Management of Construction Firm Performance Using Benchmarking

In today’s highly competitive construction industry, there is a critical need for managers to continuously improve their firm’s efficiency and effectiveness. More specifically, managers need to know which performance measures are most critical in determining their firm’s overall success. Benchmarking, when done properly, can accurately identify both successful companies and the underlying reasons for their success. However, rigorous benchmarking within the construction industry still remains an embryonic field. This paper analyzes and critiques both the performance measures and metrics used traditionally in the construction industry and the benchmarking models developed to date for the industry. Based on the results of this analysis, benchmarking models using data envelope analysis are proposed that offer significant improvements over current models. The proposed models measure construction firm performance on a company-wide basis, foster trade-off analyses among various performance metrics, and tie the resources expended by construction firms to how well those firms perform overall. The models also provide managers guidance in determining how specific company resources can be reallocated to improve overall company performance.     

Dynamic Regression Models for Prediction of Construction Costs

Accurate prediction of construction costs in the market is essential to effectively estimate costs for construction projects. In the construction industry, cost indexes that are reported in series are often used to explain the change of construction costs. By tracking the trend of such quantitative contemporaneous cost index and making frequent and regular forecasts of the future values of the index, one can develop a deeper understanding of prices of resources used for construction. Incorporating such an understanding and prediction into estimating will help practitioners manage construction costs. This paper proposes two dynamic regression models for the prediction of construction cost index. Comparison of the proposed models with the existing methods proves that the new models provide several advantages and improvements.     

Strengths, Weaknesses, Opportunities, and Threats: Case Study of Consulting Firms in Shenzhen, China

After China became a member of the World Trade Organization, Chinese architectural, engineering, and project management consulting firms faced competition from not only their domestic competitors but also from foreign firms. As most Chinese consulting firms are used to operating under a protected setting, they may face difficulties competing in the globalized environment. This research involves a strengths, weaknesses, opportunities, and threats (SWOT) analysis of Chinese consulting firms based in Shenzhen; investigates how they respond to opportunities and threats; and recommends how foreign firms can respond to Chinese consulting firms’ SWOT. The case study research design is adopted. Using semistructured interview questions, face-to-face interviews were conducted with 23 Chinese consulting firms based in Shenzhen. Foreign firms’ responses are investigated through a case study of a U.S.-based consulting firm operating in China. The SWOT analysis reveals that Chinese consulting firms are lagging behind foreign firms in design and technical capability; experience in international projects; general and project management ability; and financial capacity. Industry practitioners from outside China who are contemplating entering the Chinese market can leverage on Chinese firms’ strengths by forming joint ventures with them. Foreign industry practitioners can take advantage of Chinese firms’ weaknesses by offering superior products and services which would improve their competitive advantage.     

Competitive Positioning in United States Construction Industry

The concept of competitive positioning is explored in the context of the United States construction industry along two dimensions—scope and mode of competition. The effects of competitive positioning on construction company performance are also explored while controlling the size of construction companies. Construction firms’ choices regarding scope and mode of competition and their economic performance are self-reported. The statistical analyses used in this research include cluster analysis, Duncan multiple range tests, one-way analysis of variance, and one-way analysis of covariance. Research findings point out that construction companies address the challenges of the industry by adopting a number of competitive positioning alternatives. Research findings also reveal that construction companies’ choices regarding scope and mode of competition are significantly related to company performance, measured by means of three criteria—profitability, growth in contract awards, and overall performance. Construction firms that place a strong emphasis on all modes of competition and adopt a neutral approach to scope of competition outperform their rivals.     

Fuzzy Intellectual Capital Index for Construction Firms

Construction firms are now operating in a new era. Gaining and sustaining competitive advantage in this era primarily depends on effective and efficient management of knowledge assets. This paper proposes a performance evaluation model called fuzzy intellectual capital index (FICI) that can guide construction business executives to effectively and efficiently manage their knowledge assets. FICI incorporates an intellectual capital performance measurement model with fuzzy set theory to adequately handle imprecision, vagueness, and uncertainty that prevail in this process. FICI uses the fuzzy-weighted average algorithm to compute the intellectual capital performance of architectural/engineering/construction (A/E/C) firms. It is an internal reporting model that can guide executives of A/E/C firms to evaluate their firm’s ability to achieve their strategic objectives and to pinpoint their firm’s strengths and weaknesses in order to neutralize threats and to exploit opportunities presented by today’s construction business environment. A real-world case study is presented to illustrate the implementation and utility of the proposed model. Implications for practitioners and directions for future research are discussed.     

Lawyerization of the Engineering and Construction Industry

Lawyerization has become more and more prevalent in the engineering and construction industry. Some would argue the merits of firms’ retaining lawyers on staff as providing cost savings on projects through averting potential litigation. Others view lawyers as increasing project costs due to increased overhead. Therefore, it is important to understand the pros and cons of lawyerization as viewed by the contractor, designer, owner, manufacturer, and supplier. This paper discusses the current role of lawyers in the engineering and construction industry and examines the factors that contribute to the lawyerization of the industry.     

Strategic Assets Driving Organizational Capabilities of Thai Construction Firms

This research study aims to identify strategic assets which currently drive and enhance the organizational capabilities of construction firms. There were 258 sets of questionnaires assessing the level of importance given to 106 substantial resources underlying six organizational capabilities of Thai construction firms that were analyzed. Using factor analysis, these 106 items were reduced to 14, which were termed strategic assets. These 14 strategic assets were then classified based on their influence on the six organizational capabilities. The results indicate that Thai construction firms concentrate mostly on developing excellent reputation, creating strong bargaining power with suppliers and subcontractors, and strengthening the firm’s financial stability. However, they do not give much importance to effective risk and investment management, continuous development and innovation, and explicit strategic management. These findings provide in-depth insight to comprehensively understanding a Thai construction firm’s capabilities. These 14 strategic assets should thereafter be used to develop a practical tool for managers of construction firms to evaluate their firm’s strengths and weaknesses as well as to identify strategic assets required to enhance competitiveness in the market.     

Managing Drivers of Innovation in Construction Networks

Various drivers of construction innovation are distinguished and classified in four distinctive categories: environmental pressure, technological capability, knowledge exchange, and boundary spanning. Innovation drivers in these categories are active at the transfirm, intrafirm, and interfirm level in the network of organizations in the construction industry. Empirical research in the Dutch construction industry illustrates that the innovation drivers are used by managers of the authorities, clients, architects, consultants, and contractors to stimulate and facilitate innovation processes. It also exemplifies that driving innovation on the transfirm, intrafirm, and interfirm level in the network of organizations is an opportunity for managers of both public and private organizations to develop, improve, and renew their organizations’ positions in the market, the quality of their organizations’ projects, and the cooperative structure of the industry as a whole.     

Enablers That Help Foreign Architectural, Engineering, and Construction Firms Win Construction Contracts in China

With China’s fast economic growth and entry into the World Trade Organization (WTO), more foreign architectural, engineering, and construction (AEC) firms are expected to venture into this huge and attractive market. This paper explores the important strategies to help foreign AEC firms clinch construction projects in China. Using a questionnaire survey approach complemented by in-depth interviews, it was found that firms need to pay more attention to the market and working conditions in China and to strengthen their own capabilities. To win projects in China, foreign AEC firms should also be able to offer project financing services. The findings are useful to foreign AEC firms because it may help them win projects in the Chinese construction industry.     

Strengths, Weaknesses, Opportunities, and Threats for Architectural, Engineering, and Construction Firms: Case Study of Vietnam

After Vietnam became a member of the World Trade Organization, Vietnamese architectural, engineering, and construction (A/E/C) firms face competition from not only their domestic competitors but also from foreign A/E/C firms. As most Vietnamese firms are used to operating under a protected setting, they may face difficulties competing in the globalized environment. This study undertakes a strengths, weaknesses, opportunities, and threats (SWOT) analysis of Vietnamese A/E/C firms, investigates how they respond to opportunities and threats, and recommends how foreign A/E/C firms operating in Vietnam could respond. Using semistructured interview questions, face-to-face interviews were conducted with Vietnamese and foreign A/E/C firms. The SWOT analysis reveals that Vietnamese A/E/C firms are lagging behind foreign firms in financial capacity, experience in complex projects, knowledge in advanced design and construction technology, and management ability. Industry practitioners from outside Vietnam who are contemplating entering the Vietnamese market can leverage on Vietnamese firms’ strengths by forming joint ventures with strong and reputable private Vietnamese firms. To improve their competitive advantage, it is recommended that foreign A/E/C firms offer superior products and services and familiarize themselves with local culture and regulations. They should be mindful of corruption and set up surveillance systems to curb wasteful spending.     

Potential Mechanisms for Construction Innovation

Construction presents important opportunities for innovation. Current competitive conditions and owner demands for cost effectiveness provide strong incentives. Examining mechanisms for innovation rather than barriers to technical progress is one means to stimulate advance. This paper describes several advantages and disadvantages which the construction industry presents for innovation. The advantages include project organization, necessity and challenge, engineering and construction integration, low capital investment, capability and experience of key personnel, process emphasis, and variation in methods. Major disadvantages for construction include investment reluctance, competitive conditions, institutional framework, seasonal and economic cyclicity, and the role of suppliers. Based on these conditions, a set of hypotheses is developed (project demands, individual initiative, construction input to design, and transfer from other industries) concerning possible mechanisms for innovation in construction. The paper also reviews prior research regarding innovation in construction and manufacturing, develops practical applications of mechanisms for construction innovation, and highlights conclusions regarding opportunities for technological progress in construction.     

Forces Driving Adoption of New Information Technologies

This paper investigates the forces that drive construction firms to adopt new information technologies. The research focuses on CAD and electronic data interchange technologies and studies in-depth eight innovation adoption decisions. The paper presents the findings regarding the forces that created the managerial stimuli for innovation and the organizational characteristics that played an important role in the adoption. The investigation identified four forces that drive innovation: competitive advantage, process problems, technological opportunity, and institutional requirements. These forces change over time and drive the diffusion of a technology in the industry. The study also found that different organizational characteristics determine a company's sensitivity to each force. The paper proposes a new model of diffusion of new technologies and presents the implications for increasing the rate of innovation in the industry.     

Exploratory Study on Value of Information Systems to Electrical Construction Companies: Resource-Based View

Many practitioners and researchers believe that the application of information systems in the construction industry lags behind that of other industries such as the manufacturing industry, because the construction industry is mainly composed of small to medium size companies. Besides, to many people, the value of information systems to their business is vague and elusive. Existing studies on the value of information systems are not specifically focused on small to medium size specialty contractors such as electrical contractors. In addition, with an intention to demonstrate the value of information systems to the improvement of operations or business of all relevant companies, those studies typically do not look into the impact of information systems on the competitive advantage of individual companies. This paper argues that such a generalization of the value of information systems, although valuable to both practitioners and researchers, may have overlooked the fact that the value of information systems needs to be reflected through improved competitive advantage of a company and the competitive advantage is company specific. Thus, the examination of different effects of information systems on individual companies can generate useful insight into the value of information systems because such a strategy leads to a better understanding of the relationships between information systems and the competitive advantage of individual companies. With such a perspective, this study applies a case study strategy to study five small to medium size electrical construction companies based on the resource-based view theory. The case studies show that the observed electrical construction companies are well equipped in terms of physical information infrastructure in relation to their business objectives regardless of company size. However, their capabilities of strategically integrating information systems with their business plans and with their external business partners are general lacking, compared with their physical information system infrastructure. This is partly because many electrical contractors do not fully understand that there are many different forms of information systems that have different impacts on gaining and sustaining competitive advantage. This paper then conjectures that the existing imbalanced application of information systems may not lead to the improved competitive advantage of electrical construction companies, which in turn prevent many contractors from clearly seeing the value of the information systems. Thus, the paper further points out that a plan for the systematical implementation of information systems in a company is very important. However, the successful development of such a plan depends on a better understanding of electrical contactors on the concepts of information system capabilities, competitive advantage, and their relationships.     

Production System Loading–Cycle Time Relationship in Residential Construction

Production home building possesses characteristics similar to manufacturing processes, such as the construction of more or less similar houses repeatedly and a growing demand for mass customization of homes. As a result of these similarities, larger homebuilders often attempt to view their production system as an assembly line process. However, the management tools generally utilized by these home builders are those used in other sectors of the construction industry, such as critical path method scheduling, cost estimating, and earned value analysis. These management tools do not provide an explanation or control/prediction tools for many undesirable situations that arise during home building, such as increasing cycle time which slows delivery of product to consumers and increases project capital costs, and increasing amounts of work in process that increases capital investment and thereby decreases company financial performance. In order to bring better management tools to the residential construction industry, this study examines relationships between cycle time, work in process, system throughput, new construction starts, and the capacity of the production system using building permit data for new single family homes in Chandler, Ariz. The applicability of Little’s law, a basic equation used in factory production management models, to a residential production system is examined. This study shows a definite, predictable relationship between cycle time, work in process, and production system throughput. It provides a pathway for further study of production system characteristics that have historically not been included in construction management models, with the expectation of developing new construction management tools that will account for more of the characteristics of construction production systems that affect project performance and company financial performance.     

Long-Term Entropy and Profitability Change of United States Public Construction Firms

A firm’s business composition and the sales volume of each business segment are subject to change depending, to a considerable extent, on the firm’s business strategy. These changes were first weighted and represented as a single index, referred to by scholars in strategic management and industrial organization research fields as “firm entropy,” then the impact of firm entropy on firms’ profitability was assessed over 12?years. The performance differences between contractor and noncontractor firms, as well as focused and diversified firms, were compared through a longitudinal data analysis technique within a hierarchical linear modeling framework. Two hypotheses were formulated based on firm diversification theories and previous research findings. These hypotheses were tested according to the modeling outcomes, and implications are presented. The research findings indicate that the entropy changed constantly for both contractor and noncontractor firms. In addition, the level of firms’ long-term profitability supports the argument that the construction industry is highly competitive and mature.     

Development Model for Competitive Construction Industry in the People’s Republic of China

This paper identifies and analyzes the open-policy trend of the Chinese construction industry, which is characterized by trade liberalization, the underlying principle of the World Trade Organization (WTO). Compared to the construction industries in the United States, Japan, and the U.K., the construction industry in China is less developed in its legal framework, industrial structure, technological level, and international market share. To develop a competitive construction industry, the Chinese construction industry needs not only to accommodate appropriate international practice, but also to adapt and adopt it according to the market environment in China. A model to enhance the performance of the Chinese construction industry is proposed. The model consists of six modules: defining government’s role, opening up the construction market and establishing a competitive mechanism, promoting design institutes’ services and empowering professional bodies, encouraging technological innovations, upgrading employees’ educational level, and adopting multiprocurement routes. Recognizing China’s recent accession to the WTO and the attendant boost to its economy and industry development, the paper gives a timely evaluation of the post-WTO Chinese construction industry and proposes a model for its development. The model may serve the needs of academics, Chinese construction policymakers, construction enterprises, design institutes, and foreign contractors.     

Conceptual Planning Process for Electrical Construction

The competitive nature of the construction industry has motivated many specialty contractors to search for ways to improve efficiency by increasing their quality and decreasing their costs in order to strengthen their market share. As a result, contractors are turning to “better planning” as a method for improving their efficiency and, consequently, increasing their profitability. In fact, a consensus exists in the construction industry that more formalized preconstruction planning is necessary to remain successful in an increasingly competitive industry. This paper presents a model electrical preconstruction planning process that was crafted from outstanding processes used on several successful electrical projects. Furthermore, a method to evaluate the effectiveness of planning, by comparing actual planning to the model process, is briefly introduced. From this assessment, “effective planning” was correlated to project outcome, and evidence is provided that better planning is, indeed, related to successful performance.     

Theft and Vandalism on Construction Sites

Theft and vandalism on construction sites in the commercial construction industry is a problem that can affect productivity and drain profits. To explore the impact of theft and vandalism in the commercial construction industry, a survey was sent to commercial construction firms to gather information by which the magnitude of the problem of theft and vandalism could be estimated; and to determine what techniques have been successfully used to deter thieves and vandals. The responses were analyzed and several conclusions were developed. Firms engaging in all types of projects are susceptible to theft and vandalism. Theft is more costly to large sized firms ($100 million and over in annual volume of construction work) than smaller firms, but vandalism is more costly for smaller firms. This occurs despite the fact that larger firms use a greater number of measures to combat theft and vandalism on their construction sites. The results should be of particular interest to construction firms that want to reduce the number of theft and vandalism incidents.     

Critical Success Factors for Competitiveness of Contractors: China Study

Gaining or maintaining a “contractor’s” competitive advantage is not easy as it is determined by a large number of factors. Identification of critical success factors (CSFs) allows one to reduce the vast number of factors to some manageable few but vital ones. Based on the CSFs, contractors’ limited resources such as money and manpower can be allocated and aligned appropriately for yielding a maximum outcome of overall competitiveness. This paper describes the CSFs identified from a survey study carried out in Mainland China. The ranking analysis of the survey results shows that 35 factors are rated as critical for determining the competitiveness of a contractor. Factor analysis reveals that the 35 CSFs identified can be grouped into eight clusters, namely, project management skills, organization structure, resources, competitive strategy, relationships, bidding, marketing, and technology. The CSFs in this study provide a vehicle for guiding a contractor in managing its resources in order to improve competitive advantage. The study also provides insights into the management of competitiveness for contractors that are operating in the particular context of the Chinese construction industry.     

ISO 9000 and the U.S. Construction Industry

ISO 9000, the series of quality management standards issued by the International Organization for Standardization, is being used by organizations involved in construction all over the world. The construction industry in the United States has generally lagged behind other industries and other countries in the acceptance and implementation of ISO 9000 standards. Differing opinions surround the issue of ISO 9000 in the U.S. construction industry; it has received either the support or the criticism of experts, who weigh the effects of ISO 9000 as a matter of real improvements in quality against competitiveness and specific requirements at a domestic and international level. This paper attempts to determine the applicability and effectiveness of ISO 9000 in U.S. construction firms and the barriers that hinder its acceptance. The methodology used consists of a literature review and a survey distributed to a sample of firms that have or have not received ISO 9000 certification. After analyzing the gathered data, it was concluded that ISO 9000 is an appropriate and effective tool for construction firms in the United States, although several obstacles affect its implementation and acceptance among construction organizations.