Subcontractor Evaluation and Management Framework for Strategic Partnering

Recently, main contractors have shifted their attitudes about subcontract procurement to more strategic and long-term partnering philosophies. The objective of this study was to present a framework for subcontractor evaluation and management to help main contractors develop more strategic and productive relationships with their subcontract partners. As the strategic performance feedback model, the balanced scorecard concept was adopted with modification. A case study was also conducted to evaluate the framework with subcontracting strategy, performance indexes, weighting, evaluation of subcontractor performance data, and feedback methods. The research results obtained can be useful as a guideline of subcontractor management for long-term partnering and also to enhance overall productivity within the construction supply chain.     

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.     

Duties and Responsibilities of Construction Managers: Perceptions of Parties Involved in Construction

This paper reports the findings of a study conducted by researchers at Illinois Institute of Technology under the direction and supervision of the ASCE Committee on Management Practices in Construction to investigate the expectations of the parties involved in the construction process, including designers, owners, general contractors, subcontractors, construction managers, and educators, relative to construction managers’ duties. The findings suggest that while there is some consensus among parties to a construction project relative to CM duties particularly in the construction phase, there is also some disagreement, most of which appear to be between contractors and designers. Most disagreements are related to CM duties performed in the bidding and postconstruction phases of projects.     

Subcontractor Schedule Control Method

Trade coordination and claims documentation is a challenge on any project, particularly for specialty subcontractors. The writers introduce a schedule control method initiated by the subcontractor, which facilitates coordination and communication between a subcontractor and other project participants as well as documentation to the prime contractor. A case study illustrates the preparation of a trade-specific critical path method (CPM) schedule, which is updated on a regular basis. The writers also address the interrelationship between the CPM schedule, internal reporting, schedule of values, and labor tracking. It is difficult to ensure that all subcontractor-produced documentation is complementary, but it is well worth the effort when it comes to supporting a claim. Monthly schedule updates and narratives communicate the conflicts, issues, and schedule constraints the subcontractor experiences or anticipates on a project, thereby providing contractually required notice to the prime contractor during the project. This increases the likelihood of resolving issues during the project, while simultaneously protecting a subcontractor’s position if change order requests are denied or if back charges are levied prompting a subcontractor to enforce its rights, execute a claim, or proceed to litigation.     

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.     

Impacts of Overseas Management Structures on Project Buyout Management: Case Studies of Chinese International Contractors

Project buyout management is essential for the transition from the preconstruction to the construction phase. It is during this period that the project team is formed; subcontractors are finalized; the orders of material and equipment are placed; and project plans are made. Despite its importance, few studies have been conducted in this field, especially for international contractors who face many complex situations in project buyout. This paper presents the study conducted for the project buyout management for the Chinese International Contractors (CICs) in developing countries, with focus on the project buyout management under different overseas management structures, and the key influencing factors. It discusses the characteristics of CICs in developing countries; investigates the project buyout management under different overseas management structures; analyzes the advantages and disadvantages of each overseas management structure to project buyout, and identifies the major project buyout influencing factors. The results of this research will benefit both the industry practitioners and the academic researchers in this area.     

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.     

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.     

Modeling the Dynamics of Heavy Equipment Management Practices and Downtime in Large Highway Contractors

Machine downtime is invariably perceived as one of the most critical problems faced by highway contractors. Attempts to reduce downtime often result in failure due to the dynamic behaviors between equipment management practices and downtime. This paper is thus intended to highlight the dynamics of heavy equipment management practices and downtime in large highway contractors and utilizes them as a framework in constructing a simulation model using a system dynamics approach. Face-to-face interviews were conducted with equipment managers from five different large highway contractors in Thailand. The finding reveals that, to be successful in alleviating downtime, contractors must view their practices on equipment management as an integration of multiple feedback processes, which are interrelated and interdependent with downtime. Based on various validation tests, the simulation model is deemed appropriate in representing the equipment management system as related to downtime of large highway contractors. The research is of value in facilitating better understanding on the dynamics of equipment management practices and downtime as well as their interdependency.     

Construction Process Reengineering by Integrating Lean Principles and Computer Simulation Techniques

A construction process reengineering framework and its corresponding methodologies have been developed by integrating lean principles and computer simulation techniques. Instead of classifying activities into value-adding and non-value-adding activities, or into conversion and flow activities as is common in lean production practices, this framework classifies activities into main and supportive activities and/or into normal and interactive activities. This classification makes it more effective in modeling the construction workflow and reengineering the construction process. It also avoids the confusion of the classification of activities into value-adding and non-value-adding activities encountered in the construction industry. In addition, computer simulation techniques are incorporated into the framework to virtually simulate and assess the efficiency and effectiveness of the reengineered construction process that is achieved based on lean principles. Simulation makes it easier to quantify and assess the effectiveness and efficiency of the reengineered construction process.     

Effects of Organizational Supports on the Stress of Construction Estimation Participants

Forecasting the likely cost of construction work before tendering is known as to be a hazardous task. Both underestimates and overestimates may present problems to clients and contractors. Not surprisingly, cost-engineering activities can be stressful for those responsible. Coping with the stresses requires action on the part of the individuals affected and the organizations to which they belong. This paper examines the effect of organizational supports in the process of project estimation through a survey of construction estimation participants in Hong Kong. Using correlation analysis and regression analysis, it is found that: (1) the stressors of autonomy and feedback are directly related to the stress experienced by cost engineers; (2) informal organizational supports (particularly concerning relationship conflict, Type A behavior, work underload, lack of autonomy, and unfair rewards and treatment) are far more effective than formal supports in reducing stress; and (3) lack of autonomy and lack of feedback are predictable variables affecting stress. Cost-engineering managers and supervisors need to carefully distinguish between those who prefer hands-on support and those who prefer hands-off support. A good communication and team decision-making process and a fair reward and treatment system may help establish close relationships among cost engineers in a company and ensure sufficient autonomy to cost engineers and the participants in the estimation process.     

How Reliable Is the Total Cost or Modified Total Cost Method?

The total cost or modified total cost method is the most common contractor used method of quantifying contract damages, probably because of its simplicity. But the judiciary has placed limits on its use. In theory, before it can be used by a contractor in a court of law, the contractor must show that (1) all the damages were the result of actions by the owner; (2) the project was sufficiently complex that there is no other way to satisfactorily quantify the damages; (3) the contractor’s bid is correct; and (4) the costs are reasonable. This note focuses only on the correctness of the contractor’s bid. The writers recently completed a benchmarking study of union interior system (framing and drywall) specialty contractors. The study relied on the use of a reference project and an accompanying shopping list of 10 commonly constructed items. In theory, all contractors were developing a bid on the same thing. The study was distributed nationally. Based on an analysis of 57 responses (and subsequently cleansed to 42 responses) the range of workhours to construct the shopping list was 1,247–2,500 with an average of 1,805. There is a twofold increase from the low bid to the high bid. There are also significant differences between regions that are in close proximity to one another, for example, northern and southern California and San Diego, Pittsburgh and Philadelphia, Chicago and St. Louis. The range in the total database is 1,253, which is a surprisingly large amount. The standard deviation in some regions of the United States was as large as the standard deviation of the total database. Based on these results, it is concluded that a contractor could make a sizable mistake in his/her bid and still be within the range of “correct” estimates. Almost any bid could be argued as correct. This hardly seems to be a reasonable standard of proof.     

Developing an ARIS-House-Based Method from Existing Information Systems to Project-Based Enterprise Resource Planning for General Contractor

In recent years, general contractors in the construction industry have gradually begun to implement a system called enterprise resource planning (ERP). During the ERP implementation process, contractors performed required analyses on daily operation functions demanded by the enterprise. The analyses focused on function mapping to ensure that ERP satisfies all the requirements, including the functions of existing information systems, and meets future requirements. The process of function mapping in the construction industry typically involves a series of lengthy and time-consuming meetings, and face-to-face discussions; systematic analysis procedure was lacking. This research will propose a novel function mapping approach, the Architecture of Integrated Information Systems (ARIS)-house-based (AHB) method, to enhance the effectiveness of meetings and improve the efficiency of discussions. In addition, AHB method will use the structure of ARIS-house diagram to guide the function mapping process, streamline existing information systems, meet future requirements, and successfully implement ERP. Finally, this research will use a case study to verify the effectiveness of the AHB method for contractor to implement ERP.     

Study of Factors Influencing the Efficient Management and Downtime Consequences of Highway Construction Equipment in Thailand

Downtime resulting from machine breakdown invariably has a considerable impact on the performance of construction projects and companies as a whole, especially to contractors with heavy investment in equipment. Attempts to investigate the causes and consequences of downtime are rarely found. The aim of this paper is to characterize and quantify factors that influence downtime consequences (consequential problems resulting from downtime) of highway construction equipment based on the structural equation modeling (SEM) approach. A questionnaire survey was conducted to collect data on equipment management practices and downtime consequences among highway contractors in Thailand. The SEM model proposed is of value for both researchers and practitioners to facilitate a better understanding of the relationships among acquisition condition, operational practice, maintenance quality, disposal practice, and downtime consequence of heavy equipment. The model also helps contractors to manage equipment more efficiently by concentrating on several practices that can convey the greatest benefit in minimizing downtime consequences at each particular stage of a machine’s life cycle, rather than considering all practices simultaneously where the benefits gained are perhaps not proportional to the effort.     

Contractors’ Views of the Potential Causes of Inconsistencies between Design and Construction in Saudi Arabia

The study identifies the causes of inconsistencies between the design and construction of large building projects. To achieve the study objectives, a questionnaire survey was carried out to collect information on potential causes of inconsistencies at the project design and construction interface. Responses from 27 contractors were analyzed. The results suggest that the involvement of designer as consultant, communication gap between constructor and designer, insufficient working drawing details, lack of coordination between parties, lack of human resources in design firm, lack of designer’s knowledge of available materials and equipment, and incomplete plans and specifications were considered as the most important causes of the project design and construction interface inconsistencies. On the other hand, project management as a professional service, weather conditions, nationalities of participants, involvement of the contractor in design conceptual phase, unforeseen problems, involvement of the contractor in design development phase, and government regulations were the least important causes of inconsistencies between professionals at the project design and construction interface in large building projects.     

Charrettes as a Method for Engaging Industry in Best Practices Research

Gaining innovative and useful research findings concerning construction industry best practices requires an interaction and feedback mechanism between industry respondents and academia. Typical research methods such as surveys, source document reviews, and structured interviews will work, but suffer from barriers which can hamper results. Examples of these barriers include low response rates, asynchronous communication, time commitment of the researchers and respondents, access to project data, and travel costs. Structured workshops (research “charrettes”) are a unique and useful method for facilitating data collection between industry respondents and academic researchers. They combine the best tenets of surveys, interviews, and focus groups in an accelerated time frame. This paper will explain how these workshops provide a critical avenue for industry interaction. Characteristics leading to successful charrettes will be outlined. The paper will conclude by describing the benefits of these workshops to researchers including lessons learned from successful workshops.     

Performance and Strategy of Chinese Contractors in the International Market

The past decade has witnessed the steady growth of Chinese international contractors (CICs), who have become important and influential players in the international market. The enormous development demands worldwide, especially in developing countries, attract CICs to engage in the market. Similarly, the strong support from the Chinese government plays an important role for the expansion of Chinese contractors globally. Some leading CICs perform very well in certain fields and countries. This brings the competitiveness of CICs to the attention of the international community. The strengths, weaknesses, opportunities, and threats (SWOT) approach was adopted in order to analyze CICs’ strengths, weaknesses, opportunities and threats in international construction markets. Literature from various sources was reviewed in the first instance, which is followed by an interview survey with 42 CICs employees. A SWOT strategy matrix is used to establish a framework that can help CICs to select suitable business development strategies in overseas markets. The applicability of the strategy framework was tested through the case study of two CICs. The strategies to reinforce their positions in the international market were studied based on the SWOT analysis. The results indicate that CICs are on their way to becoming major competitors to other overseas contractors. In essence, the research results offer a valuable reference of practices that construction firms need to master in order to survive and grow in the international market.     

Organizational Culture and Knowledge Management Success at Project and Organizational Levels in Contracting Firms

This research focuses on contracting firms within the construction sector. It characterizes and evaluates the composition of organizational culture using four culture types (clan, adhocracy, market, and hierarchy), the strategic approach for knowledge flow, and the success of knowledge management (KM) systems at different hierarchical levels of contracting organizations (project and parent organization level). Responses from managers of local or overseas contracting firms operating in Hong Kong were collected using a carefully constructed questionnaire survey that was distributed through electronic mail. The organizational value is analyzed in terms of the four cultural models. Clan culture is found to be the most popular at both project and organization levels, which means that the culture of contracting firms very much depends on honest communication, respect for people, trust, and cohesive relationships. On the other hand, hierarchy culture, which focuses on stability and continuity, and analysis and control, seems to be the least favored at both levels. Another significant finding was that the two main KM strategies for knowledge flow, codification and personalization, were employed at both project and organization levels in equal proportion. This indicates that successful KM efforts at both enterprise levels utilize a hybrid and balanced approach for their knowledge flow, and that they complement each other. The findings also revealed that knowledge management system success factors emphasize the support of the management level. The results show that KM is critical and beneficial as indicated by 64% at the project and 74% at the organization level. The expectation is higher for organizations as they are the organizational memories in which experiences of past projects are archived and connected. Understanding these factors and the relationships among them has been demonstrated to be critical in order to increase the chances of success or to help with making decisions when applying KM.     

Structural Equation Model of Trust and Partnering Success

The establishment of trust has been identified as the most critical factor that facilitates partnering success. As such, management should direct their efforts and energy to enhance trust effectively and systematically. It is hypothesized that partners’ trust level is positively related to their performance, permeability, and relational bonding and can be system based. This paper reports the use of the structural equation modeling technique to test this hypothesis. Project-based data on partnering success and the relative importance of the four trust factors were collected through a questionnaire survey, and the level of partnering success was assessed by the achievement of the preset project targets. The findings of the study support the hypothesized positive relationship between the partners’ trust level and partnering success. In addition, performance, permeability, and relational bonding were found to make significant contributions toward parties’ trust level.