the final evaluation matrix and ○ is a fuzzy composition operator.

6. Establish the final results by normalizing the final evaluation matrix using equation:
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Index for each CSFG = ∑D× E
i =1
(Eqn 2)

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From this equation, the index for each CSFG for operational management of PPP
projects is determined.

4.0 Data analysis and results

4.1 CSFGs for operational management of PPP projects

Factor analysis (Principal Component Analysis) was conducted based on the mean rankings
of the 19 CSFs (Table 4 presents the mean ranking of operational management CSFs).
However, considering factor analysis technique for factor groupings, a recommended variable
to sample size ratio of 1:5 is often a prerequisite (Lingard and Rowlinson, 2006).
Nevertheless the appropriateness of this analysis technique to a sample data could also be
determined through some preliminary statistical tests including correlation and anti-image
matrix, KMO, Bartlett’s test of Sphericity and reliability tests (Ahadzie et al., 2008). Hence,
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if the statistical tests values are proved favourable despite the non-conformant with the
recommended sample size ratio, factor analysis technique could proceed with full confident
and reliability (Osei-Kyei et al., 2014; Li et al., 2005a; Li et al., 2005b). In this regard,
preliminary tests were conducted to ascertain the appropriateness of factor analysis technique
in this study.

First, the internal consistency of the data was checked using the Cronbach’s alpha model
which has values ranging between 0 and 1. As suggested by Nunnally (1978), a Cronbach’s
alpha value greater than 0.70 is acceptable, indicating a good internal consistency and
reliability of the data set. A high value of 0.822 is achieved for the data set specifying the
high level of consistency and the reliability of the research instrument. The relationship
among factors was measured based on the partial correlation coefficients (correlation and
anti-image correlation matrix). The correlation matrix calculated indicates a strong
correlation among the 19 factors except for 3 factors (CSF3, CSF15 and CSF18) which rather
have very low correlation coefficient with other factors, recording coefficient values less than
the recommended 0.30. Prior to their elimination, further analysis using the anti-image
correlation matrix was conducted which reaffirmed their elimination as their Measure of
Sampling Adequacy (MSA) values (CSF3 - 0.421, CSF15 - 0.450, CSF18 - 0.460) were
below 0.50 (Hair et al., 1998).

[Please Insert Table 4 here]

After eliminating the rogue items, the correlation and anti-image correlation matrix was
recalculated and all the 16 remaining factors have their correlation values above 0.30 as well
as their MSA values above 0.50 (ranging from 0.514 – 0.862). The overall MSA value (KMO
test statistics) for the data set is 0.739 which is within the acceptable range, signifying the
suitability of the data for factor analysis (Norusis, 2008).

Additionally, the value of the Bartlett’s test of Sphericity is significant with a chi-square
value of 252.535 and a p- value of 0.00. Hence the hypothesis is rejected suggesting that the
population correlation matrix is not an identity matrix (Norusis, 2008).

8
The principal factor extraction using varimax rotation for the 16 items produced a 5 – factor
solution with eigenvalues greater than 1.0, explaining 69.982% of the total variance. Varimax
rotation was chosen because it simplifies interpretation as the principal component factor is
represented by small number of variables (Abdi, 2003). As shown in Table 5, all factor
loadings of the variables are close or above 0.50 with 12 of them exceeding 0.60, which
clearly signifies the appropriateness of the sample size (Hair et al., 1998; Chan et al., 2010).
The five factor groupings are labelled as (shown in Table 5):

Factor 1- Proficient service delivery and adequate legal structures

Factor 2- Simplified payment mechanism and consistent project monitoring

Factor 3- Effective contract variations management

Factor 4- Suitable stakeholder management mechanism


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Factor 5- Environmental health and safety control

It is believed that the 5 factor solution derived forms the underlying CSFs groupings for
operational management of PPP projects. However, considering the derived factor structures,
there still remains a question which is;

i. Which factor groupings should be considered more important by practitioners when


managing PPP projects at the operational stage?

This question is subsequently addressed using the fuzzy predictive tool.

[Please Insert Table 5 here]

4.3 Evaluating the criticality of the CSFGs for operational management of PPP projects
using FSE modelling

As previously indicated FSE tool was used to ascertain the importance of each CSFG using
the 19 CSFs as input variables. There are two levels of membership functions labelled in the
fuzzy modelling. The second level is the CSFs and first level is the CSFGs. Given these
levels, the fuzzy evaluation model is demonstrated as explained in the methodology section.

4.3.1 Determine the appropriate weightings for CSFs and CSFGs

The weightings for 16 CSFs and 5 CSFGs are established based on the mean score values
obtained from the questionnaire survey. Given the mean values, the weightings are computed
using Eqn (3) (Yeung et al, 2007):

Mi
Wi = Eqn (3)
∑ M ii
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Where: Wi is the weightings of a CSF/ CSFG; Mi is the mean score value of a CSF/CSFG

∑Mii is the summation of mean score values of all the CSFs/CSFGs.

The weightings for the 16 CSFs and 5 CSFGs are presented in Table 6.

4.3.2 Determine the membership function of each CSFG (First level) and CSFs (Second
level)

In order to establish the membership function of each CSFG, the membership function of
each CSF must be determined first. This therefore sets the basis for computing the
membership function of each CSFG. The membership function of a CSF is derived from the
evaluation by the experts given the grades for selection (i.e 1- extremely low important, 2-
very low importance, 3- low importance, 4- moderate, 5- important, 6- very important, 7-
extremely important). For example, the survey results indicated that 9.5% of the experts rated
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“reliable and effective service delivery (CSF5)” as moderate, 23.8% as important, 45.2% as
very important and 21.4% as extremely important. In this regard the membership function for
this particular factor is given as Eqn (4):

0.00 0.00 0.00 0.095 0.238 0.452 0.214


MF(CSF 5) = + + + + + + Eqn (4)
ELI (1) VLI (2) LI (3) M (4) I (5) VI (6) EI (7)

This is also written as (0.00, 0.00, 0.00, 0.10, 0.24, 0.45, and 0.21). Adopting the same
approach the membership functions of the remaining CSFs are computed and this is shown in
Table 7. After establishing the membership functions for all the CSFs, the membership
function of each CSFG is also determined using Eqn (1) (refer to methodology section)

[Please Insert Table 6 here]

D = Wi ○ R, where Wi is the weightings for all the CSFs under each CSFG and R is the
function matrix for each CSFG.

Using CSFG5 (Factor 5) as an example, the weightings for all the CSFs under this factor are
expressed as:

0.00 0.00 0.05 0.17 0.48 0.26 0.05


Wi = (0.488, 0.512) and R = ቚ ቚ
0.00 0.00 0.00 0.14 0.43 0.36 0.07
Therefore the membership function of CSFG5 (Factor 5) is calculated as:

0.00 0.00 0.05 0.17 0.48 0.26 0.05


D5 = (0.488, 0.512) x ቚ ቚ
0.00 0.00 0.00 0.14 0.43 0.36 0.07
D5 = (0.00, 0.00, 0.02, 0.15, 0.45, 0.31, 0.06)

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Calculating in this way, the membership functions for the remaining CSFGs are computed
using the same approach and this is shown in column 5 in Table 7. After determining the
membership function of each CSFG, the criticality (index) for each factor grouping is
calculated using Eqn (2) (refer to methodology section):
7
Index for each CSFG = ∑D× E
i =1

Therefore, (CSFG1) = (0.00, 0.00, 0.00, 0.05, 0.30, 0.46, 0.19) x (1, 2, 3, 4, 5, 6, 7) = 5.79

(CSFG2) = (0.00, 0.00, 0.01, 0.05, 0.29, 0.41, 0.24) x (1, 2, 3, 4, 5, 6, 7) = 5.82

(CSFG3) = (0.00, 0.02, 0.09, 0.29, 0.31, 0.26, 0.03) x (1, 2, 3, 4, 5, 6, 7) = 4.79

(CSFG4) = (0.00, 0.00, 0.00, 0.07, 0.44, 0.37, 0.11) x (1, 2, 3, 4, 5, 6, 7) = 5.47
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(CSFG5) = (0.00, 0.00, 0.02, 0.15, 0.45, 0.31, 0.06) x (1, 2, 3, 4, 5, 6, 7) = 5.19

[Please Insert Table 7 here]

The summary of results for the criticality/ importance level (index) for each CSFG is
presented in Table 8.

[Please Insert Table 8 here]

5.0 Discussion of results

As presented in Table 8, the evaluation model has indicated which factor grouping is critical
in managing PPP projects at the operational stage. Simplified payment mechanism and
consistent project monitoring ranks 1st with an index of 5.82 which is considered very
important, followed by proficient service delivery and adequate legal structures, suitable
stakeholder management mechanism, environmental health and safety control and effective
contract variations management with indices of 5.79, 5.47, 5.19 and 4.79 respectively. The
essence of the indices and rankings is to considerably inform practitioners of the key
operational management issues which need critical attention in PPP project delivery. This
would therefore enable a more effective management of PPP projects at the operational stage.

5.1 Simplified payment mechanism and consistent project monitoring (CSFG 2)

This factor grouping accounts for 14.798% of the total variance in the factor analysis and
ranks first with an index of 5.82, which is regarded as very critical in the operational
management of PPP projects. The factor structure consists of four sub factors which relate to
payment systems and project monitoring. The sub factors include acceptable level of user fee
charges, efficient and well-structured payment mechanism, consistent project performance
monitoring and long term demand for public facility. Among the sub factors, acceptable level

11
of user fee charges had the highest factor loading of 0.819 and scored a mean value of 5.50
(refer Table 4). User fee has always been a concern to civil society groups and trade unions
during the operational phase of PPP projects especially in developing regions where income
levels are substantially low (Sahn and Younger, 2009). The unexpected hikes of user charges
are often not well accepted by users and ends up in public agitations and protests (Kwan,
2005). A typical example is the Lekki Toll Road Concession project in Nigeria which
attracted lots of critics and public protests due to the unexpected toll increments (Osei-Kyei
ad Chan, 2015b). It is therefore considered prudent and effective for project parties to agree
with external stakeholders on the most favourable adjustment mechanisms for user fees
throughout the operational phase of the project (Kumaraswamy and Morris, 2002).

The next highest factor loading is efficient and well – structured payment mechanism with a
mean value of 6.50, which is regarded extremely important. The significance of this CSF is
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not surprising as the type of payment structure adopted for a PPP project is a huge incentive
to private investors and that a complex payment mechanism could considerably affect the
performance of a project (Edwards et al, 2004; Robinson and Scott, 2009). Several payment
structures exist in PPP projects including direct user charges, availability based payment
(service) system, safety payment system, end of term payment, shadow toll, user satisfaction
payment etc. (Abdel Aziz, 2007; Morrison, 2013; Duncan, 2006). However, the type of
payment mechanism adopted greatly depends on the objective of the procuring authority
(Abdel Aziz, 2007).Notwithstanding, it is very essential for proper feasibility to be conducted
to ascertain the appropriate payment structure for a proposed PPP project (Li et al, 2005a).

Consistent project performance monitoring is the third highest factor loading of 0.604. This
factor also has a mean value of 5.69 and it is considered very important in PPP operational
management. As emphasized by the Partnerships U.K (2006), the regular monitoring of
operational PPP projects helps project parties to detect any potential problems early and also
to capture lessons for future project implementation. In fact, the frequent monitoring of
projects at the operational stage enables the contracting authority and private consortium to
accurately evaluate the performance objectives set for the project. However, it is worth noting
that the responsibility of project monitoring is a collective effort of project parties (public and
private organizations), however it is not a responsibility of a single party (Robinson and
Scott, 2009).

The last factor loading in this factor grouping is the long term demand of public facility. This
CSF has a loading of 0.599 with a mean value of 5.52. Generally, PPP projects are expected
to have a long term demand capable to generate substantial continuous income stream to
investors (Mladenovic et al., 2013; Meng et al., 2011; Ozdoganm and Birgonul, 2000).
Mostly, projects without such a continuous demand affect the expected investment returns to
investors. Nevertheless, ensuring a long term demand for projects at the operational stage
depends on the details of the project feasibility studies (Chan et al, 2010). A very good
feasibility study will assist project parties to envisage the demand flow of PPP projects over
the concession period (Dulaimi et al., 2010).

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5.2 Proficient service delivery and adequate legal structures (CSFG 1)

This factor grouping accounts for 29.377% of the total variance of the factor analysis and
ranks second with an index of 5.79. The factor consists of five sub factors related to the
project service delivery and adequate legal procedures. Its sub factors include reliable and
effective service deliver, well-structured legal dispute resolution mechanism, financial
accountability and transparency, periodic evaluation of service delivery and timely
rectification of reported operational problems. The CSF “reliable and effective service
delivery” has the highest factor loading of 0.807 with a mean value of 5.78. Generally,
ensuring a reliable project service delivery is an issue which cannot be compromised in
managing PPP projects (Ng et al., 2012; Meng et al., 2011). The service delivery of PPP
projects actually has to be uninterrupted and also meet the satisfaction of users. Providing
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preventive maintenance rather than corrective maintenance could help service providers to
ensure an uninterrupted service delivery (Budai et al., 2006).

The second highest factor loading in this group is well structured legal dispute resolution
mechanism which has a mean score of 6.04. Other researchers have also emphasized the
significance of well-structured legal mechanism in PPP projects (Cheung et al., 2012; Jamali,
2004; Hwang et al., 2013). Nevertheless, given the long term operational period of PPP
projects, there is always a possibility of disputes over contract arrangements especially in
complex projects. In this regard, it is essential that project parties agree on a well-defined
resolution procedure during contract negotiations than to resort to court actions when a
dispute erupts (Delmon, 2009).

Financial accountability and transparency has the third highest factor loading in this group
with a mean score 5.83. Certainly, financial accountability and transparency could help
project parties to meet their expected investment returns. Often, making the financial status
and reports of operational projects readily available to all stakeholders including the media
reduce the negative perceptions the general public may have on PPP projects (Edwards et al.,
2004). Hence, it is essential for project parties to adopt adequate measures to make available
the financial status of operational PPP projects not only to shareholders but also to external
stakeholders (general public).

The fourth ranked CSF in this factor grouping is periodic evaluation of service delivery
which has a loading of 0.569. The periodic evaluation of operational projects is very crucial
in measuring the progress of project’s objectives. Additionally proper evaluation of service
enables the private consortium to meet the demands and satisfaction of users. In this regard
proper evaluation mechanism must be adopted to periodically evaluate services.

The last factor loading in this group has a significance value of 0.486 which is timely
rectification of reported operational problems. The quick response to reported defects of
operational PPP projects contributes to the effective delivery of the project and more
importantly it increases user satisfaction for the project facility. Practical measures such as a
24 hour customer services could be in place to respond to defects and enquiries from

13
users/customers. This will possibly increase the rate of satisfaction for the facility by the
users.

5.3 Suitable stakeholder management mechanism

This factor structure accounts for 7.43% of the total variances of CSFs and ranks third with a
performance index of 5.42. There are 3 sub factors in this group of which all factors relate to
stakeholder (internal and external) relationship within PPP arrangements. The CSFs in this
group includes open and constant communication among stakeholders, employment of highly
skilled and competent workmanship in service operations and performance failure payment
deductions. Open and constant communication among stakeholders recorded the highest
factor loading of 0.859 in this factor grouping. Undoubtedly, frequent communication and
transparency among both internal and external stakeholders facilitate stakeholders’ trusts and
deepens commitment towards a better management of the operational project. In actual fact it
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is highly essential for the key project parties to instigate an appropriate mechanism to manage
all stakeholders to the project. The concerns and interests of all stakeholders must be properly
managed to avoid the feeling of being sidelined by some stakeholders.

Employment of highly skilled and competent workmanship in service operations ranks


second in this group with a significance value of 0.679. It is important that as part of a proper
stakeholder management, the key project parties must incorporate and make use of the local
workmanship that are also competent to play some role in the operation of the project. Such
attempt could help improve the external stakeholder management for operational PPP
projects.

The last CSF in this group is performance failure payment deductions. This CSF has a
loading of 0.554 and it scored a mean value of 5.30. Payment deduction is mostly enforced
when the service provider fails to rectify a reported problem (Oyedele, 2012), however such
strategy to ensure PPP operational efficiency must be properly managed and negotiated in
order to avoid contract litigations and disputes (Oyedele, 2012).

5.4 Environmental health and safety control

This factor grouping consists of two sub factors namely effective safety management and
environmental health control and stakeholder consultation on user fee adjustments. The factor
accounts for 6.565% of the total variance of the factor analysis and ranks fourth with an index
of 5.19. Among the two factors in this group; effective safety management and environmental
health control recorded the highest factor loading of 0.806. In fact previous research studies
have pointed out the importance of environmental health and safety towards the overall
performance of projects (Tiong, 1996; Jefferies et al., 2002). PPP projects which
continuously pose health risks to the environment often faces agitations from civil
organization groups which could hamper the operational efficiency of the project. In this
regard, it is highly recommended that projects undergo a thorough environmental health and
safety assessments prior to their implementation (Zhang, 2006). Similarly prior to the
adjustment of user fees during operation, proper consultation has to be done with
stakeholders in order to avoid agitations which often occurs in user fees adjustments.

14
5.5 Effective contract variations management

This factor component accounted for 11.812% of the total variance and ranks fifth with a
performance index of 4.79. It is however critical in ensuring the proper operational
management of PPP projects. The CSFG consists of two sub factors which relates to the
management of contract variations at the operational stage of PPP projects. The sub factors
include streamline of approval process to large contract variations and effective changes in
shareholdings in private consortium. Among the two sub factors, streamline of approval
process to large contract variations has the highest loading of 0.871. Given the long term
contractual arrangement of PPP projects at the operational phase, undeniably there is a
possibility of some variations in the contract arrangement (service scope and payment
mechanism) (Hwang et al., 2013). However, the ability to manage these variations is very
important in ensuring the success of operational PPP projects. Approval process has to be
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streamlined to allow variations especially for larger ones to be fast tracked, since unnecessary
delays and excessive bureaucracy could affect project parties’ commitment to the project.

Effective change of shareholdings in private consortium has the lowest factor loading in this
group. Changes in the board of a Project Company could affect the management structure and
approach adopted during the operation of PPP projects (Partnership UK, 2006). Hence, it is
very important for the private consortium to be very conscious of the changes in the
management structure and board during the operations of PPP projects.

6.0 Conclusion

This paper has studied the CSFs for managing PPP projects at the operational stage with two
derived objectives; i) to identify the CSFGs (underlying CSFs structure) for operational
management of PPP projects and ii) to evaluate the critical/ importance level of each CSFGs
(factor structure) for PPP operational management. The paper adopted a questionnaire survey
on targeted international PPP experts to evaluate 19 nominated CSFs for operational
management of PPPs. The factor analysis technique (Principal Component Analysis) was
used to establish the factor structure for the set of 19 CSFs. The results indicate five non
correlated clusters of PPP operational management CSFs; these include proficient service
delivery and adequate legal structures, simplified payment mechanism and consistent project
monitoring, effective contract variations management, suitable stakeholder management
mechanism and environmental health and safety control. Further analysis using the FSE
shows that “simplified payment mechanism and consistent project monitoring” is the most
critical CSFG for operational management, followed by proficient service delivery and
adequate legal structures, suitable stakeholder management mechanism, environmental health
and safety control, and effective contract variations management.

The research outputs of this study are very impactful in ensuring the operational efficiency of
PPP projects. First, it informs practitioners both public authorities and private operators of the
underlying practical management techniques to employ in optimizing operational
performance. Second, the methodology adopted facilitates a more reliable selection of
operational management CSFs for PPP projects by management experts. Lastly, the lists of

15
CSFs would enhance the robustness of the existing checklist of CSFs for general PPP project
implementation.

7.0 Limitations and future research

The generalizability of the findings of the study is limited considering certain factors. First,
the percentage of international PPP experts involved in the study is low despite efforts to
maximize responses (Osei-Kyei and Chan, 2016). Nevertheless the years of research/
industrial experience of respondents and the wide coverage of different cultural background
(18 countries from 5 regions globally) contribute to the authenticity of the survey responses
(Osei-Kyei and Chan, 2016). Future research could adopt a more locally focused interviews
and case study analysis to unravel CSFs in managing operational PPPs. Second, although a
comprehensive literature is conducted to develop a robust list of CSFs, the checklist of CSFs
could further be improved. Nonetheless, the adopted checklist of CSFs captures most of the
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relevant management issues related to operational PPPs. Therefore, the findings of the study
are useful and relevant for future reference.

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Table 1. Summary of operational management CSFs for PPP projects

Operational management CSFs Descriptions Sources


Efficient and well-structured The existence of clearly defined and agreed payment Abdel Aziz (2007);
payment mechanism structure to generate targeted revenue Robinson and Scott
(2009)
Well-structured legal dispute The establishment of a clear resolution approach to address Jamali (2004);
resolution mechanism disputes between stakeholders Hwang et al (2013)
Timely rectification of reported Spontaneous response to users concerns on operational Partnerhsip U.K. (2006)
operational problems defects
Streamline of approval process to Approvals to contract variations during operations are fast Partnerhsip U.K. (2006)
large contract variations tracked and avoid excessive bureaucratic process
Stakeholder consultation on user Public users and trade unions are consulted prior to user fee Edwards et al. (2004)
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fees adjustment adjustments


Stable macroeconomic indicators Stability of interest, inflation and exchange rates during Li et al. (2005a);
operational phase of PPP projects Chan et al. (2010)
Reliable and effective service Constant and quality service delivery by the private Robinson and Scott
delivery operator (2009); Ng et al (2012);
Meng et al (2011)
Periodic evaluation of service Frequent assessment of service delivery by the private Partnerhsip U.K. (2006)
delivery sector
Performance failure payment Deducting an annuity based payment in case the private Oyedele (2012);
deduction sector fails to rectify a defect or reported problem Partnership U.K. (2006)
Open and constant communication Transparency and frequent interaction with stakeholders Tang et al (2012);
among stakeholders including external parties Jacobson and Choi
(2008)
Minimizing contract variations Reducing changes in contract agreements during the Edwards et al (2004)
operational phase
Long term demand for public Continuous demand for service delivery Mladenovic et al. (2013);
facility Ozdoganm and Birgonul
(2000)
Financial accountability and Publicly making available financial reports of the project Abdul-Aziz and Kassim
transparency facility (2011);
Edwards et al. (2004)
Employment of highly skilled and Qualified and skilled expertise are employed in the project Partnerhsip U.K. (2006)
competent workmanship in service service delivery
operations
Effective safety management and Proper health and environmental safety control are ensured Liu et al. (2014)
environmental health control during project service delivery
Effective operational risk Operational risks are properly allocated and mitigated Edwards et al. (2004)
management
Effective changes of shareholdings Changes in the management of private consortium which Partnerhsip U.K. (2006)
in private consortium does not affect the service delivery of project
Consistent project performance Regular assessment of operational performance of the Edwards et al. (2004);
monitoring project Partnerhsip U.K. (2006)
Acceptable level of user fee Charging of user fees which are reasonable and agreed by Tiong (1996);
charges stakeholders Zhang (2005)

Source: Adapted and expanded from Osei-Kyei and Chan (2016)

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Table 2. Background information of experts (Osei-Kyei and Chan, 2016)

Respondents Profiles Category No. of respondents Percentage (%)


Type of sector Academia 18 43
Industrial practitioners 24 57
Total 42 100

Experts years of research 10 years and below 17 40


and/or industrial experience 11- 20 years 17 41
in PPPs 21years and above 8 19
Total 42 100
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Table 3. Geographical background of respondents (Osei-Kyei and Chan, 2016)

Region Countries No. of Experts


Europe UK 5
France 3
Netherlands 1
Switzerland 1
Portugal 2
Greece 1
Spain 2
North and South America USA 2
Canada 3
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Brazil 1
Africa Nigeria 2
Kenya 1
South Africa 1
Asia Australia 13
China 1
Bangladesh 1
Hong Kong 1
Indonesia 1
Total 42

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Table 4. Mean rankings of operational management CSFs for PPP projects

No. Critical Success Factors Mean Std. Rank


Deviation
CSF1 Efficient and well-structured payment mechanism 6.50 0.55 1
CSF2 Well-structured legal dispute resolution mechanism 6.04 0.69 2
CSF3 Effective operational risk management 5.95 0.69 3
CSF4 Financial accountability and transparency 5.83 0.72 4
CSF5 Reliable and effective service delivery 5.78 0.89 5
CSF6 Timely rectification of reported operational problems 5.73 0.85 6
CSF7 Consistent project performance monitoring 5.69 0.78 7
CSF8 Open and constant communication among stakeholders 5.69 0.78 8
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CSF9 Periodic evaluation of service delivery 5.61 0.79 9


CSF10 Employment of highly skilled and competent 5.57 0.76 10
workmanship in service operations
CSF11 Long term demand for public facility 5.52 0.91 11
CSF12 Acceptable level of user fee charges 5.50 0.89 12
CSF13 Stakeholder consultation on user fees adjustment 5.35 0.82 13
CSF14 Performance failure payment deduction 5.30 0.78 14
CSF15 Minimizing contract variations 5.19 0.89 15
CSF16 Effective safety management and environmental health 5.09 0.90 16
control
CSF17 Streamline of approval process to large contract 5.07 1.02 17
variations
CSF18 Stable macroeconomic indicators 4.92 0.97 18
CSF19 Effective change of shareholdings in private consortium 4.45 1.08 19

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Table 5. Factor extraction and their loadings

Cumulative
Eigenvalue

explained

explained
variance

variance
loadings
Factor

% of

% of
No. Factor groupings (CSFG)

CSFG1 Proficient service delivery and adequate legal 4.7 29.377 29.377
structures
CSF5 Reliable and effective service delivery 0.807
CSF2 Well-structured legal dispute resolution mechanism 0.802
CSF4 Financial accountability and transparency 0.798
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CSF9 Periodic evaluation of service delivery 0.569


CSF6 Timely rectification of reported operational problems 0.486

CSFG2 Simplified payment mechanism and consistent 2.368 14.798 44.174


project monitoring
CSF12 Acceptable level of user fee charges 0.819
CSF1 Efficient and well-structured payment mechanism 0.812
CSF7 Consistent project performance monitoring 0.604
CSF11 Long term demand for public facility 0.599

CSFG3 Effective contract variations management 1.89 11.812 55.987


CSF17 Streamline of approval process to large contract 0.871
variations
CSF19 Effective change of shareholdings in private consortium 0.762

CSFG4 Suitable stakeholder management mechanism 1.189 7.43 63.417


CSF8 Open and constant communication among stakeholders 0.859
CSF10 Employment of highly skilled and competent 0.679
workmanship in service operations
CSF14 Performance failure payment deduction 0.554

CSFG5 Environmental health and safety control 1.05 6.565 69.982


CSF16 Effective safety management and environmental health 0.806
control
CSF13 Stakeholder consultation on user fees adjustment 0.748
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 6 iterations.

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Table 6. Weightings for the 16 CSFs and 5 CSFGs for PPP operational management

Weighting

Weighting
Total MS
for each

for each

for each
MS for
No. Factors and Factor groupings

CSFG

CSFG
CSFs

CSF
CSF5 Reliable and effective service delivery 5.78 0.199
CSF2 Well-structured legal dispute resolution mechanism 6.04 0.208
CSF4 Financial accountability and transparency 5.83 0.201
CSF9 Period evaluation of service delivery 5.61 0.194
CSF6 Timely rectification of reported operational problems 5.73 0.198
CSFG1 Proficient service delivery and adequate legal structures 28.99 0.327
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CSF12 Acceptable level of user fee charges 5.5 0.237


CSF1 Efficient and well-structured payment mechanism 6.5 0.280
CSF7 Consistent project performance monitoring 5.69 0.245
CSF11 Long term demand for public facility 5.52 0.238
CSFG2 Simplified payment mechanism and consistent project 23.21 0.262
monitoring
CSF17 Streamline of approval process to large contract 5.07 0.533
variations
CSF19 Effective change of shareholdings in private consortium 4.45 0.467
CSFG3 Effective contract variations management 9.52 0.107
CSF8 Open and constant communication among stakeholders 5.69 0.344
CSF10 Employment of highly skilled and competent 5.57 0.336
workmanship in service operations
CSF14 Performance failure payment deduction 5.3 0.320
CSFG4 Suitable stakeholder management mechanism 16.56 0.187
CSF16 Effective safety management and environmental health 5.09 0.488
control
CSF13 Stakeholder consultation on user fees adjustment 5.35 0.512
CSFG5 Environmental health and safety control 10.44 0.118
Total mean score for CSFGs 88.72

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Table 7. Membership functions of CSFs and CSFGs

No. CSFs and CSFGs Weightings Membership Functions of level 2 (CSFs) Membership Function of Level 1 (CSFGs)
for CSFs
Proficient service delivery and adequate legal structures
CSF5 Reliable and effective service delivery 0.199 (0.00, 0.00, 0.00, 0.10, 0.24, 0.45, 0.21) (0.00 0.00 0.00 0.05 0.30 0.46 0.19)
CSF2 Well-structured legal dispute resolution mechanism 0.208 (0.00, 0.00, 0.00, 0.00, 0.21, 0.52, 0.26)
CSF4 Financial accountability and transparency 0.201 (0.00, 0.00, 0.00, 0.00 0.36, 0.45, 0.19)
CSF9 Period evaluation of service delivery 0.194 (0.00, 0.00, 0.00, 0.07, 0.36, 0.45, 0.12)
CSF6 Timely rectification of reported operational problems 0.198 (0.00, 0.00, 0.00, 0.07, 0.31, 0.43, 0.19)
Simplified payment mechanism and consistent project
monitoring
CSF12 Acceptable level of user fee charges 0.237 (0.00, 0.00, 0.02, 0.10, 0.33, 0.45, 0.10) (0.00 0.00 0.01 0.05 0.29 0.41 0.24)
CSF1 Efficient and well-structured payment mechanism 0.28 (0.00, 0.00, 0.00, 0.00, 0.02, 0.45, 0.52)
CSF7 Consistent project performance monitoring 0.245 (0.00, 0.00, 0.00, 0.02, 0.43, 0.38, 0.17)
CSF11 Long term demand for public facility 0.238 (0.00, 0.00, 0.02, 0.07, 0.41, 0.36, 0.14)
Effective contract variations management
CSF17 Streamline of approval process to large contract 0.533 (0.00, 0.02, 0.00, 0.29, 0.31, 0.33, 0.05) (0.00 0.02 0.09 0.29 0.31 0.26 0.03)
variations
CSF19 Effective change of shareholdings in private 0.467 (0.00, 0.02, 0.19, 0.29, 0.31, 0.19, 0.00)
consortium
Suitable stakeholder management mechanism
CSF8 Open and constant communication among 0.344 (0.00, 0.00, 0.00, 0.02, 0.43, 0.38, 0.17) (0.00 0.00 0.00 0.07 0.44 0.37 0.11)
stakeholders
CSF10 Employment of highly skilled and competent 0.336 (0.00, 0.00, 0.00, 0.05, 0.45, 0.38, 0.12)
workmanship in service operations
CSF14 Performance failure payment deduction 0.32 (0.00, 0.00, 0.00, 0.14, 0.45, 0.36, 0.05)
Environmental health and safety control
CSF16 Effective safety management and environmental 0.488 (0.00, 0.00, 0.05, 0.17, 0.48, 0.26, 0.05) (0.00 0.00 0.02 0.15 0.45 0.31 0.06)
health control
CSF13 Stakeholder consultation on user fees adjustment 0.512 (0.00, 0.00, 0.00, 0.14, 0.43, 0.36, 0.07)
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Table 8. Importance level of CSFGs for operational management of PPP projects

No. Factor Groupings Index Importance Ranking


CSFG1 Proficient service delivery and adequate 5.79 Very important 2
legal structures

CSFG2 Simplified payment mechanism and 5.82 Very important 1


consistent project monitoring

CSFG3 Effective contract variations 4.79 Important 5


management

CSFG4 Suitable stakeholder management 5.47 Important 3


mechanism
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CSFG5 Environmental health and safety control 5.19 Important 4

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