A framework for contractors to reach strategically correct bid/no bid and mark-up size decisions

In an effort to uncover the main factors that characterize the two distinct but sequential stages of bidding decisions, namely bid/no bid and mark-up size decisions, this study identifies the key determining factors and their importance weights by presenting survey findings of 80 contracting organizations from Northern Cyprus and Turkish construction markets regarding this issue. The framework presented in this study will serve as a basis for a knowledge-based system model which will guide the contracting organizations in reaching ‘strategically correct’ bid/no bid and mark-up size decisions. The proposed framework used a reasoning model, which went deeply into the heart of the decision-making process and helped to clarify the complex picture regarding the two sequential decisions. The results revealed that there is a distinct and significant difference in the importance assigned to the same key factors for the two separate decision processes. Furthermore, the study confirmed the fact that the factors related to ‘strategic considerations’ have a significant role in both of these decision processes. One of the most striking findings of this research was the distinct difference in approach of varying sizes of contractors to the overall issue. Hence, these results suggest that any model regarding bidding and mark-up size decisions should definitely differentiate among different sizes of contractors to reflect the approaches of the related contractors in a better manner. Furthermore, it was interesting to find out that the correlation between different sizes of contractors’ approaches was higher in the mark-up decision process compared to the bidding decision process. In spite of the fact that this study was based on input provided by certain types of contractors in Northern Cyprus and Turkish construction markets only, we believe that the overall approach, reasoning and findings of the proposed framework are of good value to contracting organizations in different construction markets throughout the world as well.     

Revealing bank lending decisions for contractors in Hong Kong

Banks’ conservative attitude towards construction loan applications has been considered as the biggest obstacle to contractors’ business development. The objective of this research is to explore and understand banks’ perception on contractors’ borrowing in Hong Kong through three stages. First, a framework that classified a set of criteria on loan application assessment was formulated. Second, a questionnaire survey was conducted to determine the key criteria by testing the theoretical framework with a number of banks. Third, a number of bankers were interviewed to explore the reasoning behind the tested framework. The paper presents findings on how banks have processed and evaluated contractors’ loan applications. Further, similar lending policies adopted by international banks in Hong Kong would also be applied internationally. Accordingly, the findings would help contractors, not only in Hong Kong but also internationally, to find ways to enhance the success of their loan applications.     

Client satisfaction and quality management systems in contractor organizations

The construction industry is predominantly project based and quality is one of the client's prime concerns in their construction projects. Many clients, especially those in the Hong Kong public sector, require their contractors to have a Quality Management System (QMS) certified under ISO9000. Also, several contractors as well as clients themselves voluntarily implemented an ISO9000-based QMS in their respective organizations in order to target the various benefits perceived from such initiative. It was considered timely and worthwhile to explore the effectiveness of ISO9000-based QMSs in the Hong Kong. This paper portrays the key findings from a focused study that relate to the client satisfaction aspects from implementation of the ISO9000-based QMSs in the contractor organizations.     

Start-up and steady-state learning in recurrent bidding

Is contractors' bidding competitiveness under the governance of the adaptive learning mode? The adaptive learning model suggests contractor organizations would regulate the use of a bidding strategy, which is deemed optimal in response to recurring and similar bidding situations. A data set on open tendering by a select group of contractors was gathered over six years by the Hong Kong government and used to test this premise. The behaviour of the eight newly listed contractors indicates that an upward trend of bidding competitiveness in initial bidding attempts is not a generic phenomenon. The theoretical construct of bidding behaviour in the start-up phase is therefore dubious. Data lend only partial support to the existence of rapid learning during the start-up phase. However, the five more experienced contractors (indicated by the largest number of bidding attempts) show high and consistent bidding competitiveness. This provides evidence that contractors display behavioural regularity when the optimal bidding strategy has been reached. Construction organizations are, therefore, urged to treat organizational learning strategically in their attempts to maintain high competitiveness in the bidding process.     

The capital budgeting evaluation practices (2014) of contractors in the Hong Kong construction industry

Capital budget evaluation plays a crucial role in financial management. This places a firm in a competitive position. Recent development points to the need for implementing capital budgeting in construction organizations due to the capital-intensive nature of construction business. The aim here is to investigate the trends in the practice of capital budget evaluation among construction contractors operating in Hong Kong over a 20-year period. A longitudinal survey approach is used; four cross-sectional surveys were conducted between 1994 and 2014. The findings indicate that ‘formal financial evaluation’ is the most common technique used for capital budget evaluation. In addition, the practice of capital budget evaluation is more pronounced in the large-sized firms. A comparative analysis of the results of the four surveys reveals that there are variations in the degree and frequency of use of capital budget evaluation techniques over the study period. Further research is needed to understand the challenges associated with the use of sophisticated capital budget evaluation techniques in the construction industry of Hong Kong.     

Start-up and steady-state learning in recurrent bidding

Is contractors' bidding competitiveness under the governance of the adaptive learning mode? The adaptive learning model suggests contractor organizations would regulate the use of a bidding strategy, which is deemed optimal in response to recurring and similar bidding situations. A data set on open tendering by a select group of contractors was gathered over six years by the Hong Kong government and used to test this premise. The behaviour of the eight newly listed contractors indicates that an upward trend of bidding competitiveness in initial bidding attempts is not a generic phenomenon. The theoretical construct of bidding behaviour in the start-up phase is therefore dubious. Data lend only partial support to the existence of rapid learning during the start-up phase. However, the five more experienced contractors (indicated by the largest number of bidding attempts) show high and consistent bidding competitiveness. This provides evidence that contractors display behavioural regularity when the optimal bidding strategy has been reached. Construction organizations are, therefore, urged to treat organizational learning strategically in their attempts to maintain high competitiveness in the bidding process.     

Work–life strategies in the Australian construction industry: Implementation issues in a dynamic project-based work environment

A participatory work–life balance intervention was implemented in a medium-sized construction contracting organization based in Melbourne, Australia. Weekly data capturing the number of hours worked, satisfaction with work–life balance and capacity to complete required tasks at work and at home were collected for 25 consecutive weeks. Data was subjected to time series modeling procedures and weekly work hours were found to significantly predict participants' overall satisfaction with work–life balance, and capacity to complete tasks at work and at home. The occurrence of ‘long weekends’, i.e., a period of three days away from work arising as a result of a public holiday coinciding with a ‘rostered day off’, was also found to predict workers' capacity to complete tasks at home. An evaluation workshop explored workers' experiences of a work–life intervention. Participants' were generally positive about the organization's support of their work–life balance, however areas for improvement were identified, such as the need for better communication of work–life strategies and to address the ‘long hours’ culture within the organization. The research presents a participatory framework for improving the work–life balance of project-based construction workers.     

Impact of social safety investments on social costs of construction accidents

Most contractors' financial losses associated with accidents, but not all, are also social costs. Some social costs are not incurred by contractors, but by society. Social costs of construction accidents have been gathered for years 1999–2001. The safety investments made by both contractors and society are also identified based on data assembled for these three years. These social costs and safety investments were identified from 119 construction projects involving 1414 accidents and from 18 government departments in Hong Kong. The data shows that there was an increasing trend in social safety investments and a decreasing trend in social costs of construction accidents from 1999 to 2001. During this period, for every extra $1 of social safety investments made, a reduction of $2.27 of social costs on construction accidents was achieved in Hong Kong.     

美韩日建筑市场及对中国对外工程承包企业的启示

通过考察美韩日建筑市场,对比中国工程承包企业与国际知名工程公司的不同做法,提出对承包企业工程项目管理模式和企业组织结构进行适当调整,逐步将工程承包模式由施工承包向EPC总承包过渡。     

ISO 9000 and beyond: from a Hong Kong construction perspective

Client driven ‘pushes’ for ISO 9000 certification in Hong Kong are observed to have overtaken any spontaneous ‘pull factors’ (motivators) towards quality improvements ‘for their own sake’. For example, the need for ISO 9000 certification as a prerequisite for even being considered for public sector construction works appears to have distracted some organizations from a more comprehensive organization-specific development of their quality management systems. Both positive (beneficial) and negative (detrimental) outcomes from ISO 9000 certification, as observed from relevant previous studies, are summarized herein. These provide a useful background against which to present perceptions derived from the current study in Hong Kong construction. The target groups were predominantly from consultants in the initial survey and all from contractors in the second and more comprehensive survey. The more significant positive and negative outcomes from ISO 9000 certification as derived from the two current surveys are identified. Recommendations are made for realigned approaches to ISO 9000 certification and for seamless integration with other quality management approaches such as TQM, as well as with other management subsystems, such as for productivity improvement and dispute minimization.     

Equity joint ventures in the Chinese construction industry

In order to penetrate the Chinese construction market, some Hong Kong or overseas contractors form joint venture companies with Chinese construction organization's. This paper describes in detail the formation and operation of such ventures. Laws and regulations that must be complied with are outlined.     

Construction loans and industry development: the case of Hong Kong

Building contractors are generally small private firms. Bank loans are their major, if not only, source of external finance. However, building and construction loans represent a mere minuscule portion of all bank loans in Hong Kong, suggesting that contractors may have been neglected by banks. With the case of Hong Kong, this study examines the lack of supply and demand of construction finance, and the implications for industry competition and innovation. Contractors’ perceptions were solicited through a questionnaire survey. Key issues identified were further explored in subsequent interviews. The results were then triangulated with secondary data. It is found that although contractors do not usually have enough assets to pledge as collateral, they generally do not need to borrow that much. The provision of interim payments has enabled them to work with small capital outlay. However, the interim payment mechanism has induced a low barrier to entry, which has helped perpetuate the vicious circle of labour intensiveness of building construction, exploitation of labour‐only subcontracting, proliferation of small subcontractors and intense rivalry between firms. The findings conclude that contractors’ limited access to finance generally and bank loans in particular has posed a major barrier to innovation and hence industry development.     

Learning from project monitoring feedback: A case of optimizing behavior of contractors

Monitoring is an essential part of construction project management and has typically been devised to guard against non-compliance. When contractors are subjected to regular performance feedback, instead of just taking remedial action, they may take the opportunities to enhance their operations in the light of the feedback. Thus, it has been advocated that responding to performance feedback has a learning element. This study takes on this notion and examined the performance change pattern of contractors that have been subjected to regular performance feedback. Longitudinal performance scores were fitted against five well established learning curve models using the Least Square Curve Fitting Analysis (LSCFA). It was found that the 3-parameter hyperbolic model is the ‘best-fit’ model in terms of effectiveness and stability. The LSCFA results also suggested that the contractors in the sample can be arranged in four clusters: Competent Learners, Incidental Learners, Indifferent Learners and Optimizers. The majority of them fall into the optimizing cluster. This suggests that these contractors may adjust their resources to maintain their performance at an acceptable level which do not deprive their future opportunities. With due caveat to the constraints and limitations of working sample, this finding is thought provoking for project managers in exercising project monitoring.     

A framework for evaluating the safety performance of construction contractors

Improvements to contracting organisations’ safety standards could inevitably be helped by continuous monitoring and review of their safety performance. To achieve this, an objective Safety Performance Evaluation (SPE) framework is a prerequisite. Although various methods of SPE have been proposed, a more comprehensive SPE framework which takes into account factors pertinent to an organisation and its project has yet to be realised. In this paper, the importance of SPE factors is examined through a questionnaire survey conducted in Hong Kong. The results of the questionnaire survey are used to develop a SPE framework suitable for use in the construction industry and protocols for evaluating the safety performance at the organisational and project levels. Through this analytical framework, SPE scores can be computed which would facilitate the benchmarking process and various initiatives to improve the safety performance of construction contractors.     

Restructuring and repositioning Shenzhen,China's new mega city

Shenzhen, a new mega city founded under China's ‘open door’ policy, has experienced dramatic urban development over the past 30 years. From humble beginnings as a fishing village before the 1980s, it benefited from locational advantage next to Hong Kong, an autonomous city with a global role in finance and trade. Shenzhen was first among cities in China to adapt the capitalist world's urban development practices to an indigenous, centrally controlled land management system. As a new city, Shenzhen may best represent the role of planning in a time of economic transition. Urban planning in Shenzhen was ambitious in its reach, using ‘experimental reform’ as a vehicle for institutionalising changes in management of the land resource. These reforms became generalised in China, leading to a recent decline in academic investigation of Shenzhen. While the city as ‘reformer’ seems to have run its course, new challenges upset the old assumptions and call for more research. Today, as industry moves inland away from increasingly costly coastal areas, the city is grappling with the need to restructure its economic base. The city has undertaken major infrastructural projects in a bid to secure its role as a major transhipment hub and logistics command centre, while also developing a rail-based mass transit system. The regeneration of disused industrial land and ‘urban villages’, built up to accommodate at low cost a huge factory workforce, are important ongoing city programmes. While the city extends its infrastructure to connect more effectively with the rest of the Pearl River Delta (PRD) and with Hong Kong, more fundamental questions surround its role within a restructuring regional economy. Ambitions for international stature, bolstered by a large and young population base, a world-class port and modern facilities are challenged by a rapidly evolving regional economy.     

Clients’ needs,wants and expectations from contractors and approach to the concept of repetitive works in the Northern Cyprus construction market

Intense competition existing in the construction market creates an industry that is dominated by the client groups. This paper provides insights into private clients’ needs, wants and expectations from contractor firms in the Northern Cyprus building construction market, by presenting survey findings of 91 clients regarding this issue. Moreover, it presents their perspective related to doing repetitive works with the same contractors in possible future works. The study has clearly confirmed the fact that the clients in the specified market place high emphasis on a wide variety of factors. The importance assigned to these factors varies according to the categories or characteristics of the clients within the private building construction sector. Another striking finding was the responding clients’ willingness to do possible repetitive works with the same contractors assuming that they are fully satisfied with the existing or past projects. This opportunity, if used properly by the contractor firms in this market, may be the key to beating the competition and lead to the easy path to increase a contractor firm's market share. Furthermore, it was found that the responding clients expect much more than quality, finishing on time and within budget for full satisfaction and continuing to do repetitive works. The importance and hence the contribution of a set of criteria related to achieving full client satisfaction, and leading to possible repetitive works is presented. Although it would not be reasonable to determine general strategies on just a single study, the contractor firms in the Northern Cyprus construction market will benefit from the framework given within this paper by recognizing what is important and essential to private building construction clients in particular situations and hence present the capabilities of the contracting or potential contracting organizations in ways that meet this to best advantage. Although the results given are based on input from the Northern Cyprus construction market, we believe that the contractor firms in other countries, who specialize in building works for private sector may also benefit from the findings or at least the approach of this research as well.     

Modelling financial decisions in construction firms

Some contractors predict their corporate cash flow on the basis of individual contracts without considering the relationships between the overall before-tax profit, risks, other crucial qualitative factors, or the allocation of resources within the company. Moreover, some contractors, in predicting their cash flow, focus only on the early-start progress in the project and their predictions of progress are too pessimistic, or result in the overuse of resource in order to make up for delays. In the present research a decision model is established for a contracting firm. It provides a methodical system for construction financial decision-making, and a way of solving a financial decision problem under qualitative and fuzzy circumstances. The model can be applied to the management of corporate cash flow, thereby facilitating the minimal use of resources. The information provided by the model allows the planner to eliminate excess use or idleness of resources during the scheduling of a project. Financial forecasting may also suggest the best time to invest in a new project. Four projects for a medium size construction firm in Hong Kong were employed as case studies in order to evaluate the mathematical model. The cases involve two objectives: maximize profit margin and minimize construction risk (consider in a qualitative factor). The model leads to a compromise optimal schedule that provides the contracting firm with the optimal schedule for achieving optimal profit and construction risk by making optimal use of the contractor's resources.     

An evaluation of construction time performance in the building industry

Building industries in many countries have been increasingly recognising the need for more efficient and timely completion of projects. Often, a number of unexpected problems and changes from original design arise during the construction phase, leading to cost and time overruns. Therefore, exploring the reasons for delay is one of the prerequisites of keeping the cost within budget and of good construction time performance. The primary objective of this paper is to identify the principal factors responsible for delays in the Hong Kong building industry, and determine their relative importance as perceived by different participant groups. A questionnaire survey, based on 83 previously identified delay factors, grouped into eight major factor categories, was conducted in early 1995. Responses from 78 construction personnel — from client, consultant and contractor organisations — suggest a strong consistency in perception between clients and consultants, for example as to the importance of the “poor site management and supervision” delay factor and the “contractor-related” delay factor category. However, there was a substantial disagreement between consultants and contractors, as well as between clients and contractors, in respect of the rankings of both the individual factors and the factor categories. Suggestions are given for more effective project management based on the observations. The results of this survey also provide a foundation for further research towards the development of an envisaged “construction time” prediction model for local building projects.     

Market structure of the construction industry in Hong Kong

This study examines the market structure of four different sectors within the construction industry in Hong Kong. Market concentrations, expressed in terms of Herfindahl-Hershamann indices (HHIs) and number equivalents (HNEs), are calibrated for the top five contractors and compared with those of the local property industry. The study reveals the following ascending order of market concentrations: private building, public building, property development, and civil engineering. Our explanation is that technological and capital requirements have imposed a strong barrier to entry into the civil engineering sector, resulting in a concentrated market. Conversely, the lack of technological demand and supply in the private building sector has led to easy market entry and exit. Building contractors thus compete intensely on cost reduction rather than technology improvement, leading to poor construction safety and product quality. The paper concludes that the Government, being a major client of construction works and regulator of the industry, can assume a more active role in promoting the overall competitiveness of indigenous local contractors in Hong Kong.