Critical Success Factors for Competitiveness of Contractors: China Study

Gaining or maintaining a “contractor’s” competitive advantage is not easy as it is determined by a large number of factors. Identification of critical success factors (CSFs) allows one to reduce the vast number of factors to some manageable few but vital ones. Based on the CSFs, contractors’ limited resources such as money and manpower can be allocated and aligned appropriately for yielding a maximum outcome of overall competitiveness. This paper describes the CSFs identified from a survey study carried out in Mainland China. The ranking analysis of the survey results shows that 35 factors are rated as critical for determining the competitiveness of a contractor. Factor analysis reveals that the 35 CSFs identified can be grouped into eight clusters, namely, project management skills, organization structure, resources, competitive strategy, relationships, bidding, marketing, and technology. The CSFs in this study provide a vehicle for guiding a contractor in managing its resources in order to improve competitive advantage. The study also provides insights into the management of competitiveness for contractors that are operating in the particular context of the Chinese construction industry.     

Cash Flow Forecasting Model for General Contractors Using Moving Weights of Cost Categories

This research introduces the development of a project-level cash flow forecasting model from a general contractor’s viewpoint. While most previous models have been proposed to assist contractors in forecasting cash flow in the early stage of pretendering or the planning phase, this paper aims to provide a tool that can be applicable during the construction phase based on the planned earned value and the actual incurred cost on a jobsite level. The critical key to cash flow forecasting at this level lies in how to build a realistic cash-out model. Toward the end, this paper adopts moving weights of cost categories in a budget that are variable depending on the progress of construction works. In addition, it addresses time lags in accordance with the contractual payment conditions and credit times given by suppliers or vendors. As for the cash-in model, net planned monthly earned values are simply transferred to the cash-in forecast with a consideration of billing time and retention money. Validation of the proposed model involves applying realistic data from four ongoing projects. Based on the results of comparative analyses, the writers conclude that the proposed model is more accurate and reliable, yet simpler to field engineers who are generally not familiar with certain intricate financial knowledge.     

Risks in Chinese Construction Market—Contractors’ Perspective

With China’s entry into the World Trade Organization (WTO), the Chinese construction market will be increasingly open and finally become part of the international market. Because of different social and economic systems, as well as different historical and cultural backgrounds, contractors are likely to encounter different risks in different markets. Based on questionnaires and case studies, this paper adopts an importance evaluation index and makes an importance evaluation of various risks encountered by Chinese contractors when contracting for projects in Chinese markets. This paper also makes comparisons between and analyses of the research findings and related available investigation results. The Cox–Stuart trend increase test method is applied in the current research, the results indicating that the variance corresponding to the importance index value tends to increase as the risk event importance decreases. This tendency shows that those investigated tend towards unanimity in terms of higher importance risk events. This paper also examines the reliability of the questionnaires by means of Cronbach’s Alpha Coefficient. The research shows that the main risk currently encountered by Chinese contractors in domestic markets includes owner’s irregular behavior and government departments’ interference in construction markets. China’s accession to the WTO has provided greater opportunities for international contractors to enter the Chinese construction market. Therefore the research results described in this paper can provide valuable data enabling international contractors to gain a better understanding of the potential risks in the environment of the Chinese construction market.     

Capturing Knowledge in Construction Projects: Knowledge Platform for Contractors

Managing knowledge effectively is critical to the survival and advance of a company, especially in project-based industries such as construction. However, capturing knowledge in construction projects is a tedious task, as knowledge is usually experience based, tacit, and hard to pass on to others. In this study, a survey was carried out among eight leading Turkish construction contractors that are operating within the international construction market. The specific objectives of this survey are to find out how the tacit and explicit knowledge are captured, stored, shared, and used in forthcoming projects, as well as major drivers and barriers for knowledge management. Based on the survey, it was determined that most of these firms do not have a knowledge management strategy and a systematic way of capturing and storing tacit knowledge. A conceptual framework is proposed to formalize the knowledge-capturing process within construction companies. To demonstrate how the conceptual framework can be implemented in practice, a Web-based system, namely, Knowledge Platform for Contractors (KPfC) is presented. It is hypothesized that KPfC can be used to manage both tacit and explicit knowledge effectively in construction projects.     

Factors That Influence Safety Performance of Specialty Contractors

In the construction industry specialty contractors perform most of the construction work. Given their impact on the industry, the safety performance of specialty contractors should be of concern to the construction industry. This paper describes a study conducted to identify factors that significantly influence the safety performance of specialty contractors. The study was composed of separate surveys of three different specialty contractor populations—a variety of trade contractors located primarily in southern Nevada, roofing contractors in the state of Florida, and the regional offices of a large, nationwide mechanical contractor. While there appeared to be contradictions between the surveys in some areas, the study concluded that specialty contractor safety performance was consistently influenced, in part, by a number of factors. The factors shown to positively affect safety performance include minimizing worker turnover, implementing employee drug testing with various factors initiating the testing, and training with the assistance of contractor associations. Safety incentive programs were not necessarily associated with better safety performance. Growth in company size was found to be associated with improved safety performance as well.     

Competitiveness of Inexperienced and Experienced Contractors in Bidding

This paper tests the assertion that experienced contractors are more competitive than inexperienced contractors by measuring the effect of experience on bidding competitiveness for building contracts procured by a regular client. Contractors are grouped into experienced and inexperienced contractors, and two levels of contractors’ experience are identified: (1) bidding experience only and (2) bidding plus construction experience. Results of two-sample t tests show that experienced contractors are more competitive than inexperienced contractors. Contractors’ competitiveness in respect of school contracts and other contracts are further compared in evaluating the relationship between the project type and experience effect. Experienced contractors are, on average, more competitive in competing for school contracts. It emerges that the factor of project type familiarity amplifies the experience effect. A comparison of experienced contractors’ competitiveness in bidding for (1) new building works and (2) alteration and extension works shows that the effect of experience would be more significant when contract works packages are highly standardized.     

Risk and Price in the Bidding Process of Contractors

Formal and analytical risk models prescribe how risk should be incorporated into construction bids. However, the actual process of how contractors and their clients negotiate and agree to price is complex and not clearly articulated in the literature. With participant observation, the entire tender process was shadowed in two leading U.K. construction firms. This was compared with propositions in analytical models, and significant differences were found. A total of 670?h of work observed in both firms revealed three stages of the bidding process. Bidding activities were categorized and their extent estimated as deskwork (32%), calculations (19%), meetings (14%), documents (13%), off-days (11%), conversations (7%), correspondence (3%), and travel (1%). Risk allowances of 1–2% were priced in some bids, and three tiers of risk apportionment in bids were identified. However, priced risks may be excluded from the final bid to enhance competitiveness. Although risk apportionment affects a contractor’s pricing strategy, other complex microeconomic factors also affect price. Instead of including pricing contingencies, risk was priced primarily through contractual rather than price mechanisms to reflect commercial imperatives. These findings explain why some assumptions underpinning analytical models may not be sustainable in practice and why what actually happens in practice is important for those who seek to model the pricing of construction bids.     

Fuzzy Approach to Prequalifying Construction Contractors

Construction contractor prequalification (CCPQ) is a crucial decision making process to select capable potential bidders and ensure the success of construction projects. The purpose of CCPQ is to guarantee a contractor’s characteristic to meet the construction project’s requirements, which has been established worldwide as a standard practice. However, existing methods, i.e., marking method, subjective judgment method, etc., for contractor prequalification have been inadequate because it is difficult for decision makers to investigate contractor’s capabilities against inexact, vagueness, and qualitative criteria. The objective of this paper is to propose a fuzzy framework-based fuzzy number theory to solve construction contractor prequalification issues, which include decision criteria analysis, weights assessment, and decision model development. Finally, a case study for a tunnel construction project was used to demonstrate the feasibility of fuzzy approaches.     

Constructability Practices among Construction Contractors in Indonesia

The concept of constructability in the United States or buildability in the United Kingdom emerged in the late 1970s, which evolved from studies into how improvement can be achieved to increase cost efficiency and quality in the construction industry. It is an approach that links the design and construction processes. The studies in the Unites States, United Kingdom, and Australia have demonstrated that improved constructability has lead to significant savings in both cost and time required for completing construction projects. However, in implementing constructability improvement, it is important to consider the uniqueness of the construction industry in a specific country. This paper presents the study performed on the construction contractors in Indonesia with regard to their current constructability practices and its impact on the project performance. The study shows that many contractors in Indonesia have been implementing part of the constructability concept in their projects. The concepts that usually applied during the construction stage as part of the overall construction plan were planning the sequence of field tasks and analyzing layout, access, and temporary facilities     

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.     

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.     

Conflicts between Owner and Contractors: Proposed Intervention Process

The parties of a construction contract, the owner and contractor, are a society with a complex set of interrelated relationships requiring cooperation and collaboration to coordinate time, resources, and communication. The main goal of the parties involved in a project’s construction is to have a successful project constructed in accordance with the plans and specifications, within the time and cost originally anticipated. The success of a project depends on a number of variables, not the least of which is how the organizations approach problems and conflicts. However, the adversarial atmosphere that infects the industry can prevent the parties from reaching their goal. This paper proposes an intervention process, a combination of partnership and mediation, to prevent and resolve dispute prior to contract close-out.     

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.     

Analysis of Occupational Injuries and Fatalities in Electrical Contracting Industry

The purpose of this paper was twofold: (1) to determine jobs/tasks associated with current injury, illness, and fatality trends in the electrical contracting sector of the construction industry; and (2) to identify current safety practices associated with the prevention of these injuries, illnesses, and fatalities. To achieve the project objectives, a survey was designed and sent to Michigan electrical contractors. To design an adequate survey, the research team first collected background information using the U.S. Bureau of Labor Statistics online database, published research, and contractor interviews. This paper presents and discusses the results of this study.     

Classifying Construction Contractors Using Unsupervised-Learning Neural Networks

Contractor prequalification involves the screening of contractors by a project owner to determine their competence to complete the project on time, within budget, and to expected quality standards. The process of prequalification involves a large number of contractors, each being represented by many attributes. A neural network model was applied to aid in the prequalification process by classifying contractors into groups based on similarity in performance using the financial ratios of liquidity, activity, profitability, and leverage. Contractors are represented in this model by patterns in four-dimensional space. Patterns of similar performance tend to form clusters intercepting regions of low pattern density in between. A neuron with weights is used as a classifier to set a decision boundary between clusters. The method basically iterates the neuron weights to move the decision boundary to a place of low pattern density. Then, the statistical hypothesis testing of the mean difference of two independent samples was used to validate the classification of the parent class to the two child classes considering the four ratios separately. The method was used hierarchically to classify a group of 245 contractors into classes of small numbers. Finally, the inferred procedure of classification proves that the neural network model classified the four-dimension pattern representing contractors efficiently.     

Factors Affecting Absenteeism in Electrical Construction

Construction contractors continue to be faced with the challenge of improving productivity in order to remain successful in an increasingly competitive industry. One factor that contributes to lower productivity is absenteeism. Yet, little is known or understood about the reasons electricians miss work, and very few studies have been conducted on absenteeism in the construction industry. As a positive step to reduce the problems associated with voluntary and involuntary absences, a study was initiated to identify why workers miss work and what steps should be taken to minimize absenteeism. The main objectives of the study were to learn the reasons for absenteeism and to quantify the impacts so that solutions can be developed to help contractors improve their productivity. The study determined that managers and electricians agreed that illnesses and medical appointments were two common reasons workers missed work. However, managers also believed workers were absent because of a lack of interest or irresponsibility, while electricians reported injuries and unsafe working conditions as reasons for missing work. Furthermore, a quantitative analysis of the data revealed that when the absenteeism rate was between 0 and 5%, there was no loss in productivity. However, when the absenteeism rate was between 6 and 10%, a 24.4% loss in productivity was experienced. By understanding what causes electricians to miss work, and the effect of absences on productivity, a company can manage and control absenteeism on electrical construction projects.     

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.     

Predicting Construction Contractor Default with Option-Based Credit Models—Models’ Performance and Comparison with Financial Ratio Models

Construction contractor evaluation is a critical issue in successfully completing a project. It is important for project owners and other stakeholders to identify potentially failing contractors and to avoid awarding them contracts. Previous studies developed construction contractor default prediction models incorporating managerial or economic variables into traditional financial ratio models to enhance predicting power. However, managerial variables are subjective and qualitative, and both economic variables and financial ratios are only available periodically and may not provide the necessary information in time. This study predicts contractor default by employing three option-based credit models (BSM, CB, and BS) based on stock market information, and the empirical results show that all of the models have strong discriminatory power in ranking contractors from riskiest to safest. The misclassification rates of the three models are BSM: 10%, CB: 10%, and BS: 12.7%, all of which are smaller than that of the enhanced ratio model developed by Russell and Zhai (22%), and two of which are smaller than that of the model developed by Severson and colleagues (12.5%). The results show that option-based credit models are good alternatives for construction contractor default prediction.     

Critical Success Factors for Public–Private Partnerships in Infrastructure Development

Different types of public–private partnerships (PPPs) have been practiced in worldwide infrastructure development with diverse results and a variety of problems have been encountered. A number of factors combine to determine the success or failure of an infrastructure project in terms of its objectives. There is an urgent need for a workable and efficient procurement protocol for improved practices in future PPP projects. As an important step toward the development of such a protocol, this study identifies, analyzes, and categorizes various critical success factors (CSFs) for PPPs in general based on a public–private win–win principle and a systematic research approach that includes case studies, literature review, and interviews/correspondence with international experts. A CSF package is developed that contains five main CSFs, each including a number of success subfactors (SSFs). Relative significances of these CSFs and SSFs are examined based on the results of a questionnaire survey of international expert opinions. Agreement analysis shows that there is a good agreement in the ranking of these CSFs and SSFs between respondents from the industrial sector and those from the academic sector.     

Information Technology Planning Framework for Japanese General Contractors

Developments in information technology (IT) continue to have a significant impact on the architectural/engineering/construction (A/E/C) industry. However, the issue of whether A/E/C organizations are receiving adequate returns from their IT investments remains an important managerial concern. Recently, Pe?a-Mora, Vadhavkar, Perkins, and Weber introduced a strategic IT planning framework for construction projects that includes four steps: environmental scan, internal scrutiny, IT diffusion analysis, and IT investment modeling. It analyzes the external and internal IT conditions of a project/firm, identifies the diffusion phase of IT in the project/firm, and finally evaluates the effects of IT investments on the project/firm. Although this framework was originally intended to plan future IT investments, we assume that the framework can also be used to evaluate ongoing or past IT investments in projects/firms. Following this idea, this paper presents an application of the Pe?a-Mora et al. framework to an ongoing IT project in Kajima Corporation, one of the largest Japanese general contractors. Kajima is currently developing an IT system called LINCS (Linkage of Information for a New Construction System). This synthetic information network system has been designed to share building data among design and construction stages and streamline design/build activities. By using the framework proposed in this paper, we analyzed how LINCS is justified in terms of its strategic and operational value for Kajima and its construction projects.