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.     

Transaction-Cost-Based Selection of Appropriate General Contractor-Subcontractor Relationship Type

Relationships between general contractors and subcontractors are generally formed on a project-by-project basis. However, because of the competitive nature of the construction industry, this traditional arrangement can result in adversarial relationships between general contractors and subcontractors, which can jeopardize potential or ongoing collaborative construction plans. To avoid this problem, close, long-term relationships between general contractors and subcontractors, as in strategic partnerships, must be established. Unfortunately, forming and sustaining such relationships can be time-consuming and cost-intensive. Furthermore, this type of relationship does not necessarily enhance cooperation or work performance. For contractors to successfully establish effective partnerships with their subcontractors, they must select the appropriate relationship by considering the different characteristics of the subcontracted work involved. Based on transaction cost theory, the findings of this study show that transaction costs incurred by general contractors and subcontractors vary according to the type of relationship established. Therefore, for the purpose of comparing transaction costs incurred in both competitive and partnership relationships, transaction-cost-based profit models for both general contractors and subcontractors are developed, respectively, for each relationship type. As well, by applying different strategies to maximize profits in each relationship, and by simulating the parameters affecting the nature of the subcontracted work, the conditions and relationships under which general contractors’ profits are optimized have been determined. Finally, based on simulation, practical guidelines for choosing the most appropriate relationship type are proposed.     

Empirical Assessment of Internationalization Strategies for Small and Medium Construction Companies

In the wake of increased globalization, more small and medium construction companies (SMCCs) are expanding into the global market. However, the international construction industry is different from the domestic with respect to resource, regulations, culture, entry strategies, and risk levels among other factors. This paper explores various ways and modes of internationalization for SMCCs under 13 key hypotheses that are relevant to the issues of internationalization from the perspective of SMCCs. To verify these hypotheses, this study used actual data from 560 cases of SMCCs’ overseas projects performed between 1990 and 2007. It was found that SMCCs’ entry scheme as prime contractors was more rewarding than in the case of subcontractors. Moreover, SMCCs are likely to evolve from subcontractors engaged with home-country contractors to subcontractors engaged with foreign contractors. Also, cultural distance is positively related to performance, but the effects of cultural properties are not as strong compared to the international manufacturing industry. The results are expected to help SMCCs build internationalization strategies by determining promising entry modes, proposing possible evolutionary paths to enter overseas projects, and assessing cultural effects in reference to SMCCs’ successful performance.     

Analysis of the United States Department of Transportation Prompt Pay Provisions

In recent past the United States Department of Transportation has implemented a number of changes in regulations regarding federal-aid transportation projects. Some of these regulations are designed to help the disadvantaged business enterprise (DBE) firms and subcontractors in general, by requiring the general contractors to pay their subcontractors in a timely manner. Further, these regulations require that general contractors pay their subcontractors’ retainage after the subcontracts are completed, even if they have not received their own retainage from the owner. This paper reviews these new regulations and introduces a financial model for quantifying the effect of these new regulations on the contractors’ profit and the cost of transportation projects. The analysis is done using a spreadsheet-based cash flow model that takes into consideration the expenditure curve, the owner and general contractor’s payment and retainage policies, front money, finance charge on negative cash flow, and interest income on positive cash flow, and final payment and return of retainage policies. A survey was conducted among contractors in Massachusetts and their input was used to run the cash flow model. The results of the analysis for eight different projects are presented and it is shown that the new regulations, on average, reduced the contractor’s profit by 4.35%. It is also shown that the average potential cost increase for transportation projects is 0.14%.     

Asphalt Works Subcontracting Disputes in Large Construction Programs

Subcontracting is a common, and sometimes warranted, practice on large construction projects. However, it is also well recognized that disputes are likely to develop between subcontractors and general contractors in trying to achieve target objectives of cost, quality, and time. This paper tackles quality- and time-related disputes that are peculiar to the case of subcontracting asphalt works under a large construction program, such as that of a new airport construction. In particular, it reports on disagreements regarding the achieved thickness and surface smoothness of the constructed asphalt concrete layer, and on activity-interfacing and delay-attribution issues resulting from improper contractual and scheduling practices. Factors believed to be relevant to both classes of disputes are identified, and analyses are offered to pinpoint significant anomalies. Finally, arguments are developed and recommendations given, that reflect best industry practices whose application could help minimize the likelihood of facing such disputes in the future.     

Common Interface Problems among Various Construction Parties

The objectives of this paper are to identify and assess the interface problems among the various construction parties. The methodology used in this research consists of two phases. In the first phase, a literature review and interviews with various construction professionals were conducted in order to identify the interface problems among them. This resulted in the identification of 19 common interface problems, which were classified into four categories: financial problems, inadequate contract and specification, environmental problems, and other common problems. In the second phase, a questionnaire was developed that included the identified interface problems obtained from the first phase. This survey was then randomly distributed to selected samples of 102 various construction professions consisting of owners, designers, general contractors, subcontractors, and maintenance contractors from Saudi Arabia to evaluate the severity of the 19 identified interface problems. The relative severity of the categories and their related problems were determined and then ranked according to a severity index. Three categories were found to have a “severe” effect, while the remaining category was rated “moderately severe.” Fourteen of the detailed common problems were evaluated as “severe,” while the remaining five were evaluated as “moderately severe.” Furthermore, this study presents additional common problems obtained from the survey.     

Construction Site Safety Roles

A survey of design engineers, general contractors, and subcontractors indicates there is not uniform agreement on the site safety responsibilities that should be assumed by each of these groups. Possible explanations for this lack of shared expectations regarding site safety roles are discussed. It is suggested that specific site safety responsibilities be assigned on future projects based on each group’s ability to control the factors needed to prevent eight root causes of construction accidents.     

General Contractors' Management: How Subs Evaluate IT

A large set of criteria by which top quality subcontractors evaluate the managerial performance of general contractors under whose management they have worked during the construction process and by which they may differentiate their bids to different generals for the same future project are listed and described. These criteria can also be seen as the intrinsic managerial, cost‐and time‐sensitive factors by which general contractors or any manager of construction could improve performance, competitiveness and profitability. It also describes separate, “most important” and “super‐important” subsets of the foregoing criteria∕factors for office and site staff, etc., and the range of effects of the generals' good and bad managerial performance against these criteria∕factors on the costs and duration of the subcontractors' work. The cost and duration effects, etc., that each lump sum bidding general contractor and appointed construction management agent has on the subcontractors' work are compared, and the carefully formatted research process which produced these results is outlined.     

Transportation Agency Use of Owner-Controlled Insurance Programs

Controlled insurance programs are highly efficient risk control mechanisms. With a controlled insurance program, the interest of the owner, designer, construction manager, contractors, and consultants are covered by one insurance arrangement. This paper describes the current state of practice regarding the use of owner-controlled insurance programs by transportation agencies. Departments of transportation that have used controlled insurance programs for their major projects (construction costs greater than $100 million) report that they were satisfied with the results. But contractors are cautious because, when an owner’s controlled insurance program administrator fails to perform, it is the contractor who incurs the residual consequences of increased business cost, and those consequences can extend far into the future.     

Owner’s Role in Construction Safety

Despite dramatic improvements in recent decades, the construction industry continues to be one of the industries with the poorest safety records. Recent improvements are due, in part, to the concerted efforts of owners, contractors, subcontractors, and designers. While past safety studies have investigated the roles of contractors, subcontractors, and designers, the owner’s impact on construction safety has not been previously investigated. This paper will present the results of a study on the owner’s role in construction safety. Data were obtained by conducting interviews on large construction projects. The relationship between project safety performance and the owner’s influence was examined, with particular focus on project characteristics, the selection of safe contractors, contractual safety requirements, and the owner’s participation in safety management during project execution. By identifying practices of owners that are associated with good project safety performances, guidance is provided on how owners directly impact safety performance.     

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.     

D-SUB: Decision Support System for Subcontracting Construction Works

Letting work to subcontractors is a very common practice in construction industry. Subcontractors help contractors overcome problems including the need of special expertise, shortage in resources, and limitation in finances. The decision to subcontract involves designating work items to be subcontracted and making assignments to subcontractors. Generally, work assignments to subcontractors can be for the total quantity of a work item or a proportion thereof. This paper presents a decision support system that makes assignments to subcontractors of the work items designated for subcontracting. Moreover, the system calculates and plots the overdraft profile based on the financial terms of the contract and project schedule. The ultimate goal of the system is to make work assignments to subcontractors under constraints economical and predict the expected profit at the end of the project. The system encompasses four basic components including project data, linear programming module, sensitivity analysis module, and financial analysis module. The sensitivity analysis adds strength and flexibility to the system by allowing the user to experiment with different scenarios. Finally, the developed system that represents a structured method for making subcontracting decisions is demonstrated through an illustrative example project.     

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.     

Construction Risks: Single versus Portfolio Insurance

Risks and uncertainties are naturally inherent in the construction industry and negatively affect contracting parties and executed projects. This paper explores the possibility of insuring against construction risks, which are beyond the control of contractors and not covered by surety policies, through single and portfolio insurance strategies. Accordingly, the writers programmed Iman and Conover’s bootstrapping method for inducing correlations using Microsoft Excel and consequently, developed a technique for pricing insurance premiums as an exotic option using Monte Carlo simulation. The aforementioned methodology was applied on a data set of five defined risks that were collected from small, medium, and large scale projects in California. Pursuant to this study, the calculated premiums for insuring against the defined risks are in line with the premiums available in market for other insurance policies. Moreover, the estimated premium for the proposed portfolio insurance product is more advantageous to contractors in both risk coverage and cost because it is well below the estimated premiums for single insurance products covering individual risks. It is foreseen that this research could open horizons for new construction related insurance products, which would significantly contribute to the efficiency of the risk management process in the construction industry.     

Total Quality Management Implementation in the Egyptian Construction Industry

Total quality management (TQM) has been recognized as a successful management philosophy that can be successfully implemented in the construction industry. By examining the Japanese contractors working in Egypt and comparing their managing systems to the local ones, a comparative analysis of the two contractors working in the Egyptian field is presented in this paper to illustrate how TQM can be implemented effectively in the Egyptian construction industry. Bearing in mind the location bound nature of the production process, the competitive bidding, which emphasizes cost and the absence of the quality culture of the clients, subcontractors and site operatives are some of the constraining factors for implementing the quality policy. Based on the research findings, the paper presents some features of the Japanese construction industry that could be implemented in the Egyptian field in addition to a new model for TQM implementation that appropriates the Egyptian construction industry.     

Risk Management in International Construction Joint Ventures

This paper identifies the risk factors associated with international construction joint ventures (JVs) from and “integrated” perspective. The risk factors are grouped into three main groups: (1) Internal; (2) Project-specific; and (3) External. It examines the most effective mitigating measures adopted by construction professionals in managing these risks for their construction projects in East Asia. Based on an international survey of contractors, it was found that the most critical risk factors exist in the financial aspects of JVs, government policies, economic conditions, and project relationship. When entering a foreign construction market in the form of a JV, a foreign construction company could reduce its risks if it would carefully select its local partner, ensure that a good JV agreement is drafted, choose the right staff and subcontractors, establish good project relationships, and secure a fair construction contract with its client.     

Contractors’ Claims Insurance: A Risk Retention Approach

The negative effects of claims and disputes have serious negative impacts on contracting parties, their projects, the construction industry as a whole, and consequently on the nation’s economy. This paper explores a method for mitigating the negative effects associated with contractors’ claims and disputes using a risk retention approach. This method can help contractors in getting early relief from the financial and economic burdens of construction claims. To meet the goals and objectives of this study, the writers have: (1) investigated the feasibility of pricing insurance premiums using the options pricing theory; (2) explored the applicability of modeling the options pricing theory using Monte Carlo simulation; (3) set up the principles required for optimal design of a risk retention group for construction claims; and (4) tested the possible impact of the newly developed risk retention group using historic data of 10,193 construction projects spanning over 12 different California districts. Pursuant to this study, it was verified that construction claims satisfy the required principles for insurance. Also, based on the used testing framework, the developed risk retention group for construction claims has been proved a success from the insured and insurer sides. It is the writers’ hope that this study will lay the basis for a leading risk management technique that could be extended over the nation for the benefit of relieving the negative consequences associated with lengthy claims and disputes resolution in the construction industry.     

Importance of Capacity Constraints to Construction Cost and Schedule

This paper makes a practice-based critique of the assumptions behind network planning methods from the perspective of subcontractors and suppliers. In the context of a case example, the time-cost trade-off and its resource-oriented extensions are critiqued as being incapable of representing the capacity costs and constraints of subcontractors and suppliers. These methods are also critiqued as being incapable of representing the effects of site conditions on productivity, which in turn affects the capacity choices of subcontractors. Restricting the focus to the general building industry, case findings from 15 subcontractors and suppliers are presented. The case research indicates that capacity constraints systematically affect subcontractors and suppliers and that site conditions affect the productivity of subcontractors. Moreover, it is found that these firms consistently take action to mitigate the impact of capacity constraints and site conditions on cost. This second finding suggests that not only do network planning methods fail to account for the costs of capacity constraints and site conditions, but also that the schedules generated by network techniques will be inaccurate. Hence, the research implies that much of the current basis of construction costing and control is inadequate to its task, and that new methods must be developed that more realistically represent the needs of construction subcontractors and suppliers.