Client’s flexibility in renovation projects with long-term DBFMO contracts

Construction project clients are faced with long-term commitments when opting for a DBFMO contract, the Dutch version of PFI. This way of contracting is characterized by the delivery of a full housing service to the client over a period of decades, offered by a construction consortium including contractors, financial institutions, architects and facility managers. This consortium is paid periodically for the performance delivered, depending on the level of fulfillment of performance according to the criteria specified in the client’s output specification. Increasingly, construction project clients – mainly governmental – choose to apply DBFMO contracts. However, based on foreign experiences, some concerns exist regarding whether clients have enough possibilities to adapt to changing business environments when committed to such long contracts. In this article, the contractual flexibility of DBFMO contracts is studied by applying the theory of negotiation power in a conjoint analysis. Goal of the study is to enable advisors to govern the contractual negotiation process – either in the contract formulation phase or in the latter exploitation phase – in trying to reach maximum contractual flexibility for clients. Results show that the factors ‘commitment within project management’, ‘availability of real outside options’ and ‘time’ are strongly related to the level of contractual flexibility in DBFMO contracts.