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.     

How Relational are Construction Contracts?

For many years, the construction industry has relied on formal contracts to define and enforce the obligations and rights of contracting parties. Legal scholars have suggested that, based on their transaction characteristics, there are three different forms of contracts: classical, neoclassical, and relational. Of these, which form is more appropriate for use in construction projects? With increasing awareness of the importance of teamwork in construction, there is clear evidence of a rising trend in adopting a partnering approach to construction project delivery. For projects that seek to achieve a partnering relationship, relational contracts that value relationships, trust, and communication appear to be the appropriate form of contract. This paper discusses the application of relational contracts in construction by examining the fundamental question “How relational are construction contracts?” The degree of relationalism is assessed using a relational index comprising eight factors: cooperation, organizational culture, risk, trust, good faith, flexibility, the use of alternative dispute resolution, and contract duration. It was found that in the traditional design–bid–build form of delivery, the main contract and domestic subcontract forms are more relational than those of the nominated subcontract and the direct labor contract. The study was conducted in Hong Kong.     

Cultural Considerations in International Construction Contracts

International construction projects involve multinational participants from different political, legal, economic, and cultural backgrounds. As one of the major issues affecting the management of international construction projects, culture deserves wide research. This paper aims to establish a valid groundwork for further research on the impact of cultural issues on contractual arrangements; conflict causation, and the selection of dispute resolution mechanisms for international construction projects. The paper reviews the characteristics of international construction activities and discusses the cultural context. It sets the research background for disseminating the findings of two surveys, carried out in Hong Kong and in London and Sydney. The study identifies the important features expected for the contract of international construction projects and ascertains their significance to further in-depth research.     

Mediation for Public Construction Contracts under the GPA in Taiwan

The purpose of this paper is to examine mediation for public construction contracts under the Government Procurement Act (GPA) in Taiwan. The World Trade Organization Committee on Government Procurement, on December 9, 2008, adopted a decision that invites Taiwan to accede to the plurilateral agreement. Government procurement accounts for in the range of 15–20% of gross domestic product, on average, in developed countries. At the same time, the number of disputant cases over public construction contracts reached 70% of contract disputes under GPA between January and March in 2009 according to the official statistical information of Taiwan. In recent years, there are specific measures of the dispute settlement mechanism, especially in mediation under GPA, to be enacted and implemented. As the growing attention given to the Agreement of Government Procurement in Taiwan, the dispute settlement mechanism regarding government procurement has become an important issue. Therefore, this paper probes into the developments of mediation for public construction contracts under Taiwan’s government procurement. It is hoped that the discussion of the study will help the reforms of the dispute settlement mechanism of government procurement in Taiwan and also be beneficial for both Taiwan and international contractors.     

Temporary Heating in Construction Contracts

It appears that in construction projects extending through winter with freezing temperatures, the cost of temporary heating is not always equitably resolved between the parties in a contract. Although existing guidelines have been initiated since 1964 by the construction industry, the bid allowances in calendar days and cost perdiem of heating, as suggested, have not been implemented. The three case studies described with varying structures and heating systems, show how heating costs are affected by changes beyond the General Contractor's control. These costs can be substantial; however, they can be minimized if owner, designer, contractor and mechanical subcontractor can cooperate.     

Project Management in the Chinese Construction Industry: Six-Case Study

Originating from the West, project management was introduced into China after the country’s economic reforms in the 1980’s and has since spread quickly throughout the whole country, particularly in the construction industry. However, despite the wide adoption of project management practices by construction organizations and the growing recognition of the importance of project management as an enabler of organizational success, empirical studies on project management in the context of the Chinese construction industry have been inadequate. This paper presents the results of an empirical study of six Chinese construction organizations in order to come to a more comprehensive and sophisticated understanding of project management practices in the Chinese construction industry. The findings revealed: (1) a good appreciation of the role of projects and project management and satisfaction with current project management practices; (2) 11 key aspects of project management implementation; (3) 12 resultant value and benefits; and (4) five aspects of the main challenges facing the organizations. Meanwhile, variations in project management practices and the resultant organizational value were identified, first between the three owner- and the three contractor-case study organizations, then between the two construction contractor organizations and the one design contractor organization.     

Teaching Construction Contracts: Mutual Learning Experience

Construction contract modules are delivered to second-year architectural technology and construction/construction management students undertaking foundation and undergraduate degree programs. Feedback and assessment results from recent years showed that students generally found these modules difficult. Studies were conducted to further understand students’ experiences and expectations, to assess quality of teaching, and to evaluate the dissemination of theoretical and practical knowledge during the delivery of construction contract modules. The objective was to review the methods used for teaching, learning, and assessment of construction contract modules and make recommendations to inform and improve future module development and delivery. This paper is based on a first-time experience of teaching a law-related subject to construction students. Reflection on the teaching and assessment methods implemented during the term and on student responses permits conclusions to be drawn on how best to improve students’ learning experience and simultaneously maintain the university’s quality standards.     

Incentives in the Chinese Construction Industry

Incentives have been increasingly applied to align the objectives of participants in the delivery of construction projects. However, little research has been undertaken to systematically study the use of such incentives. This paper reports the findings of an empirical survey of the Chinese construction industry on: the need to apply incentives; frequency of the usage of incentives; how the incentive schemes are decided; and their effectiveness in application. The incentive schemes of the Three Gorges Project is also studied, from which an incentive matrix is presented that has measures tied not only to the final results but also extended to the whole construction process to facilitate providing early warnings, obtain continuous improvement, and ultimately achieve satisfactory project results for participants. It is recommended that future studies be encouraged to develop incentives according to project features such as project type, delivery system, project risk, and participants’ needs and their experience, enabling incentives to be applied broadly by participants to improve the efficiency of project delivery.     

Three-Stage Least-Squares Analysis of Time and Cost Overruns in Construction Contracts

Construction cost overrun and time overrun (delay) are a significant problem in highway-construction project delivery. Previous research studies have provided insight into the factors that affect overruns; however the findings may have been limited because they do not explicitly consider the simultaneous relationship between cost and time overruns. In this paper, we use data from Indiana highway projects to provide empirical evidence that a simultaneous relationship exists between cost and time overruns and that analysis of these two contractual outputs need to take due cognizance of such simultaneity. Using the three-stage least-squares technique, we identify a number of factors that significantly affect cost overrun and time overrun and we show how the effect of these variables vary by attributes such as project type and results of the bidding process. The models developed in this paper can help agencies enhance the estimation of the expected overruns of final cost and the delay in completion time for their planned projects.     

Comparison of Contract General Conditions between United States and China

In light of the fact that construction projects are expensive, complex, and time-consuming undertakings, a well-written contract that specifies each participant’s duties and obligations is required. Furthermore, a well-written contract with regard to business practice differences between the United States and China is unquestionably needed by American owners, design firms, and construction companies conducting business in China. In response to this industry need, general conditions of construction contracts commonly used in the United States (AIA-A201) and China (GF-1999-0201) have been analyzed and compared. The findings of this research reveal that the content of subclauses in AIA-A201 and GF-1999-0201 is different in several ways. These differences may have been caused by cultural, historical, geographical, political, and language variations that exist between the American and Chinese construction markets. Understanding these differences could help U.S. companies stay competitive and profitable in China.     

Benchmarking Studies on Construction Safety Management in China

This paper presents information by which to measure safety management performance on construction sites. In China, the conventional construction safety benchmarking approach is to assess safety performance by evaluating the physical safety conditions on site as well as the accident records, while no attention has been paid to the management factors that influence site safety. This paper is to identify the key factors that influence safety management and to develop a method for measuring safety management performance on construction sites. Based on the survey and interview data collected on safety management factors in 82 construction projects in China, the safety management index as a means to evaluate real-time safety management performance by measuring key management factors was developed. The quantified factors were compared with the commonly accepted physical safety performance index, which was derived from inspection records of physical safety conditions, accident rates, and the satisfaction of the project management team. Multifactor linear regression was conducted and the result indicates that safety management performance on site is closely related to organizational factors, economic factors, and factors related to the relationship between management and labor on site. Based on this benchmarking study, a practical safety assessment method was developed and then implemented on six construction projects. The results show that this method can be an effective tool to evaluate safety management on construction projects.     

Exploring the Influence of Contract Governance on Construction Dispute Negotiation

The obligations and rights of the contracting parties are typically set out in the conditions of contract. The attempt to have a “water-proof” contract that caters to all eventualities has turned contracts into management manuals with detailed contractual procedures to deal with, inter alia, performance, changes, payment, approval, and dispute resolution. Contract disputes, therefore, have to be negotiated within the ambits of the contracts. This study revisits the assumption of free negotiation that underpins most conventional negotiation studies, i.e., negotiation is free with rational negotiators who can walk away from the negotiating table at will. Constraints imposed by a contract are collectively described as contract governance. With taxonomies developed through principal component factor analyses for contract governance (CG) and negotiating behaviors (NH), the influence of CG and NH is explored by a Pearson correlation analysis. In general, it was found that dominating and obliging behaviors are mostly influenced by CG while compromising behavior is the least influenced. It was further found that procedural requirements influence all types of negotiators under the Rahim organizational conflict inventory except integrators. This suggests that if negotiators are having concern for both themselves as well as their counterparts, amicable settlement is possible notwithstanding the complex procedural requirements.     

Why Contracts: Evidence

Contracts are a ubiquitous part of the architecture, engineering, and construction industry. Despite this, they are poorly understood by practitioners and academics. This paper empirically tests a conceptual model of the contract that seeks to improve our understanding of contracts. This model argues that the contract should be viewed as a managerial tool that provides the structure within which we accomplish the project tasks. The choice of the appropriate contract facilitates a process that allows the parties to achieve superior performance. The model views the contract as a multidimensional instrument that addresses three critical questions: (1) what is the structure of the organizational relationship between firms; (2) what is the disposition of risk and reward for involvement in the project; and (3) how will conflicts between firms be resolved? This paper empirically examines the first two dimensions. In order to address these distinct but intertwined questions, theories from Transaction Cost Economics and Agency Theory are brought to bear. The results of the study suggest that the conceptual model explains some of the variation in project performance, and therefore holds promise as a strategic management tool.     

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.     

Construction Adjudication in the United Kingdom: Past, Present, and Future

Adjudication was enacted in the Housing Grants, Construction and Regeneration Act (1996) as a means of improving payment practices in the U.K. construction industry. It is a statutory right that can be invoked unilaterally at any time on a construction contract that is in writing and is a quick (28?days) and usually inexpensive alternative to arbitration or litigation covering all manner of disputes. Construction adjudication has developed from zero in 1998 to 2,000 cases in the year 2002 reducing to about 1,500 cases per annum currently. Construction adjudication produces a decision that is “temporarily binding” and will be enforced by the courts until the substantive issues in dispute are resolved by litigation, arbitration, or agreement. The principles of natural justice apply but the courts apply them pragmatically because of the statutory time scales. The adjudicator may get the decision wrong. The courts will still enforce the Decision. A dispute must exist for adjudication to be invoked. A governmental review of the Act has resulted in recommendations including extending adjudication to oral contracts.     

ISO 14000 and the Construction Industry: Survey in China

The rapid growth of the Chinese economy sparked off a great volume of construction activities, but the damage caused by construction activities to the environment is indisputable and has alerted some large Chinese construction firms to seek effective environmental management. The ISO 14000 series offers a framework for managing construction operations to improve environmental performance. To discover the conditions of implementation of ISO 14000 in the construction industry, a structured questionnaire survey was conducted whose results show that the major motivation for implementing the system was to seek entry to the international construction market. Other motivations include standardization of the environmental management procedures for internal operations, obtaining social recognition, gaining confidence from clients and a better corporate image, enhancing the environmental awareness of subcontractors, and cleaner sites as a result of better housekeeping. However, some obstacles remain along the path, such as the financial burden, poor rates of return for most firms, low environmental awareness, and inadequate legal enforcement. Based on the analysis and discussion, the paper concludes that the government should take the lead in encouraging training, providing financial support, and improving the legal framework to promote ISO 14000 for the Chinese construction industry.     

Identification of Decision Drivers for the Strategy of Incorporating Utility Relocations into Highway Construction Contracts

The adjustment of utilities prior to highway construction is a particularly complex and challenging operation. One strategy that has been adopted in the last two decades is to incorporate utility adjustment work into highway construction contracts. In theory, this approach eliminates or reduces some of the complications and risks of utility adjustments. This paper aims to identify and analyze the decision drivers for selecting this strategy and help alleviate its implementation challenges. To this end, a comprehensive literature review and several interviews with experts from state departments of transportation and utility companies were conducted. Assessment surveys regarding the performance of recent projects that used the combined strategy were performed. Conclusions and recommendations for future research are presented.     

Empirical Study of the Risks and Difficulties in Implementing Guaranteed Maximum Price and Target Cost Contracts in Construction

Over the past few decades, both the guaranteed maximum price (GMP) and target cost contracting (TCC) arrangements have been regarded as alternative integrated procurement strategies for clients to mitigate risks, minimize claims, integrate the diverse interests of a complex construction project, and offer incentives to provide value-added services. However, the adoption of GMP/TCC contracts may also generate significant risks and difficulties that merit considerable attention. This paper aims to provide a concise review of the potential pitfalls of the GMP/TCC scheme in general and identifies the key risk factors and potential difficulties associated with GMP/TCC in comparison with other procurement strategies in construction in particular via an empirical survey of clients, contractors, and consultants in Hong Kong. The survey data gleaned from 45 valid replies were analyzed using the mean score ranking technique, Kendall’s concordance test, and Spearman’s rank correlation test. The survey results indicated that “involvement of inexperienced or claim-conscious contractors in a project procured by a GMP/TCC contract” was considered to be the most significant risk factor; while “design development must keep pace with main contractor’s program for tendering the domestic subcontractors’ works packages” as the major difficulty in implementing GMP/TCC projects. The research findings derived from this study are particularly essential in assisting the contracting parties to mitigate the detriments brought about by potential risks or difficulties when embarking on GMP/TCC contracts. It has also generated valuable insights into developing effective recommendations for alleviating the barriers to GMP/TCC success for future construction projects.     

Influences of Chinese Cultural Orientations and Conflict Management Styles on Construction Dispute Resolving Strategies

Investigating styles of handling interpersonal conflict across multiple situations, this study explores the orientations of Hofstede’s cultural dimensions (power distance, individualism versus collectivism, femininity versus masculinity, uncertainty avoidance, and long-term versus short-term orientation) influencing the choice of dispute resolving strategies in construction industry. Combinations of the five conflict approaches (collaborating, dominating, compromising, avoiding, and accommodating) of the two concerns model are adopted to present the styles of handling conflict (or conflict management styles). Chinese residing in Taiwan are chosen as the focus group. 62 engineering students in universities and 64 engineers in industry practices, totaling 126, were interviewed, and their conflict management styles toward supervisors and equally ranked peers were assessed using Thomas-Kilmann Conflict Mode Instrument. The cultural orientations are detected and articulated by the degree of people’s style adjustment that switches from one’s preferable style to another style to handle conflicts with his/her supervisors and peers differently. The results of the investigation data show that the adjustment of styles facing different situations clearly demonstrates the influences of cultural orientations. Our findings on Chinese cultural orientations (high power distance, femininity, and high uncertainty avoidance) may partially explain why Taiwanese-Chinese engineers prefer handling disputes through cumbersome administration routes and why most filed disputes will eventually escalate up to the central governmental authority for final settlements.     

Strategic Group Analysis in the Construction Industry

The aim of strategic group analysis is to determine whether clusters of firms that have a similar strategic position exist within an industry or not. Findings of strategic group analysis may further be used to investigate the performance implications of strategic group membership. The objective of this paper is to identify the possible strategic groups that could exist within the Turkish construction industry by using a theoretical framework applicable for the construction industry and alternative statistical cluster analysis techniques. The achieved results pinpoint the existence of three clusters and significant differences between the performances of firms in each cluster. All of the firms in the strategic group that have the highest average performance utilize a quality differentiation strategy and have the necessary resources and capabilities that give them the opportunity to differentiate their services from others. Also, they use a systematic approach and have a collaborative environment for strategic decision making. Findings of strategic group analysis can be used by professionals to understand the current strategic position of a firm within the competitive environment and formulate strategies to shift to a better performing cluster.