Factors that Impact on the Achievement of Value for Money in Public Sector Projects in the State of Kuwait

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CHAPTER ONE: INTRODUCTION

Introduction to Research Topic

Given the prevailing conditions of developing economies, Kuwait is one of those countries where the construction industry has developed profoundly. The government of Kuwait now depends on the construction industry for the development of infrastructural projects. The projected investment that Kuwait intends to make in this sector reveals further chances of its growth. The fact that infrastructural projects play a vital role in enhancing the country’s economic and social status cannot be ignored. Still, it is also true that Kuwait has natural resources such as oil, which is the country’s biggest asset and is utilised in generating millions of revenue. According to the study conducted by Al-Kattari, Fattouh, and Segal (2011,p. 10), it was found that different projects are under process in Kuwait, such as the Al- Zour import gas terminal project, which is a huge project between Kuwait National Petroleum Company and Hyundai engineering. The project aims to enhance the supply of gas in the country, especially in urban areas.

Value for money is the basic goal in all projects. The ultimate target behind starting mega projects is to increase the value for money, specifically in those cases where foreigners are involved. Foreign investments are basically the way to increase the value of money and ensure that foreign investments are involved in improving the country’s standard (Jarkas, 2013, p. 60). However, according to a report published by KKuwait’sChamber of Commerce, it was found that Kuwait is in dire need of increasing its power capacity from 12.5 GW to 30GW by the year 2030. The revenue generated from the projects is used in making debt payments. In 2015and 2016, Kuwait has started projects worth USD 30 billion in the revenue-generating sectors, oil and gas (Helmy, 2011). PPP has also been starting many mega projects in Kuwait which are generating large revenue for the country. Different private sectors have made investments in the construction industry also by collaborating with other sectors like education. Apart from this, PPP is considered a long-term contractual relationship with public and private employment. The investments that are made by PPP are for the long term growth of the construction and infrastructure industry. However, most of the construction industry in Kuwait is controlled and monitored by the government. The government has to ensure that the revenues generated from foreign investments add value to the economy.

In the light of the study conducted by Al-Mujamed, Fifield, and Power (2013, p. 45), it was found that the changes in the Kuwait system of foreign investments and partnerships have been changing with time. All the system changes lead towards enhancing the value of money and the need for PPP to be involved in construction and infrastructural projects. Since the year 2010, Kuwait has been involved in various projects involving foreign investments for economic growth and development. Apart from the oil and gas sector, the new plans designed to enhance the value of money include public-private partnerships (PPP). Kuwait has taken this step after the oil price had dropped drastically, and the country felt the need to make investments in other sectors. The development plan seeks to increase investments for the year 2015 to 2019.  However, it is difficult for Kuwait to make arrangements in this development plan because the country’s non-oil growth is only 4%.

Compared with other countries like the UK that use PPPs for development projects in schools, hospitals, and infrastructure, PPPs operate through build-own-operate (BOP) systems in Kuwait. Kuwait has various advantages if they use PPP for their developmental projects (Al Saadi and Abdou, 2013, p. 18). The biggest advantage for Kuwait is that it shall reduce the financial stress that the country has to face due to the increased amount of government spending. Though the government finances most Kuwait projects, if they use PPP so, they will attract private funding.

Aim and Objectives

The study’s aim is to show the predicted outcomes or results that the researcher intends to achieve at the end of the study. The following study had focused on developing economies like Kuwait, which are emphasising the growth of their economy through construction and infrastructure projects like transport and energy infrastructure. Value for money is obtained from the balance of benefits and costs of ownership. Public procurement is basically the activity carried out by the government to purchase goods and render services to carry out basic operations (Dawar and Oh, 2017). The process mainly involves the use of public funds. The following study will determine the impact on the achievement of value for money in KKuwait’spublic sector projects. Hence, this study aimed to evaluate the value of money in public sector projects in Kuwait.

Following are the set of objectives designed for this study:

• To understand the concept behind value for money.
• To determine the factors that affect the value of money in public sector projects in Kuwait.
• To determine the impact of inflation on value for money.
• To determine the impact of interest rate on value for money.
• To determine the impact of economic growth on value for money.
• To propose a framework for estimation of the factors which potentially affect the implementation of the VFM concept in PPP projects;
• To determine what factors significantly influence the implementation of the VFM concept in PPP infrastructure projects in Kuwait’s State.
• To provide recommendations for Kuwait’s public sector projects to enhance value for money.

Hypothesis

H_0:  Factors affecting value for money significantly impact public-private sector projects in Kuwait.

H_1:  Factors affecting value for money insignificantly impact public-private sector projects in Kuwait

Dissertation Structure

The dissertation is broken into five major chapters, mainly the introduction, literature review, methodology, findings, conclusion, and recommendations. The first chapter of the study focuses on the study’s background, research questions, and objectives. The chapter also discusses the proposed methodology, hypothesis, and limitations of the study.

Following the chapter of the introduction is the literature review. The literature review has covered a detailed discussion on the value of money and projects executed in public-private partnerships. It also includes a conceptual and theoretical framework for showing the topics’ theoretical importance and the relationship between variables. The major variables that are to be discussed in this chapter are infrastructure, procurement systems, different types of public-private partnerships, the impact of factors on the value of money for public-private partnerships in Kuwait, and the relationship between the factors of the value of money with private-public partnerships in Kuwait.

The third chapter of the study was a methodology in which the researcher discusses the data collection methods and techniques used for analyzing the data. The chapter includes research design, the approach used, sampling methods used for gathering data, and the data analysis technique used in the following chapters.

The fourth chapter of the study was the findings and analysis. In this chapter, the researcher analyses the data using qualitative, quantitative or both methods. It consists of a detailed description of the findings and its analysis by referring to the literature findings.

The last chapter of the study was concluded, and recommendations. The researcher provides a conclusion of the entire study, ensures that the objectives of the study are achieved, and provides a set of recommendations for future purposes.

Limitation of Research

Following are the set of limitations faced by the researcher:

• The time duration for gathering the data was limited.
• The budget for accessing credit-based journals and articles were less due to which all activities could not be carried out easily.
• The region of the study was too specific; therefore, all journals could not be accessed.
• The secondary data was not easily accessible because limited data was available regarding construction companies of Kuwait.
• Many journals and articles could not be opened without subscription or credit.