On-Site Subcontractor Evaluation Method Based on Lean Principles and Partnering Practices

Subcontracting has greatly increased in the construction industry. It helps shift risk from the main contractor to the subcontractor and promotes specialization. Inadequate subcontracting management, however, may result in an adversarial relationship between main contractors and their subcontractors, uncoordinated on-site execution, and disappointing quality and schedule fulfillment. New subcontractor management methods and tools are being developed and tested as part of a collaborative research project led by the Catholic University Production Management Center with the participation of the Chilean Construction Chamber and several construction companies. The experience gained by testing prototype tools and methods on selected projects enabled us to develop an on-site evaluation method based on lean principles and partnering practices. This method allows main contractors to help subcontractors improve their performance by providing them with periodic feedback. It also supports subcontractor selection based on their previous performance, which helps foster collaborative relationships with those that consistently perform well. The results of the application of the method in two case studies are discussed.     

Issues in Subcontracting Practice

Subcontractors are very important to the successful completion of most construction projects, yet the many issues involved in subcontracting practice are seldom acknowledged. A literature review indicates that these issues include the timeliness of payments by general contractors, the process of selecting subcontractors, subcontractor bonding, construction insurance, safety issues on the construction site, partnering arrangements with various parties, and productivity issues. A questionnaire survey was administered to subcontractors, general contractors, and construction owners to investigate these issues and to determine the differences in perceptions between the parties. The results confirm the existence of the issues identified in the literature and in addition indicate that (1) the practice of retainage withheld by general contractors seems to be acceptable to many subcontractors unless its magnitude is large relative to the size of the firm; (2) postaward bid shopping by general contractors is sometimes justified, particularly in cases where the scope of subcontract work is modified; and (3) current bonding and insurance practices are adequate unless the additional transferred risks are excessive. Recommendations are made on the basis of the findings to minimize the negative effects of said issues.     

Improved Subcontractor Selection Employing Partnering Principles

Despite the increasing extent of subcontracting in construction, the importance of subcontractor selection is frequently underestimated. While the subcontracting element needs more attention in contractor selection itself, subcontractor selection techniques themselves need considerable improvements. This paper examines how such techniques can beneficially draw from improved multicriteria contractor selection methodologies in general, and specifically from recent developments in client-contractor partnering. It is shown how partnering may be profitably extended further into the supply chain, i.e., into subcontractor selection. A European case study illustrates the development of a subcontractor selection process that incorporated partnering principles. Despite the longer and costlier selection process, it was found that subcontractor pricing levels were reduced by about 10% to account for anticipated efficiencies arising from the proposed partnering. Markedly better time and cost control was achieved on the pilot project. The relationships between all project participants were also found to have improved considerably. Such observations confirm the value (1) of expanding the partnering “envelope” to encompass subcontractors in general; and more specifically, (2) of assessing the potential for such extended partnering as an integral part of the subcontractor selection process.     

Relative Importance of Subcontractor Selection Criteria: Evidence from Singapore

Subcontractors carry out a large portion of the work done in construction projects. Thus, selecting the right subcontractor essentially contributes to the project’s success. We designed a choice-based conjoint experiment to examine the relative importance of four criteria in the subcontractor selection process of main contractors from Singapore: price, technical know-how, quality, and cooperation. Although main contractors adopt a multicriteria selection process and perceive all four criteria to be important for their choice decision, the actual choice situation reveals that price is still by far the most important selection criterion, followed by quality, cooperation, and technical know-how. Main contractors are not willing to compromise on price but accept a lower performance of a known subcontractor on the remaining criteria.     

Enhancing Financial Success Among Electrical Contractors

This paper provides electrical contractors with significant information related to enhancing company financial performance. The methodology involves understanding the determinants of contractor financial success through: (1) an extensive literature review; (2) collection of financial- and management-related data from electrical contractors; and (3) analysis of data to identify management trends that are more prevalent in profitable firms. Ninety-six usable responses were collected from small, medium, and larger electrical contracting companies. General trends reveal that more profitable firms place greater emphasis in the areas of certain management initiatives (higher lines of credit and supporting continuing education), marketing initiatives (involvement in formal alliances and partnering), and technology initiatives related to spending more capital resources on computers and software. Significant differences are revealed with financial ratios as well. A Financial Success Scorecard is created for firms to compare their management inputs to those of successful firms. Findings from this study could provide helpful guidelines for nonelectrical contracting firms. Recommendations for achieving future financial success are also provided.     

Impact of Resources and Strategies on Construction Company Performance

Globalized competition and customer needs forced construction companies to measure their performance beyond the financial measures such as profitability, turnover, etc. As qualitative determinants were added to measurement systems, their investigation and evaluation became a major area of research. In this study, the impact of “resources and capabilities,” “strategic decisions,” “project management competencies,” and “strength of relationships with other parties” on “company performance” was investigated. A questionnaire survey was administered to 73 Turkish contractors and the results of the survey were analyzed using structural equation modeling. The findings indicate that, as expected, resources and capabilities and strategic decisions have an important and direct impact on company performance, whereas project management competencies and strength of relationships with other parties impact company performance only indirectly, through their impact on companies’ resources and capabilities and strategic decisions.     

Forms of Collaboration and Project Delivery in Chinese Construction Markets: Probable Emergence of Strategic Alliances and Design/Build

Changes in regulations to allow foreign contractors to qualify as wholly foreign-owned “construction enterprises” came into effect in September 2002 as one of the steps taken by the Chinese government to honor its World Trade Organization commitments. Emerging markets have a significant impact on the strategic planning of contractors; based on an electronic survey covering foreign contractors, clients (foreign investors), and design institutes, the design/build procurement route in conjunction with strategic alliances has been found to enable foreign contractors to enter the Chinese marketplace. The writers present a strengths, weaknesses, opportunities, and threats (SWOT) analysis to inform readers where opportunities for development might be found and to warn of threats to entry. The research also found that mutual trust, synergistic strengths and complementarities, market demand for services, flexibility for both parties, and minimum change of top managers were ranked as the top five critical success factors for strategic alliances between foreign contractors and design institutes. Finally, medium-sized, state-owned, and large-sized design institutes were ranked as the first, second, and third preferences, respectively, for strategic partnering by foreign contractors.     

Modeling Interfirm Dependency: Game Theoretic Simulation to Examine the Holdup Problem in Project Networks

Subcontractor selection strategies used by contractors can significantly affect short-term project and long-term organizational success. Existing research on subcontractor selection strategy implicitly assumes that the evaluation of subcontractors depends on current conditions. We extend this perspective by integrating an agent-based simulation model with game theory to examine whether precontract partner selection strategies that do not consider subcontractor selection as a repeated game may lead to a version of the holdup problem. The holdup problem we investigate focuses on relationship-specific investments in learning after the introduction of an innovation or organizational change across a project network. A minimum total cost strategy may decelerate the rate of adaptation to an innovation or organizational change, thereby proving that the holdup problem can exist in project networks. The findings contribute to subcontractor selection strategy literature by simulating the impact of the holdup problem in project networks, distinguishing task interdependence as a moderating variable, and identifying that the minimum total cost strategy can be a suboptimal strategy for project networks adapting to systemic changes.     

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.     

Benchmarking System for Evaluating Management Practices in the Construction Industry

This paper presents the results obtained for the initial application of a management evaluation system whose objective is to provide a continuous improvement tool for construction companies through benchmarking management practices. The outlined system seeks to support a benchmarking system that has been recently established in the Chilean construction industry by incorporating qualitative management aspects in addition to performance indicators. Different analyses were made to determine trends in the sector and to establish correlations between qualitative aspects coming from surveys and quantitative aspects coming from performance indicators. Thirteen construction companies participated in the initial application of the benchmarking system. A correlation analysis found that safety performance was strongly related to companies having superior planning and control, quality management, cost control, and subcontractor management policies. A factor analysis found that central office priorities focus on strategic management policies having longer-term competitive impact, while site management emphasizes tactical management dimensions having short-term impact. There is scope to elevate the profile of continuous improvement initiatives to strategic significance at the central office level.     

Contractor as Trust Initiator in Construction Partnering—Prisoner’s Dilemma Perspective

Partnering has been advocated for use in construction as a project-delivery approach to curb dispute and enable a cooperative contracting environment. Successful construction partnering is perceived to derive benefits to both developers and contractors. In view of significant implications to successful project delivery, there has been a surge of research and studies on construction partnering. These studies typically focus on the partnering process as well as the identification of critical success factors. Among the various success factors that underpin partnering success, establishing trust among partners is considered the most important. Moreover, skeptics have been swift to point out that establishing trust in construction is daunting. A better understanding of the role of trust and its manifestation in partnering efforts is therefore of both academic and practical value. In this study, motivating trust in construction partnering is described within the classic framework of “the prisoner’s dilemma,” which suggests the trust cycle can be kick-started if construction partners put cooperation before competition and self-interest. This paper reports a study that is designed to suggest a suitable candidate for the trust initiator. As such, the critical trust factors for two groups of construction partners in Hong Kong—developers/consultants and contractors—are first identified. It is found that “performance” and “permeability” of partners are the two most critical trust factors. “Performance” describes the partner’s competence and problem-solving ability as perceived by their counterpart. “Permeability” reflects the partner’s openness in sharing information. The result of a multiple-regression analysis further suggests that the contractor is in a position to initiate trust through competent performance and maintaining effective communication with the client. In this manner, the trust cycle can expand with reciprocal trustworthiness from the client.     

Partnering on Defense Contracts

Contracting on government construction projects has historically been structured and adversarial. The decade of the 1990s saw the advent of a new attitude in government contracting that emulated success stories from the private sector. After witnessing several high-profile success stories such as constructing the Atlanta Olympic Park, the government embraced the concept of partnering as a primary method of contract administration. The private sector consistently demonstrated an ability to contract for services while realizing a marked decrease in claims and litigation costs with partnering. Their success was founded in the building of trust within the project team by creating a common bond between previously dissociated parties. This was achieved through developing a mutual understanding of the other parties’ interests and goals in the project while maintaining a team focus on the ultimate goal of a successful project. The government espied partnering as a way to improve its relationships with contractors and reduce the volume of litigation that seemed to only be increasing in the industry. The government began a paradigm shift by instilling a new attitude of openness and communication with contractors as well as implementing several broad contract administration changes. This paper examines the process of partnering, its key elements and core competencies, and how various agencies apply these principles in their construction management. The paper further researches stakeholder goals and important issues when entering into a partnering relationship on government contracts and what barriers are perceived that preclude the process from working as effectively as possible.     

Construction Partnering Process and Associated Critical Success Factors: Quantitative Investigation

This paper aims at examining a customized model of construction partnering in order to highlight the relationships between the critical success factors and individual partnering process stages. It used two surveys (a simple rating method and the analytic hierarchy process) to produce empirical evidence for identifying the critical success factors and the partnering process stages. Results suggest that this study is consistent with previous findings that a general partnering process consists of three stages (formation, application, and completion/reactivation). In addition, it reaffirms that there are critical common factors affecting the whole partnering process and critical functional factors influencing individual process stages. Specifically, the four critical common factors are top management support, open communication, effective coordination, and mutual trust. Also, the critical functional factors at the stage of partnering formation are team building, facilitator, and partnering agreement; those of partnering application are joint problem solving, adequate resources, and partnering goals’ achievement; those of partnering reactivation (or strategic partnering) are partnering experience, continuous improvement, learning climate, and long-term commitment. Finally, the paper provides implications to practical application and future theory testing efforts.     

Efficacy of Partnering on the Woodrow Wilson Bridge Project: Empirical Evidence of Collaborative Problem-Solving Benefits

This paper examines the large body of partnering rating data collected during more than 8 years of partnered construction contracts on the Woodrow Wilson Bridge replacement project. The writers report that partnering efficacy, as measured by “collaboration,” was not predetermined by bid results or regional/national distinctions between construction contractors. The data show that good partnering is strongly associated with team satisfaction with budget and schedule results. The correlation among these indicators is not “proof” of the effectiveness of partnering. However, had the analysis shown negative correlations where positive correlations were expected, enthusiasm for construction partnering would certainly have suffered a blow.     

Proposed Subcontractor-Based Employee Motivational Model

The intent of this research was to identify the factors that promote positive motivational behavior in construction subcontractor crews. The factors affecting motivation, goal-setting, workforce needs, and incentives were investigated to determine the attributes for a subcontractor employee motivational model. A survey addressing these four categories was distributed to subcontractor foremen and supervisors to establish a list of motivational factors. The statistical analysis of the survey results aided in the final development of the proposed subcontractor based employee motivational model, which includes such components as confidence and competence as being reinforced by quality of work, incentives, safe performance, praise, and a sense of belonging. The proposed model provides industry practitioners with another level of understanding of the motivation sequence of the subcontractor’s labor force. Perhaps the most interesting finding was related to the attributes found in relation to workforce needs. A common link “feeling of being a member of the team/crew” was discovered between “praise” and “job security.” It was surmised that essentially a worker must first receive praise before they feel as if they are a member of the team/crew and once they feel like a member of the team, they then begin to acquire feelings of job security. The results of this study further reinforce the findings of several previous behavioral studies. Future research should attempt to validate the model using a larger sample size incorporating multiple general contractors.     

Construction Safety Risk Mitigation

Construction safety and health management has improved significantly following the Occupational Safety and Health Act of 1970. In response to this legislation, contractors began implementing safety programs to reduce occupational safety and health hazards on construction sites. Researchers recently found that the current process of selecting specific elements for a safety program is informal. This paper describes the results of a recent study designed to determine the relative effectiveness of safety program elements by quantifying their individual ability to mitigate construction safety and health risks. In order to determine the effectiveness of individual safety program elements, the following research activities were performed: (1) an appropriate safety risk classification system was created using an aggregation of relevant literature; (2) highly effective safety program elements were identified in literature; and (3) the ability of each safety program element to mitigate a portion of each of the safety risk classes was quantified using the Delphi method. The results of the research indicate that the most effective safety program elements are upper management support and commitment and strategic subcontractor selection and management and the least effective elements are recordkeeping and accident analyses and emergency response planning. It is expected that the data presented in this paper can be used to strategically select elements for a safety program, target specific safety and health risks, and influence resource allocation when funds are limited.     

Exploring Critical Success Factors for Partnering in Construction Projects

The construction industry is a very competitive high-risk business. Many problems, such as little cooperation, lack of trust, and ineffective communication resulting in adversarial relationships between contracting parties, are facing the construction industry. Partnering is perhaps one of the most innovative developments in delivering a project efficiently and reducing construction disputes. It provides a sound basis for a “win-win” climate and synergistic teamwork. Project partnering in the Hong Kong construction industry has gained in popularity since 1994. A number of potential factors contributing to partnering success have emerged and deserve further study. This paper presents a review of the development of the partnering concept in general and identifies critical success factors for partnering projects from the Hong Kong perspective in particular. Through a postal questionnaire survey geared toward project participants with hands-on partnering experience, the opinions of various parties—clients, consultants, and contractors were sought and evaluated in relation to partnering success factors. The relationship between the perception of partnering success and a set of success factors hypothesized in the study was derived using factor analysis and multiple regression. The results indicated that certain requirements must be met for partnering to succeed. In particular, the establishment and communication of a conflict resolution strategy, a willingness to share resources among project participants, a clear definition of responsibilities, a commitment to a win-win attitude, and regular monitoring of partnering process were believed to be the significant underlying factors for partnering success. Such an identification of success factors could well formulate effective strategies for minimizing construction conflicts and improving project performance.     

Games People Play with Cost Control in Australia

A study of a selected group of building and engineering construction contractors in the Australian construction industry was performed in order to determine the actual site cost control procedures and techniques being practiced. The study was conducted through a detailed questionnaire completed by the researcher during the course of interview sessions with the site managers of the 18 construction projects in the sample. The main trends disclosed from the questionnaire allowed a model of actual site cost control procedures to be flowcharted. This system was then subjected to a comparative analysis with an idealized site cost control system developed in a previous study. Cost control functions that are discussed in this paper include, among others, the method of work breakdown for site use in cost control, performance data feedback techniques and uses, yardsticks for cost control, and management action at the site. The study concludes with a set of general recommendations aimed to bring current site cost control practices more in line with the available body of knowledge.     

Integrated Project Delivery Case Study: Guidelines for Drafting Partnering Contract

This paper presents a case study through which a multinational contracting firm aimed to introduce integrated project delivery through strategic partnering into its industry operations. The study reports on a research carried out by the author on behalf of the firm to set out series of principles and guidelines to consider when drafting a standard partnering contract whereby the owner, contractor, suppliers, and manufacturers collaboratively work together under the same terms and conditions. A partnering contract would never, on its own, change the culture and environment of the construction process and thus, strategic partnering should be promoted not only at project specific activities but at all organizational activities. Based on this project, the paper presents a list of ten managerial and contractual issues to promote strategic partnering. The author hopes that the results of this case study would foster legal professionals toward drafting a modern partnering contract, which should help in developing a more effective and efficient contracting environment.     

平衡计分卡与绩效管理

传统绩效管理以财务为主，忽视非财务指标的作用，不能准确评估企业价值，没有和企业的长期战略结合，在管理选择上也存在误区。于是，就出现了平衡计分卡，它从财务、客户、内部经营过程、学习和成长四个角度审视企业业绩，打破了传统的只重视财务指标的绩效管理，对企业前瞻性投资做出了合理的评估。平衡计分卡的实施需要与企业的长远规划、年度绩效考核指标及组织架构相结合，并需取得内部人员的支持与配合．在实际过程中，企业应根据自身情况，严格按步骤操作，才能使平衡计分卡在绩效管理中得到很好的应用。