Downloaded - Test Input

ProceedingsTG65 & W065 - Special Track18th CIB World Building CongressMay 2010 Salford, United KingdomCIB TG65 - Small Firms in ConstructionCIB W065 - Organisation and Managementin ConstructionCIB Publication 360

CIBTASKGROUPANDWORKINGCOMMISSIONTG65‐SMALLFIRMSINCONSTRUCTION&W065‐ORGANISATIONANDMANAGEMENTINCONSTRUCTIONPAPERSANDPOSTGRADUATEPAPERSFROMTHESPECIALTRACKHELDATTHECIBWORLDBUILDINGCONGRESS2010,10‐13MAY2010THELOWRY,SALFORDQUAYS,UNITEDKINGDOMSelectedpapersfromtheProceedingsofthe18 th CIBWorldBuildingCongress.Proceedingseditedby:ProfessorPeterBarrett,ProfessorDilanthiAmaratunga,Dr.RichardHaigh,Dr.KaushalKeraminiyageandDr.ChamindaPathirageTG65SpecialTrackPapers(excludingPostgraduatePapers)reviewedby:ProfessorAndrewDainty,Dr.ChunChinKao,ProfessorChristianKoch,ProfessorFranciscoF.Cardoso,Dr.FrédéricBougrain,Dr.GraemeD.Larsen,Dr.JianZuo,ProfessorKähkönenKalle,AssistantProfessorMartineBuser,Mr.LudwigMartin,Dr.MohammedDulaimi,Dr.Shu‐LingLu,Mr.SihleDlungwana,Mr.TorbenTamboandMs.VeronicaJonesW065SpecialTrackPapers(excludingPostgraduatePapers)reviewedby:CarlAbbott,Dr.ChrisHarty,ProfessorChrisFortune,ProfessorDavidLangford,Prof.Dr.FrankSchultmann,GabrielLefebvre,Dr.JenniferWhyte,Dr.LauriPalojarvi,Prof.MarizaKatavia,Prof.RobertoPietroforte,Dr.StephenGruneberg,Dr.SepaniSenaratneandProf.TeuvoTolonenCIBPublication360

TG65‐SMALLFIRMSINCONSTRUCTION&W065‐ORGANISATIONANDMANAGEMENTINCONSTRUCTIONPAPERSANDPOSTGRADUATEPAPERSFROMTHESPECIALTRACKTG65Small construction firms play an increasingly important part in improving the overallperformanceoftheconstructionindustry.Asconstructionprojectstypicallydrawtogetherbothsmallandlargefirmsinvaryingcollaborationsisacknowledgedthatalsolargefirms'performances are impacted by their small supply chain partners' performance. Thesuccessfulmanagementofsmallfirmsisoftennegativelyinfluencedbytheircharacteristics:limited staff capacity and capability, scarce time and resources for innovation, excessiveinfluencebyowner‐managers,difficultyinraisingfinancesandmaintaininggoodcashflows.Achallengetotheindustryisthedevelopmentofbusinessstrategies,organizationofwork,technologies and human resources that are appropriate to the characteristics and specialneedsofsmallconstructionfirmsindifferentcountrycontexts.AgainstthisbackgroundtheTask Group aims: to bring together the experience and expertise of both researchers andpractitioners who not have otherwise interacted, to develop, share and disseminateappropriateresearchmethodologiesandmanagementandorganizationtheoryandpracticewithregardtothesuccessfulmanagementofsmallconstructionfirmsandtoencourageandenable new collaborative, multi‐disciplinary research in this area. Specific researchobjectivesfortheTaskGrouparetoidentifytheconceptandscaleofsmallconstructionfirmactivity in various country contexts, to identify generic antecedents to the successfulmanagement of small construction firms, as well as discern country specific drivers andconstraintsandtodevelopingappropriatemethodologiesforthestudyofmanagementofsmallconstructionfirms.

W065The objectives of W065 are to be the leading research and innovation focus for theorganisation and management of construction, to support the creation of constructionpracticesandoutcomesthatequatetoorexceedthebestfoundinotherindustries,intermsof imagination, energy, effectiveness and efficiency and to stimulate, facilitate andcommunicate research and innovation, stressing the integration essential for successfulinnovation in a complex environment. The Scope of W065 covers all aspects of theorganisationandmanagementofconstruction.Inparticularthefollowingbroadthemeswillpervademanyofitsactivities:Projects,Companies,PolicyandProcesses.

CONTENTSTG65PapersStrategyDevelopmentinSmallandMediumContractorsintheLightoftheFinancialCrisis 1Wandahl,S.Ussing,L.F.CharacteristicsoftheInnovationProcessinFrenchSMEsoftheConstructionIndustry 12Bougrain,F.CriticalSuccessFactorsforaConstructionCompany 26Lasker,G.C.Schuette,S.Cox,R.F.Beck,D.M.NewHighTechnologyProductDevelopment:TheCaseofLightEmittingDiodes 38Shu‐Ling,L.Sexton,M.OncetheyWereHeroes:WhatHappenedtotheCompaniesthatBuilttheSydneyOpera 48House?Tombesi,P.Fowler,M.Nigra,M.Teoh,D.Saunders,V.DoProjectsMatter?TracingFirms'IndustrialTrajectoriesfromtheAustralianFederal 60ParliamentHouseTombesi,P.Hutson,A.Nigra,M.Fowler,M.Teoh,D.Saunders,V.LearningfromCollectiveAction:LessonsfromCamaraColombianaDeLaConstruccion 73Record1957‐2007Vargas,H.Paez,H.SmallandMediumSizeContractorsinSouthAfrica:15YearsofLearning 85Thwala,W.D.Phaladi,M.J.BetweenFitandMisfit‐SmallContractorsUsingMobileTechnology 95Koch,C.Tambo,T.Buser,M.TG65PostgraduatePapersApplyingthePrincipleofSubsidiarityintheBuildingIndustry:AWaytoImprove 108CompetitivenessinBrazilHaito,R.J.O.Cardoso,F.F.DevelopmentofBusinessManagementSkillsforSmallContractorsinSouthAfrica‐ 120CanWeReallyMeasureIt?Hauptfleisch,D.Dlungwana,S.CorporateDecisionMakingintheImplementationofEnvironmentalManagement 134Systems:SmallandMedium‐SizedEnterprisesNjuangang,S.Douglas,C.H.Liyanage,C.

PrioritisingVariablesofSMEs/PrivateSectorthroughInterpretiveStructuralModel 146(ISM)Dawood,I.Underwood,J.W065PapersCompetitiveStakesinthe'CreditCrunch':AnAnalysisofStrategicPolarisation 161amongstEuropeanContractorsSmyth,H.TheMovetoNighttimeConstruction'HowAreU.S.HighwayAgenciesCoping? 175MinchinJr.,R.E.Thurn,S.B.Ellis,R.D.AdvancementofGlobalBuiltEnvironmentasThreeRecursiveSystems 190Huovinen,P.TowardsaGender‐NeutralWork‐LifeBalance? 202Raiden,A.Caven,V.CalculationofConstructionTimeforBuildingProjects‐ApplicationoftheMonte 214CarloMethodtoDeterminethePeriodRequiredforShellConstructionWorksHofstadler,C.CopingwithComplexity:TowardsaFrameworkforUnderstandingKnowledge 226IntegrationinConstructionBygballe,L.E.Orstavik,F.ManagingRisksinInternationalGrowthBusinessofConstructionContractorsand 238BuildingProductSuppliersPalojarvi,L.Huovinen,P.Kiiras,J.SensemakinginInternationalConstructionJointVentures 252Brockmann,C.RiskManagementonMajorPropertyDevelopmentProjectsinNewZealand 264Qu,J.Boon,J.CheckingtheHealthinessofCommitmentProfilefromItsPredictionofBurnout 276Jia,Y.Rowlinson,S.Kvan,T.Lingard,H.Yip,B.DigitalInfrastructure,ManagementPracticesandtheDesignOrganization 288Whyte,J.RisksSharedandAllocatedbyConstructionClientsandContractorsinDutch 301(Hybrid)ProjectAlliancesKoolwijk,J.S.J.

ComparativeStudyonQualityAssuranceofConstructionProjectinTaiwanandJapan 308Tsung‐Chieh,T.Furusaka,S.Han,T.ImplementationofaSystemforAchievingInnovationOpportunitiesinaConstruction 319CompanyYepes,V.Pellicer,E.Correa,C.L.Alarcon,L.F.HeuristicRepetitiveActivitySchedulingProcessforNetworkingTechniques 331Bragadin,M.A.TheInnovationValueChainAnalysisofanUrbanRegenerationProject 343Ozorhon,B.Abbott,C.Aouad,G.SupplyChainManagement:ACritiqueofSupplyChainArchitecture 355Tennant,S.Fernie,S.NurturingaVirtualConstructionManagementServicesCompanyanditsSystem 368ContractorNetworkKiiras,J.Alsakini,W.Huovinen,P.ImplementationofMobileICTToolsinReengineeringProjectinSlovenianConstruction 380CompanySuman,N.Sorsak,M.BeyondtheDesignFix‐NewIndustrialisationinContractors 388Koch,C.FrodellM.Josephson,P.E.KahkonenK.QualificationsintheCroatianConstructionIndustry:TheNewFramework 401Lazic,M.Ceric,A.BarrierstoIntegrationandAttitudestowardsCulturalDiversityintheConstruction 414IndustryPhua,F.T.T.Loosemore,M.Dunn,K.Ozguc,U.SuccessFactorsinLargeConstructionProjects 423Szentes,H.W065PostgraduatePapersIdentifyingtheFactorsthatInfluenceInnovationChampioningBehaviourin 434ConstructionSupportServicesorganisations:AReviewoftheRoleofMiddleManagementKissi,J.Payne,R.Luke,S.Dainty,A.Liu,A.MultidisciplinaryIntegratedToolsinSeismicRiskManagement 447Vahdat,K.Smith,N.J.

AppropriateTimeandCostsEstimatesfortheBuildingProjectFeasibilityAnalysis 459DeFilippi,G.Melhado,S.B.ProjectTrade‐OffDecisions:TheGapbetweenRealityandtheAcademicWorld 468Vahidi,R.Greenwood,D.ExploringthePotentialContributionsofBenefitsRealisationtotheManagementof 479ComplexConstructionProjectsTillmann,P.Tzortzopoulos,P.Formoso,C.T.AdvancementofConstruction‐RelatedRiskManagementConcepts 492Lehtiranta,L.Palojarvi,L.Huovinen,P.ConductingRigorousReviewsofResearchonRiskManagementinConstruction 504Lehtiranta,L.Huovinen,P.CriticalSuccessFactorsofSustainableOfficeDevelopmentintheNetherlands 517Vink,G.Abdalla,G.Favie,R.Huyghe,J.Maas,G.SustainableDevelopmentinConstruction:ATooltoBridgetheGapBetweenStrategic 529andTacticalPlanningHerazo‐Cueto,B.Lizarralde,G.ComparativeStudyonProjectManagementSystemandRoleofClientsofLarge‐Scale 544DevelopmentProjectsinAsianMegacitiesHan,T.Furusaka,S.Tsung‐Chieh,T.IdentifyingCausesofadditionalCostsinToleranceCompliancesFailureinBuildings 554Jingmond,M.Lindberg,T.Landin,A.PerformanceIndicatorsoftheCompaniesQualityManagementSystemswithISO9001 567CertificationLordsleem,A.C.Duarte,C.Barkokebas,B.Jr.ManagementProcessStandardization:APracticalCase‐StudyinColombia 579Vargas,H.Paez,H.Prieto,J.Mesa,H.ImprovingConstructionDesignandProjectDeliverythroughaMoreConsideredOff‐ 589SiteStrategyZimina,D.Pasquire,C.MarketingFunctionsInCrotianConstructionCompanies 600Butkovic,L.L.Katavic,M.Design‐Bid‐BuildVersusDesign‐Build:TheClient'sChoice 609Favie,R.Sijbers,J.Abdalla,G.Maas,G.

StructuralEquationModellingforSmallConstructionOrganizationalSystem 622Chen,Y.Lasker,G.C.CooperationinProjectAlliancing:TheServiceProfitChainApproachinBuilding 635InterorganisationalRelationshipsShe,L.Aibinu,A.Johnson,L.W.LeanMethod,aSolutiontoProblemsinHospital 648Sfandyarifard,E.InvestigatingtheAdaptabilityofRelationalContracting(RC)Practices‐TheSriLankan 663ContextGunatilake,S.Liyanage,C.Jayasena,H.S.CIBBrochure 675Disclaimer 677

Strategy Development in Small and MediumContractors in the Light of the Financial CrisisWandahl, S.Department of Mechanical and Manufacturing Engineering, Aalborg University(email: sw@production.aau.dk)Ussing, L. F.Department of Mechanical and Manufacturing Engineering, Aalborg University(email: lf@production.aau.dk)AbstractThe construction industry is very dependent on the general economic state. If the economic state of agiven country is good, consumers will have finances to spend on construction assets. On the otherhand, when an economic slump occurs, the activity in the construction industry is low. One way ofnavigating in this sea is to know ones business's core competences, strength and weaknesses, goals,etc. called a strategy. This will help the contractor adjusting capacity, and selecting jobs and marketsegments. Small and medium contractors (SMC) are known to have small contribution margins perjob, and are therefore dependent on a constant flow of orders. If SMC's have a strategy the hypothesisis that there is an increased chance of surviving in the market, especially in economical down times.This paper reports on four small case studies where SMCs are analyzed in terms of their strategiccompetencies. It is found that these companies often have not a strategy, at least not an expressedstrategy. SMCs do not have the resources to develop large strategies. This research, therefore, alsodiscusses how SMC in a very simple manner can develop a usable strategy.Keywords: strategy, SMC, business, case study1

1. Strategy in the construction industryConstruction is often referred to as a conservative industry where tradition goes ahead of innovation.Of course this is not fully true, think just of the innovation within materials and equipment. In manyother aspects the conservative sticker is okay. Take for example the slow implementation of new cooperationsforms and digitalization of the construction industry. Strategy as a discipline belongs alsoto the latter part. It is our clear expression that strategy work within contractor organization is in manycases not taken serious. This is based on our extensive industry knowledge achieve from academiaindustrycooperation and continuing education.Many leaders have a “business as usual” agenda, but is this latent strategy effective and what are theconsequences? Due to (among other things) the financial crisis the amount of jobs available is limited.This increases the importance of a positive outcome for jobs assigned. But also calls for a moregathered and enforced bidding strategy. In total, contractors need a more intensive strategy work tosurvive in the market in these years – at least this is the hypothesis of this paper. Small Medium SizedContractors (SMC) has often not resources available or resources with the right competencies forcaring out an intensive and continuous strategy effort.The purpose of this paper is by means of four cases studies to a) map the amount of strategy workcarried out in SMC‟s and b) to look into any consequences this might have.2. Strategy as theoryStrategy originates from the Greek word strategia, which means to plan military operations. Theinterest in strategy steams thus from military where operations required that the action of thousands ofpeople should be coordinated, organized and managed in order to achieve military success. (Bakka et.al, 2002). Though it can concluded that in the original meaning strategy is an intentional actionincluding thoughts on goals, means, scenarios for implementation and results (Lægaard et. al, 2006).Construction firms is in competition with ”enemies” where survival depends on the management‟sability to adjust and develop organization under shifting external conditions. The battlefield isregional, national and international market segments, while the weapons on the operational level areemployees‟ competencies, and financial strength and cooperational abilities on the tactical andstrategically level.A vast amount of definition of strategy exists. A commonly accepted definition is that strategy is “theroad to the goal through a pattern of deliberate actions that creates competitiveness and addedvalue.” (Lægaard et. al, 2006).Michael Porter had years prior in the famous article ”What is strategy ?” (Porter, 1996) argued thatstrategy is all about differentiation combined with operational effectiveness.2

While there is broad unity on the main purpose of strategy – to create competitiveness and addedvalue – much more disarray on the meta research behind strategy. The disagreement can be boileddown to that some argue that strategy can be planned or not. Based on this two strategy schools exists,the emergent strategy approach (or resource based) which argues that the turbulent external conditionscalls for at open strategy that quickly can respond to changes. The second approach is the normativestrategic planning school which argues that based on an analysis of the present external conditions oneright strategy can be selected (Radich, 2006).3. Methodological approachThis paper is based on contact with four general contractor firms. The selection of these four firms isbased on the following criteria. Firstly, the intension was to have four different firms covering a broadspectrum of the construction industry. Secondly, it was important not only to select firms known fortheir strategy work, or attitude towards strategy. This could bias the results. In practice the firms wasselected among the authors‟ industry networks. The first four asked accepted the „invitation‟.A qualitative approach of structured interviews was selected because interview and dialog seems to fitthe soft area of strategy the best. The top managers of the four firms was the target of the interviews.In two of the cases the interview was carried out in two sessions. First a face-to-face interviewfollowed by a telephone update. In the two other cases only face-to-face interview was conducted.4. Case study of four SMC’s strategy readinessIn the following four cases will in short be analyzed in relation to how these four contractors do andthink of strategy. As mentioned earlier, these case studies are carried out by means of interviews. Theselection of the four cases is based primarily on knowledge of the local construction industry andnetwork, and secondary, they should all be SMC and willingly to participate anonymous ininterviews.4.1 Case ACompany A is a contractor doing almost all kinds of new build and refurbishment. The company isnow having a lot of public financed construction orders, e.g. housing, institution, hospitals, etc.Company A employs approximately 50 hourly workers and 10 permanent employees, mainlyengineers. The company attempts in economic downturns to retain employees with great competenceversatility. Permanent staff is not often dismissed.Company A has an explicit and written strategy, in terms of a vision, a mission and goals. It seems,however, that what the CEO calls a strategy more is what theoretically would be viewed as a set ofgoals. The strategy provides an image of a company with focus on its local connection, its credibilityand its employees. The strategy is updated every two to three years. This is carried out by using the“old” strategy as a debating point on a manager seminar.3

The main part of orders is achieved through bidding, and hence the workforce capacity is fluctuating.The jobs to put bids on are selected by matching employee competencies from the workforce withavailable project managers.The financial structure is characterized by that often used equipment is bought (e.g. portable cabins,scaffold, lift, etc.) whereas special equipment or equipment only to be used for a short period is rentedthrough sub contractors. The goal is to minimize the capacity costs.The strategy for the facing economical downturn period is evident for the CEO of company A. Firstly,the investment base is kept low to ensure a sufficient solidity and liquidity. Secondly, they increasethe amount of job bids, even though the hit rate might not increase. The aim is to increase earning notturn over. Therefore, smaller jobs are selected for bidding. Thirdly, it is important to still posses theright competencies, hence submitting employees is not first choice. Finally, the company increasefocus on subcontractors. The aim is not to engage with subcontractors of dubious financial strengthand to ensure that the subcontractors have high competencies in their workforce. They also attemptnot to contract the same subcontractor for each job, to ensure that bidding prices is kept low.However, the strategy for the facing economical downturn mentioned right above, is not identicalwith the provided written strategy material from the company. The formal strategy has thereforecharacter of a pro forma strategy. This is critical, because how is the informal strategy of the CEOcommunicated to the entire organization?4.2 Case BCompany B is a family owned contractor, employing approximately 80 hourly paid workers and 20permanent employees. Half of the yearly turnover is raised from project development from thecompany. The company has solid base in the strategic work, among others CEO and other mangershave taken courses in strategic management. Even though it is a family owned business the board isstrategically assembled with external experts having expertise in areas missing in the topmanagement, e.g. university professors with specialty in innovation.At yearly seminars competences, competition, SWOT analyses, emergent strategy inputs, etc., isassessed. The result is an updated strategic intention consisting of a vision, a mission, a valueproposition and an action plan.Selection of jobs for bidding is based on a detailed scheme illustrating company resources availabilityover time. The decision is taken in co-operation with project managers and division managers.Moreover, the job is evaluated in concern to possible margin and finally, the prestige of the job istaken into account. In a longer perspective the company applies Jack Welch‟s 20/70/10 theory(Welch, 2005) as means of having the right employee competencies. A yearly update of this model isthe foundation for future hiring and firings.4

Company B owns 80% of all material and equipment used in their projects. The largest piece ofequipment is a telescope loader. Anything larger than this is rented. Then management is aware of thelarge amount of capital tied in equipment and the potential disadvantage this might be.Within the next decade the company is expecting a change in the construction industry towards “fullconcepts”, e.g. complete deliver of housing concepts, including financing, furniture, maintenance, etc.Therefore, the company has already started a production of modular prefabricated housing modules,as well as PPP project has high focus.4.3 Case CCompany C is a large infrastructure contractor, employing around 150 hourly paid workers and 45permanent staff. This company has projects within bridging, environment, railroads and complexconstructions. A major part of the division‟s projects is hence from public clients. The companyargues that the public and governmental budgets not are affected by the general state of the market.Company C has a strategy formulated at an aggregate level. On the basis of this strategy the managersformulates more tactical considerations and goals. These are revised yearly.The division is bidding on jobs the managers estimates matches with the division‟s resources andemployee competences. Furthermore, the division places tactical bids due to entering new markets orgeographical areas, or to maintain visibility on the market.The cost structure of the division is characterized by almost all equipment is owned. The divisionmanager argues that the solidity of the division is high, and hence they can afford not to have allequipment in used at all times.The division‟s expectation to the future is that there will be several jobs within railroad due to thepoor state of the Danish railroad system. Environmental jobs are also expected to increase, and latelythe division has increased its resources and capabilities within this area. Staff size is expected to bestatus quo.The company has a policy of not distributing its strategy; hence the exact wording cannot bepublished in this paper.4.4 Case DCompany D has around 40 hourly paid workers and 12 permanent staff. Their main activity isinfrastructure assignments, especially sewerage. The main client is therefore public, but assignmentsare rooted very locally.Prior to the interview the manager conveyed that the company did not apply any strategy work, andfound the whole concept of strategy irrelevant. His point is that it is not the company but the clients5

and the public that shapes the market, and a company has just to fit into that framework. “No strategybut common sense” as the manager puts his view forward.The company is bidding on public tender, invited tender and small assignments from returningcustomers. At present time, few jobs are available in tender. This tendency started mid 2007. Bids areplaced on jobs matching core competencies and if resources are available. However, one single jobmust never exceed 20% of yearly turnover.The company has chosen only to have around 70% of workers needed and only owning around 70%of equipment needed. The idea is to have only small changes in the staff.Their expectation to the future is that major changes in the sector will occur within a decade. Themanager expects medium sized contractors will paste away, e.g. merge, bought or buy. The reason forthis argument is that future jobs will be both more complex and larger.4.5 Comparison of the four casesIn table 1 a comparison of the four cases is illustrated. The purpose is to achieve an overview ofwhich characteristics are shared in the four cases and which connections there exists between caseswith shared characteristics.Table 1: Comparison of the four cases.AttributeCaseType of contractorCompany sizehourly / permanentPresent strategyBiding strategyCost structureCase A Case B Case C Case DGeneralcontractorGeneral &developmentcontractorInfrastructurecontractor50 / 10 80 / 20 150 / 45 40 /12Mission, vision &goals, updatedevery 2-3 years.Seems like a proforma strategy.Tender. Jobs toplace bids on isselected byproject managerOwns mostequipment, butspecial needs isrented. Seeks todecrease capacitycosts.Intensive strategywork, includingSWOT, emergentinput, etc. Yearlyupdate.Tender based oncompetencies, butdo also place bidson jobs with highvisibility.80 % of the equipmentis owned.CEO aware of thepotential risk, butno action taken.Yearly update oftactical goals.Must followcorporate strategyTender based onavailable workforce.Also bidson jobs in newmarket segments.Almost all equipmentis owned.CEO argues thisis OK due to highsolidity.InfrastructurecontractorNo strategy.Strategy work isirrelevant, clientand marketshapes marketTender, but hardtime getting jobs.No bids placed onjobs that exceed20% of turnover.70% of the equipmentis owned.6

The lower part of figure 1 illustrates en evaluation of the strategy work carried out in the four cases.Again, this is an evaluation based on the overall impression of the companies obtained during theinterviews. Company D stand out by having done no strategy work at all. The three other companiesis more similar in extend of strategy work carried out. However, there is again a correlation with thesize of the company, i.e. the largest case companies has carried out the most strategy work.5. Financial performanceInitially this paper put forward the hypothesis that SMC‟s devoting resource in working thorough witha strategy has an increase chance of surviving in the market and to grow. Therefore, the financialperformance of the four case companies is now investigated. Prior to the investigation, it is thoughacknowledged that several other factors than a company‟s strategy influence the financial state.When performing a financial analysis of a company numerous key numbers could and should be putforward. Due to the limited length of this paper and because the main purpose not is financial analysisof SMCs only a few key indicators is used. The focus on growth / decline and EBITDA 1 is thereforeused as key indicator. Due the difference company size the key indicator is made relative byillustrating it per employee. EBITDA per employee is illustrated in figure 2.Figure 2: Development in EBITDA per employeeTo grow is not always a success. It is necessary to ensure a healthy growth. Thus liquidity and solidityis also applied as key indicators. These key indicators for the four case companies are illustrated infigure 3 and 4 respectively.1 EBITDA: Earnings before Interest, Taxes, Depreciation, and Amortization8

Figure 3: Development in liquidityFigure 4: Development in solidityIn general case company D can post the best key indicators. Among others, case D has an impressingincrease in EBITDA. Case A and C show also an increase in EBITDA. An increase can in generallyspeaking derive from two factors. Either an increase in turnover or a decrease in cost (mainly flexiblecosts). In both instances this could be due to well preformed management and strategically decision,but it could also be due to “lucky” construction project specific circumstances. It is proven (Flanaganet. al, 2007) that construction project rarely turns into an zero solution but rather often goes eitherterrible wrong with great financial losses in consequence or turns out well with an high contributionmargin. This is due to the complexity in most construction project and the lack of planning and riskmanagement skills among all parties in the construction industry (Flanagan and Norman, 1993).All the four cases have a steady liquidity level. This is basically what could be expected from wellmanaged companies. Text books (Anlægsteknikforeningen, 2008) prescribe a liquidity not less than100%. If lower, the company can quickly come in big trouble fulfill future paying obligations. Casecompany B and C is close to the limit, and this should be a warning signal for the management and forpotential suppliers.9

Solidity is an expression of the relation between equity and liabilities, i.e. horizontal leverage. Case A,C and D shows small improvement in solidity, whereas case B has a dramatic decrease. In theconstruction industry solidity around 25-50% is acceptable (Anlægsteknikforeningen, 2008). Case Bhas solidity lower than 10% meaning that it very quickly can lose its equity and hence affect theliabilities. Therefore, this key indicator is important for possible creditors. In the light of the financialcrisis a low solidity can be critical when new loans or credits are negotiated.The question is now, if there is any connection between the case companies performing well in theareas of strategy and case companies performing well financial. The immediate conclusion is that anegative relation exists. It seems that the companies putting the lowest effort into strategy work isperforming financial best! It is also evident, that the smallest companies (employees) perform best.Basically this falsifies the hypothesis of this paper.6. Discussion and conclusionThe following section is a discussion of reasons for this odd connection, and also a discussion of theusability of the connection between strategy and financial performance.When investigating the four case companies‟ strategy works more in debt, there is after all aconnection. Case D and A seems to apply a more resource than market based attitude towardsstrategy. Case D neglects the important of strategy, but still the manager is very focused onhis resource base and how to maintain and match this with possible jobs.It should also be in mind that several other factors influence the financial performance of acompany. It is possible to have a great strategy but having major problem implementing andrealizing the strategy. It is also possible that the explicit strategy is based on a misleadinganalysis of the “as is” situation. In a production to order company project specificcircumstances, will in particular influence the financial outcome. Factors like the general stateof the market, relationships with suppliers and customers, and implementation of partneringand Supply Chain Management will clearly also have vast impact on the performance.In relation to the methodological choices it can be challenged if four cases are enoughfoundation for valid conclusions. Also the selection of the four cases can often be critical forthe outcome of the analysis. Statistically (though a quantitative analysis) it is acknowledgedthat a sample should consist of at least 15-20 before can illustrates a representative segment ofthe population.Finally, it is possible that other analysis factors in both the strategy analysis and the analysisof the financial performance could have led to another result. Especially the choice of KPIcan be questioned. However, in this research EBITDA, solidity andAcknowledgementThe authors would like to thanks managers of the four case companies for participating. They wereopen for great discussion both in relation to the topic of this paper in relation to the construction10

industry in general. Also a special thanks to M.Sc. student Helle Bobach for outlining the foundationfor the four cases.ReferencesAnlægsteknikforeningen (2008). Construction Management 3 - Management accounting inconstruction (in Danish). Copenhagen, Polyteknisk forlag.Bakka J and Fivelsdal E (2002). Organizational theory (in Danish). Handelshøjskolens forlag,Copenhagen.DCA (2009), Analysis of the state of the construction market, Marts 2009. The Danish ConstructionAssociation, Copenhagen.Flanagan R, Lu W, Shen L, Jewell C. (2007). "Competitiveness in construction: a critical review ofresearch." Construction Management & Economics 25(9): 989-1000.Flanagan R and Norman G (1993). Risk Management and Construction, Blackwell Publishing.Lægaard J & Vest M (2006). Strategy in winning companies (in Danish). Jyllands postens forlag.Porter M (1996). “What is strategy ?” Harvard Business Review, Boston.Welch, J. (2005). Succes. Copenhagen, Jyllands-Postens Forlag.Radich F, Drejer A & Printz L (2006). Emergent strategisk ledelse – vejen frem?(in Danish). AarhusSchool of Business.11

Characteristics of the Innovation Process in FrenchSMEs of the Construction IndustryBougrain, F.University Paris Est, CSTB(email: frederic.bougrain@cstb.fr)AbstractThe paper aims at presenting how SMEs of the French construction industry innovate. Thepaper focuses on the nature of the innovations (product, process, organisation, marketing), theway firms use internal and external resources to innovate. SMEs usually represent around 90%of the firms of the construction industry. Understanding how SMEs manage innovation canhelp public authorities who aimed at supporting innovation in construction and promoting newbuilding regulation. To fulfil these goals, the paper defines innovation in construction andSMEs. The empirical analysis draws upon face-to-face and telephone interviews with generalmanagers of SMEs and executives of large groups. Results indicate that most contractors usetheir own resources to innovate whereas suppliers appear more opened to external knowledge.This is probably due to the nature of the innovation process followed by contractors and to thefact that contractors invest less in R&D. This reduces their ability to identify and apply externalknowledge.Keywords: innovation, SMEs, collaboration, absorptive capacity12

1. IntroductionThe construction industry is often criticized for its inability to innovate, to improve its practicesand to provide value for its clients. The low level of R&D, the fragmentation of the industry,the inability to learn from one project to the other, the procurement process mainly based ontendered price and the conservatism of employees of the building site are often put forward toexplain this situation. In the Egan report (1998) construction was considered “as a business thatis unpredictable, competitive only on price not quality, with too few barriers to entry for poorperformers”.But construction is also praised for its ability to achieve complex and exciting projects such asthe Sydney Opera and the construction of Terminal 5 at Heathrow Airport (Brandon, 2006).Critics concerning the poor level of innovation in the industry are also biased as it wasindicated by Winch (2003). Reports usually tend to present a narrow definition of construction.Architectural and engineering consulting firms are usually excluded from this definition whilethey carry out most of the design and research activities. Including upstream (e.g.manufacturing), parallel (e.g. architectural and technical consultancy) and downstream (e.g.facility management) activities would give a more innovative image of the industry (Sexton etal., 2007).One element really differentiates construction from all other sectors. It is the high number ofvery small firms. In France in 2007, among the 369 100 firms of the industry, 339 900 (92.1%)employed less than 10 employees and contributed to 33.44% of the production (CommissariatGénéral au Développement Durable, 2009) 1 . Conversely the number of firms employing morethan 250 people is limited. They were about 300 in 2007 representing less than 0.1% of thefirms of the industry. Their contribution to the production reached 20.2%. Similar results werefound for Finland, Poland and Spain (BUILD-NOVA, 2006).The way these small firms innovate has benefited from a growing interest. Lu and Sexton(2006) focused their research on small construction knowledge-intensive professional servicefirms. Manley (2008) examined the case of small Australian firms through five in depth casestudies. Barrett and al. (2001) also based their research on a limited number of cases (seven) todetermine the meaning of innovation for small firms and to understand how SMEs from theconstruction industry manage and exploit innovation.The aim of this research paper is to contribute to this ongoing interest for innovation in SMEs.This issue is particularly acute within the context of the new building regulations and theambitious targets set up by the French government for the construction industry. The aim is to1 The Commissariat Général au Développement Durable distinguishes three categories in its classification:building construction, installation and finishing and civil engineering.13

educe drastically the energy consumption and the level of greenhouse emissions of buildings.By 2015 low energy buildings have to become the standard for new buildings and by 2020 allnew buildings have to be “zero energy”. The success of this policy partly relies on the capacityof SMEs to propose new products and services and to change their habits to improve projectquality.The paper exposes the innovation process adopted by small contractors of the Frenchconstruction industry. The situation of suppliers is also presented as a comparison. The secondand third sections define innovation and SMEs. The following sections focus on the methodand results of the empirical analysis. The conclusion summarises the results, allows somerecommendations to public authorities and sketches out directions for further research.2. InnovationAccording to the Oslo Manual which becomes the reference for analysis dealing withinnovation, “An innovation is the implementation of a new or significantly improved (good orservice), or process, a new marketing method, or a new organisational method in businesspractices, workplace organisation or external relations. (…)The minimum requirement for an innovation is that the product, process, marketing method ororganisational method must be new (or significantly improved) to the firm. This includesproducts, processes and methods that firms are the first to develop and those that have beenadopted from other firms or organisations” (OECD, 2005, p.46).Overlapping between products, process, marketing and organisational innovations may exist.For services innovations the separation between product and process innovation is quitedifficult because "the term 'product' frequently includes a process: a service package, a set ofprocedures and protocols, an 'act'" (Sundbo and Gallouj, 2000, pp.45).Innovations can also be classified according to their impact which is linked to the degree ofnovelty. Incremental innovation introduces minor changes to existing goods and services. Ittends to reinforce the competitive advantage of established firms. Defaults of implementationare also less risky. Conversely radical innovation “has a significant impact on a market and onthe economic activity of firms in that market” (OECD, 2005, pp.58). Radical innovation hasmore pervasive effects. It also generates new behaviours and resistances to changes.The notion of architectural innovation introduced by Henderson and Clark (1990, pp13)indicates that innovation may be radical when it modifies the link between the component of asystem: “The use of the term architectural innovation is designed to draw attention toinnovations that use many existing core design concepts in a new architecture and thattherefore have a more significant impact on the relationships between components than on thetechnologies of the components themselves.” This type of innovation is particularly importantin construction. For example if one considers the case of photovoltaic membrane system, it14

comprises several components: one photovoltaic cell, one roof deck and one roof membranelayer. The membrane can be disposed between the photovoltaic cell and the roof deck. Theoverall architecture of the system lays out how the component works together. The aim of thesystem is to provide a system for producing energy but also for creating a thermal barrier,isolating the building and bringing watertightness. Each component of the system performsdistinct functions: the photovoltaic cells produce electricity and the roof membrane layerisolates the roof deck from the photovoltaic cell. One of the issues is to be sure that the actorsin charge of incorporating a photovoltaic membrane system into the building have thecompetencies to do it. It is necessary for the performance of the system that the implementationof one component is done in such a way that it does not modify the performance of anothercomponent.3. Small construction firms and innovation3.1 SME: a definitionAccording to the European Commission (2005, pp.13-14) “the category of micro, small andmedium-sized enterprises consists of enterprises which employ fewer than 250 persons andwhich have either an annual turnover not exceeding 50 million euro, or an annual balancesheet total not exceeding 43 million euro. Within this category:Small enterprises are defined as enterprises which employ fewer than 50 persons andwhose annual turnover or annual balance sheet total does not exceed 10 million euro.Micro enterprises are defined as enterprises which employ fewer than 10 persons andwhose annual turnover or annual balance sheet total does not exceed 2 million euro.”The question of the autonomy of the firm is also important because it means that the firm is notlinked to another enterprise.3.2 Innovation propensity of SMEsThe question of the relation between firm size and the propensity to innovate has been widelyexamined in the economic literature. Most of the empirical results which tried to appreciate theroles of both small and large firms have been inconclusive. The controversy was alreadypresent in the work of Schumpeter (1935). In the early version of Schumpeter's theory, theinnovating entrepreneur appeared to be at the core of the economic development. Then hesuggested that "formally organized R&D labs administered by large corporations are thesource of most innovation in modern capitalist society" (Cohen and Levin, 1989, p.1071).15

The advantages of large firms are usually ascribed to their greater financial resources and theirability to benefit from complementary resources (large distribution and commercial facilities).They benefit from their market power to establish high barriers to entry and destabilize smallerfirms (Rothwell and Dodgson, 1994). They also gain from economies of scale and scope inR&D thanks to their portfolio of products and their broad technological base (Nelson, 1959).However large firms are often locked in to well-established routines and unable to adapt theirstructure to unstable and unpredictable environments (Darréon and Faiçal, 1993). Small firmshave greater incentives to develop new activities and to pursue new approaches which gobeyond the boundaries of large and established firms. The absence of hierarchical levels andhorizontal communications favours quick reaction to keep abreast of environmentaldisturbances and fast changing market requirements. The inconclusive nature of thesearguments suggests the existence of complementarities between small and large firms(Rothwell and Dodgson, 1994).3.3 Innovation in construction SMEsResearches on innovation in SMEs have benefited from a growing interest over the last fewyears. Seaden et al. (2003) point out that small firms of the construction industry are usuallymore risk averse and record lower intensity of use of innovative practices. Sexton et al. (2007)also consider that the structure of the industry inhibits innovation. Most firms employ less thenfive people. These firms “have limited capacity to innovate due to their management abilities,limited resources and reduced opportunities for supply chain driven innovation because oftheir inability to form long-term relationships with other firms”.Sexton and Barrett (2003) distinguish two types of small construction firms according to theirmodes of innovation. Under Mode 1, the firm has a limited influence on its environment.Innovation is driven by “cost oriented relationships between the client and the firm” (idem,p.629). Under Mode 2, the firm is proactive. It has the ability to influence its externalenvironment because of its innovation capabilities (its organisation, its human resources).“Mode 2 innovation concentrates on progressing multiple project, value-oriented relationshipsbetween client and the firm.” Under Mode 2 firms are involved in networks that help them toexploit the external knowledge stock. Networks reinforce SMEs'competitiveness by providingthem with a window on technological change, sources of technical assistance, marketrequirements and strategic choices made by other firms. According to Cohen and Levinthal(1990), firms’ ability to exploit external knowledge depends on their “absorptive capacity”.Reichstein and al. (2005) suggest that construction firms are characterised by a low level of“absorptive capacity”.Manley (2008) shows that small and innovative construction firms were able to establishrelationships with external actors such as research centres. These links were considered as onekey element in the success of the innovations. Those firms were evolving in Mode 2.16

Pries and Dorée (2005) indicate that small Dutch construction firms are more involved inprocess innovation than large ones that tend to favour product innovation. Their analysis alsoshows that “most innovations are the result of enterprises operating individually” (pp563).Lu and Sexton (2006) examine the nature and process of innovation for small constructionknowledge-intensive professional service firms such as architects. A single case study is used tounderstand how a small architectural firm innovates, develops and manages knowledge. Itshows that these firms and small contractors do not follow the same innovation path. Innovationin knowledge-intensive service firms is co-produced by knowledge workers and clients.According to the fourth Community Innovation Survey (SESSI 2006) 2 , 39.4% of the firms fromthe French construction industry declared that they were innovative between 2002 and 2004(this is less than firms from industry and services). Firms employing between 10 and 49employees (38%) were less likely to engage innovation activities than firms employing morethan 250 people (70.1%). Innovative products represented about 12% of the turnover of thesefirms. Financial factors were considered as a barrier by about 43.6% of French innovativeconstruction companies. The lack of competences, marketing factors and the lack of incentivesrespectively only concern 31%, 30.3% and 13.3% of the firms. The three sources ofinformation considered as important for innovation by construction firms are the firm itself,suppliers and clients / customers. University is the less important (it is quoted by 0.4% ofinnovative firms) than fairs, press and professional association.However the Community Innovation Survey has two limits. Firstly it presents a narrowdefinition of construction. Such a definition does not integrate all the activities and the servicesprovided by the built environment (Carassus, 2002). Secondly it excludes enterprises with lessthan 10 employees that represent the bulk of the firms of the construction industry.4. Data and methodIn 2000 a National Innovation Award concerning construction firms was launched in France.Every two years until 2006, companies were invited to present innovations that have beensuccessfully implemented. Innovations were classified into four categories (table 1): buildingtechniques; safety & work conditions; methods & organizational schemes and environmentalapproaches. Contractors were mainly targeted. Applications were judged by a jury of peopleworking for the construction industry.Table 1: Categories of innovations according to the activity2 For the first time firms from the construction industry were surveyed. 25 997 firms working for theconstruction industry were identified. 1616 firms from the construction industry employing more than 10employees received the postal survey and had to answer about their innovative activities during the period2002-2004. About 86% replied.17

Sub-sectorsCategories of innovationsMethods andBuilding Safety and workEnvironmentalorganisationaltechniques conditionsapproachesschemesTotalContractors 14 23 15 12 641 - 49 6 11 7 7 3150 - 249 3 1 3 2 9250 and more 5 11 5 3 24Civil engineering 0 0 0 2 2Suppliers 6 4 2 3 15Total 20 27 17 17 81The aim of the committee which organises the awards was mainly to promote the image of theconstruction industry and the diffusion of innovation within the industry. Indeed construction isoften characterised by its inability to learn from one project to the next and to re-invent thewheel (Winch, 1998; Gann and Salter, 2000).In 2003, CSTB was commissioned to examine the impact of the awards granted in 2000 and2002. Firms were questioned about the origin and the diffusion of the innovation, theorganisation of the innovation process, the results of the innovation and the impact of theaward.Sixty-three face-to-face and telephone interviews with general managers of small companiesand technical executives of large groups were carried out by CSTB. This represented 77innovations awarded out of 97. The difference was mainly caused by the unavailability ofexecutives and the bankruptcy of some construction companies. In four cases, enoughinformation about the firms and the innovation was available. Consequently 81 innovationsconstitute the sample of analysis. Sixty-four of these innovations were developed bycontractors, fifteen by suppliers and two by firms working for civil engineering.The analysis will mainly focus on the nature of the innovation and the way contractors organisethe innovation process.5. The nature of the innovations and firms motivationsTable 2 reveals that product innovation is dominant for all firms but mainly for suppliers. Datafrom SESSI (2006) indicates that product and process innovations respectively represent twothirdand one third of the innovations introduced by suppliers and general contractors.Conversely organisation innovations mainly concern contractors who tend to innovate byfocusing their resources on the effective management of the building site which can beconsidered as their core activity. The importance of organisation innovation in the constructionindustry indicates that construction firms are quite innovative and may not be “last amongequals” as it was exposed by Reichstein et al. (2005).18

Table 2: Distribution of innovations according to the activitySub-sectorsType of innovationProduct Process Organisation Process andorganisationBuilding and construction 30 15 13 6 64Civil engineering 0 0 0 2 2Suppliers 13 2 0 0 15Total 43 17 13 8 81TotalThe nature of the innovations is strongly influenced by the motivations of the firms. Innovativecontractors who were interviewed were pursuing three objectives:1. Improving the performance of their company;2. Following new regulatory constraints;3. Creating a new market.Most organisation and process innovations aimed at improving the performance of theenterprise by increasing the productivity, mitigating the pain supported by the workers,ameliorating the safety and the working conditions of the building site.Product innovations are mainly developed by contractors who intend to create a new market orto adapt products to new regulatory constraints. This is particularly the case for environmentalinnovations that often aimed at reducing / recycling wastes emanating from the building siteand improving the energy consumption of the building.6. Sources of innovationsPavitt (1984) who was the first to put ahead the existence of sectoral patterns of technicalchange categorised general contractors as “suppliers dominated firms”. Firms from thiscategory devote few resources to R&D. They focus their innovative activities on processes.“Most innovations come from suppliers of equipment and materials, although in some caseslarge customers and government-financed research and extension services also make acontribution” (Pavitt, 1984, p.356).Most firms of our sample (table 3) use their own resources to innovate (57 out of 81). For smallfirms the manager is always at the origin of the innovation. In SMEs, the manager bears theresponsibility of taking the decisions regarding all aspects of technical change. The dominantrole of the manager in small construction firms can be either an advantage or a barrier toinnovation. It is a source of flexibility and adaptability to any changes in market conditions andclient demands. But it “can constrain innovation activity if the owner does not have the19

necessary vision and systemic thinking when diagnosing and progressing innovation activity”(Sexton and Barrett, 2003, pp.631-632).Many managers are too busy with their day to day activity to spend time to exploit theirinnovative ideas. In many cases only few ideas are developed during managers’ spare time.Thus some innovations may take several months before being implemented. Converselyinnovations aiming at solving recurring problems which disrupt the daily activity of theoperatives working on the site are developed immediately during the course of the project.Many managers frequently even consider that they do not innovate. The empirical results ofSlaughter (1993, pp.86-87) confirm this idea. User-builders’ innovations "were ad hocresponses to problems encountered in the course of a construction project that an innovatingbuilder was engaged in."Table 3: Origin of innovations according to firm sizeSub-sectorsOrigin of innovationWithinthe firmClient(s)RegulationsCost-orientedprocurementprocessOtherTotalContractors 47 5 5 4 3 641-49 employees 23 2 3 1 2 3150-249 employees 4 2 0 3 0 9250 and more employees 20 1 2 0 1 24Civil engineering 1 0 1 0 0 2Suppliers 9 4 0 0 2 15Total 57 9 6 4 5 81As indicated by Pavitt most contractors innovate without relying on a R&D department as theydo mainly project specific innovations. Innovations are developed during the course of a projectand are frequently used for one project. Most of them are incremental. For example 75% of thein-house innovations promoted by one of the major French contractors concerned improvedmethods (Cousin, 1998).Table 3 also indicates that regulations and cost-oriented procurement process are sources ofinnovations for contractors. It stimulates innovation by changing the rules of the game. Costorientedprocurement process particularly concern contractors. Organisation and / or processinnovations are one way to be more competitive and productive and to satisfy clients who tendto select enterprises almost exclusively on the basis of tendered price. Using SESSI’s data,Tessier (2008) indicates that organisational innovations are for contractors the main way toimprove the satisfaction of clients.20

7. Innovation and collaborationTo innovate firms can less and less rely on their own resources. Technology has become socomplex that it can rarely be handled by individual corporations. Even the biggest companiesare touched by this phenomenon. Successful innovations appear heavily dependant oncollaboration between several actors. However it appears from our sample that most contractors(62.5%) did not collaborate with any external partners to develop their innovation. Theseresults are similar to those detailed by Pries and Dorée (2005) for the Netherlands. The fact thatmany innovations concern the organisation of the firm and that these innovations do not requirelarge amount of money to be developed may explained this situation. 3 But table 4 also revealsthat when collaborations are established, firms will look for suppliers. This result is consistentwith Pavitt’s classification. Suppliers as providers of technology are regular partners who takepart to the development of innovations conceived by contractors. In many occasions they havestrong interests in participating to this process. 4 Once the project is over they can benefit fromthe innovation by developing it and commercialising it to other users. Conversely contractorsare not interested in spending resources to the development and commercialisation of productsthat are not connected to their core business. Such a diversification would be risky. Asindicated by Slaughter (1993) contractors develop innovation on the building site in order touse it but not to sell it. Cooperation between contractors and manufacturers appears as a winwinsituation.Cooperation between contractors and clients are limited. When clients are the end users and canbenefit from the innovation then they have an incentive to be involved during the innovationprocess (Bougrain, 2008).Table 4: Collaboration during the development of the innovation process*Sub-sectorsOrigin of innovationNocollaborationSupplierClientResearchinstitutions(R&D lab,university)OtherNumber ofContractors 40 12 2 4 8 641-49 employees 19 4 0 4 4 3150-249 employees 4 3 1 0 3 9250 and more employees 17 5 1 0 1 24Civil engineering 0 1 0 2 0 2firms3 Slaughter (1993) indicates that the total cost of innovations introduced by residential builders was verylow, averaging $153.4 “Manufacturers and suppliers who are unaware of the changes required to implement their innovations,either in the links to other components, processes, or systems or in the product itself are likely to meetresistance in the spread of their products” (Slaughter, 2000, p.15).21

Suppliers 6 2 3 5 1 15Total 46 15 5 11 9 81*Several partners can be involved in one project.Despite its limited size the sample of analysis shows that a majority of suppliers (9 over 15)established partnerships with other actors. Five cooperative agreements involve researchinstitutions. Conversely it seems that contractors are less able or eager to exploit knowledgedeveloped by formal research institutions. They may not need such external knowledge. Butsuch a situation may also result from the lowest level of R&D expenditures spent bycontractors. According to Tessier (2008) R&D intensity is 2.2% for construction (broaddefinition). But without upstream activities R&D intensity drops to 0.5%. To collaborate withuniversity and R&D centres firms must be able to recognise the value of external knowledgeflows. It can be done only if firms have developed “absorptive capacity”. Contractors who donot spend high level of expenditures in R&D are probably less able than suppliers to identify,assimilate and use the external knowledge generated by research institutions.8. ConclusionThe paper aims at presenting how SMEs of the French construction industry innovate. It pointsout that organisation innovation is quite important for contractors. It results from the projectbasednature of the construction activity. It also implies that most studies focusing on productand process innovations tend to underestimate innovations within building firms. To innovatemost contractors use their own resources whereas suppliers appear more opened to externalknowledge. This is probably due to their lowest level of R&D expenditures that limit theirability to identify and apply external knowledge. However the study is subject to somelimitations. It was not possible to precise whether the low number of cooperative agreementsbetween contractor and external actors was due to their low “absorptive capacity” or to the factthat they do not need as much external knowledge to innovate as suppliers.These results have some implications for the French environmental policy dedicated to theconstruction industry. Many actors considered that the new regulation and the ambitious targetsset up by the French government will considerably modify firms’ business environment.According to Escribano et al. (2009) in turbulent knowledge sectors 5 the “absorptive capacity”plays a crucial role. This means that firms with low absorptive capacity such as contractors willbe less able to innovate and to implement new solutions that comply with regulatory standards.The development of training programmes that raises the absorptive capacity of smallcontractors would probably be a first step towards a better implementation of the regulationsconcerning low energy buildings. But further research should be done at this level to5 « Turbulent knowledge environments are those where the underlying knowledge base is subject to aprocess of continuous evolution and change » (Escribano et al., 2009, pp.100).22

understand better the link between the “absorptive capacity” of small contractors and theirability to innovate and cooperate. It is quite well recognised that most contractors employingless than ten employees lack competences to innovate but nothing proves that they need toestablish better links with research institutions to innovate. Not all external sources ofknowledge are a source of competitive advantage.Many innovations developed by contractors are non-technological while most publicprogrammes supporting innovation aim at fostering technological innovation. Consequentlypublic authorities tend to neglect contractors. Further research should also be done to findappropriate tools to support and stimulate innovative contractors. A first consideration wouldbe to take into account the specificities of the project-based activity.AcknowledgementThe researcher wish to thank the funding agency that sponsored part of the research: PUCA(Plan, Urbanisme, Construction et Architecture) in France.ReferencesBarrett P., Sexton M., Miozzo M., Wharton A. and Leho E. (2001), Innovation in smallconstruction firms, Base report for the EPSRC / DETR: IMI Construction – Link, University ofSalford, UMIST.Bougrain F. (2008), “The role of the client in building site innovations”, in P. Brandon and S-LLu (Eds), Clients driving innovation, Wiley-Blackwell, 252-261.Brandon P. (2005), “Vectors, visions and values – the essentials for innovation” in K. Brown,K. Hampson and P. Brandon (eds) Clients driving construction innovation – Mapping theterrain, Brisbane, CRC Construction Innovation, 13-21.BUILD-NOVA (2006), Characteristics of the construction sector – Technology and markettendencies, EUROPE-INNOVA, 6 th Framework Programme.Carassus J. (2002) Construction: la mutation – De l’ouvrage au service, Presses de l’EcoleNationale des Ponts et Chaussées, Paris.Cohen W.M. and R.C.Levin, 1989, “Empirical studies of innovation and market structure”, inR.Schmalensee and R.D.Willig, Handbook of Industrial Organization, Elsevier SciencePublishers, 1059-1107.Cohen W.M. and Levinthal D.A. (1990), "Absorptive capacity: A new perspective on learningand innovation", Administrative Science Quarterly, 35 (March), 128-152.23

Commissariat Générale au Développement Durable (2009) « Entreprises de construction:résultats de l’EAE 2007 » Chiffres et Statistiques, n°58, August 2009.Cousin V. (1998), “Innovation awards: a case study”, Building Research & Information, vol.26,n°4, 302-310.Darréon J.-L. and S. Faiçal, 1993, « Les enjeux des partenariats stratégiques entre grandesentreprises et PME », Revue Française de Gestion, September-October, 104-115.Escribano A., Fosfuri A. and J.A. Tribo (2009), « Managing external knowledge flows: Themoderating role of absorptive capacity », Research Policy, 29: 96-105.European Commission (2005) The new SME definition, Enterprise and industry publications,European Commission.Egan, J. (1998), Rethinking construction, Department of Trade and Industry, London.Gann, D.M. and Salter, A.J. (2000), “Innovation in project-based, service-enhanced firms: theconstruction of complex products and systems”, Research Policy, 29: 955-972.Henderson R. and K. B. Clark (1990), “Architectural innovation: the reconfiguration of existingproduct technologies and the failure of established firms”, Administrative Science Quaterly,vol.35, 9-30.Lu S-L. and Sexton M. (2006), “Innovation in small construction knowledge-intensiveprofessional service firms: a case study of an architectural practice”, Construction Managementand Economics, 24: 1269-1282.Manley K. (2008), “Against the odds: Small firms in Australia successfully introducing newtechnology on construction projects”, Research Policy, 37: 1751-1764.Nelson R., 1959, The simple economics of basic scientific research, Journal of PoliticalEconomy (June), 297-306.OECD (2005), Guidelines for collecting and interpreting innovation data – Oslo Manual,OECD, European Commission, Paris.Pavitt K. (1984), “Sectoral patterns of technical change: towards a taxonomy and a theory”,Research Policy, 13: 343–373.Pries F. and Dorée A. (2005), “A century of innovation in the Dutch construction industry”,Construction Management and Economics, 23: 561-564.24

Reichstein T., Salter A. J. and Gann D. M. (2005) “Last among equals: a comparison ofinnovation in construction, services and manufacturing in the UK”, Construction Managementand Economics, 23: 631-644.Rothwell R. and M.Dodgson, 1994, “Innovation and size of firm”, in M.Dodgson andR.Rothwell, The handbook of industrial innovation, Edward Elgar, Cheltenham, 310-324.Seaden G., Guolla M., Doutriaux J. and Nash J. (2003), « Strategic decisions and innovation inconstruction firms », Construction Management and Economics, 21, 603-612.Schumpeter, J., 1935, Théorie de l'évolution économique, Librairie Dalloz, Paris.SESSI (2006) Enquête communautaire sur l’innovation en 2004 (CIS4) Ministère del’Economie, des Finances et de l’Industrie,http://www.industrie.gouv.fr/sessi/enquetes/innov/cis4/cis4.htmSexton, M., Abbott C., Barrett P. and Ruddock L. (2007) Hidden innovation in construction inde Ridder H.A.J. and Wamelink J.W.F. (Eds) Second International Conference World ofConstruction Project Management, TU Delft, The Netherlands.Sexton, M. and Barrett, P. (2003), “Appropriate innovation in small construction firms”,Construction Management and Economics, 21: 623-633.Slaughter S. (2000), “Implementation of construction innovations”, Building Research andInformation, 28, n°1, 2-17.Slaughter S. (1993), “Innovation and learning during implementation: a comparison of user andmanufacturer innovations”, Research Policy, 22: 81-95.Sundbo J. and Gallouj F. (2000), "Distributed innovation systems and instituted economicprocesses", in Innovation systems in the service economy, J.S. Metcalfe and I. Miles (Ed.),Kluwer Academic Publishers, 43-68.Tessier L. (2008), “La structure et les métiers de la construction guident son innovation”, SESPen bref, n°4, April 2008.Winch G. M. (2003), “How innovative is construction? Comparing aggregated data onconstruction innovation and other sectors – a case of apples and pears”, ConstructionManagement and Economics, 21: 651-654.Winch, G. (1998), “Zephyrs of creative destruction: understanding the management ofinnovation in construction”, Building Research and Information, 26/5: 268-279.25

Critical Success Factors for a Construction CompanyLasker, G. C.Purdue University(email: glasker@purdue.edu)Schuette, S.Purdue University(email: sschuette@purdue.edu)Cox, R. F.Purdue University(email: rfcox@purdue.edu)Dirk M. BeckPurdue University(email: dbeck@purdue.edu)AbstractUnlike the majority of industries, the construction industry is not only saturated with a multitude ofsmall young companies, but also has one of the highest failure rates of all industries in the UnitedStates. Is there a relationship between the age and maturity of a company, or is the failure rate due toindustry specific internal factors? The purpose of this research is to to answer this question andestablish a foundation upon which start-up construction companies could build. After reviewingrelated literature, specific factors analysis, and questionnaire survey, this foundation will consist ofestablishing the critical factors that must be managed.Keywords: construction industry, success, acquiring the work, building the work, tracking the work26

1. IntroductionAccording to the U.S. Census Bureau, in 2007 more than 3 million construction firms existed, and ofthat total, 75% of construction firms were composed of self-employed workers with no paidemployees, and only 1% had 100 or more employees (U.S. Census Bureau 2007). The majority ofthose companies were only in business for less than five years; of the 850,029 constructioncompanies in 2004, only 649,602 were still in business in 2006, with a 23.6% failure rate (BizMiner2006). The contractor failure rate of new start-up companies is even higher, at 34.4%, a rate that issecond only to the failure rate of food service companies (Dunn & Bradstreet 2007). The followingquestions arise:”What is the cause of the failure? Is there a relationship between the age and maturityof a company that accounts for this failure rate?” So the purpose of the research is trying to answerthis question -- to establish a list of critical success factors essential to construction business survival.This paper analyzes several industry specific factors and attempts to establish a guideline foremerging construction companies to follow.2. AnalysisThe construction business can be broken down into three major functions: 1.acquiring, the work, 2.building the work, and 3. keeping track of the work. Acquiring the work consists of estimating,pricing, bidding, marketing, and selling. Building the work consists of the project management, fieldmanagement, material procurement, and labor productivity. Keeping track is simply accounting,financial management, administration, and tax reporting. And then the three functions will bediscussed separately as follows.2.1. Acquiring the workAcquiring the work consists of many daily activities. Depending on the size of company theseactivities may be performed by one individual or several different people. The research was based onthe common fact that all activities can be broken down into three roles: project management, fieldmanagement, and administrative tasks. To simplify the results the list of activities was furthernarrowed down to seven key activities or factors: planning, marketing, estimating, pricing, selling,contracting, and bonding.Planning involves several different aspects of the construction business. The way this was presentedto the participants was at any organization level plan that was formally implemented. It could includecompetitive, strategic, growth, or succession planning. The assumption was made that if anorganization places an importance on any type of formal planning that it will also place the sameimportance on all aspects of its business plan.Analysis of Figure 1 indicates from all participants the importance of planning, including all theaspects listed above regardless of either company size or length of time in business. A progression in27

its ranking as the company size increases is present due to the fact that the need for planning becomesincreasingly necessary as more people are involved in the everyday operations.The marketing and selling aspects of a company designate the beginning stages of a project. This iswhere a company establishes its identity and determines what kind of projects it pursues and the bestway to differentiate its services from those of another company. Figure 1 indicates that smaller tomid-size companies put a larger emphasis on marketing than do larger companies. This can beattributed to the establishment of a smaller company in a new market or niche. A larger companymay rely on public bid invitations and already established relationships to gain projects. Selling,which is the second part, was ranked as being of average importance. This is due to the fact that theconstruction industry is highly price competitive.Pricing can be the sole basis on the selection of a firm. Estimating and pricing demonstrate littlerelationship to the size of a company. While estimating accuracy is consistently ranked as an aboveaverage concern across the board, one may see more of a variation in the importance of pricing. Thiscan be attributed to several factors, including the concept that as the size of a company grows, thesize of projects grow as well, and with larger projects come smaller profit margins.28

50+ Employees11-50 Employees5-10 EmployeesAverage 7.72 7.17 8.33 7.56 6.22 6.56 6.00 7.00 7.50 8.28 6.78 7.28 8.11 6.83 8.56 6.94 7.61 8.06 5.83 6.83 8.78 6.22 8.28 7.22N 8.00 6.00 8.00 8.00 6.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 6.00 7.00 8.00 9.00 8.00 7.00 6.00 9.00 6.00 9.00 7.00O 9.00 6.00 8.00 8.00 7.00 9.00 9.00 7.00 7.00 9.00 9.00 7.00 8.00 8.00 9.00 6.00 9.00 7.00 5.00 7.00 9.00 8.00 8.00 8.00P 8.00 6.00 8.00 7.00 7.00 9.00 9.00 8.00 8.00 7.00 8.00 8.00 7.00 7.00 8.00 9.00 8.00 8.00 5.00 5.00 9.00 6.00 7.00 9.00Q 8.00 7.00 8.00 9.00 8.00 7.00 6.00 8.00 8.00 9.00 7.00 8.00 8.00 6.00 9.00 7.00 8.00 9.00 5.00 6.00 9.00 8.00 8.00 6.00R 9.00 8.00 8.00 9.00 6.00 8.00 8.00 9.00 7.00 8.00 9.00 9.00 8.00 7.00 9.00 8.00 7.00 8.00 6.00 6.00 9.00 7.00 9.00 8.00Average 8.50 6.67 8.17 8.33 7.00 8.00 7.83 8.00 7.67 8.33 8.00 8.17 7.67 6.83 8.50 7.50 8.17 8.17 5.67 6.00 8.83 7.17 8.33 7.83C 8.00 8.00 7.00 7.00 5.00 5.00 3.00 6.00 7.00 9.00 6.00 7.00 9.00 3.00 9.00 5.00 7.00 7.00 8.00 6.00 9.00 7.00 9.00 7.00D 8.00 8.00 9.00 7.00 5.00 4.00 6.00 5.00 8.00 9.00 6.00 5.00 8.00 8.00 9.00 7.00 8.00 7.00 5.00 7.00 9.00 6.00 9.00 8.00E 6.00 7.00 9.00 7.00 4.00 6.00 5.00 7.00 8.00 7.00 5.00 5.00 9.00 9.00 8.00 5.00 6.00 8.00 6.00 7.00 9.00 5.00 7.00 7.00F 6.00 7.00 9.00 6.00 6.00 5.00 5.00 5.00 5.00 8.00 6.00 6.00 9.00 6.00 8.00 6.00 5.00 9.00 7.00 9.00 9.00 5.00 8.00 6.00Average 7.00 7.17 8.33 7.33 5.17 5.17 3.50 5.50 7.00 8.33 5.33 6.17 8.67 6.33 8.50 6.00 6.33 8.00 6.00 7.33 8.83 5.67 8.17 6.67G 7.00 9.00 9.00 7.00 7.00 7.00 5.00 8.00 8.00 9.00 9.00 8.00 7.00 7.00 8.00 7.00 9.00 9.00 5.00 7.00 8.00 5.00 9.00 9.00H 6.00 7.00 8.00 7.00 4.00 6.00 6.00 8.00 8.00 9.00 7.00 4.00 8.00 8.00 9.00 8.00 8.00 9.00 6.00 8.00 9.00 5.00 8.00 7.00I 9.00 8.00 9.00 7.00 8.00 7.00 8.00 7.00 8.00 8.00 8.00 9.00 9.00 5.00 8.00 6.00 7.00 8.00 5.00 9.00 8.00 6.00 7.00 6.00J 8.00 8.00 9.00 6.00 5.00 8.00 8.00 8.00 8.00 7.00 6.00 8.00 9.00 6.00 9.00 8.00 8.00 7.00 7.00 8.00 9.00 7.00 8.00 6.00K 7.00 8.00 8.00 8.00 9.00 6.00 6.00 7.00 7.00 7.00 5.00 7.00 8.00 9.00 9.00 7.00 9.00 6.00 8.00 6.00 9.00 6.00 9.00 8.00L 9.00 6.00 8.00 7.00 6.00 5.00 7.00 7.00 8.00 9.00 7.00 9.00 7.00 9.00 9.00 8.00 9.00 9.00 4.00 5.00 9.00 6.00 9.00 7.00Average 7.67 7.67 8.50 7.00 6.50 6.50 6.67 7.50 7.83 8.17 7.00 7.50 8.00 7.33 8.67 7.33 8.33 8.00 5.83 7.17 8.67 5.83 8.33 7.17M 9.00 7.00 9.00 9.00 8.00 7.00 7.00 8.00 8.00 9.00 7.00 9.00 7.00 7.00 9.00 7.00 8.00 9.00 6.00 6.00 8.00 8.00 9.00 9.00A 7.00 5.00 9.00 9.00 5.00 5.00 1.00 5.00 8.00 9.00 4.00 6.00 9.00 6.00 8.00 5.00 6.00 9.00 6.00 7.00 9.00 5.00 8.00 5.00B 7.00 8.00 7.00 8.00 6.00 6.00 1.00 5.00 6.00 8.00 5.00 8.00 8.00 6.00 9.00 8.00 6.00 8.00 4.00 8.00 8.00 6.00 8.00 7.00PlanningMarketingEstimatingPricingSellingContractingBondingPre-ConstructionBudgetingSchedulingJob MobilzationDocumentingQualityProductivitySafetyMaterial ManagementCloseoutAccountingAdministrationTax ReportingCash FlowAsset ManagementBillingLegal IssuesAquiring the Work Building the Work Tracking the WorkFigure 1: Survey Results29

Contracting and contracting terms were consistently ranked as being of above average importance toall companies, with the leading cause being erroneous contract terms. Larger companies ranked itslightly higher. The most common explanation was unfair payment and retainage terms and penaltyclauses. With larger, longer products this can be especially critical. Bonding ranks lower with smallercompanies primarily due to the types of projects. As a company grows, so does the importance oftheir bonding capacity.2.2. Building the workLike “acquiring the work,” this function can consist of countless daily activities, but for the purposeof this study all said activities have been summarized into ten separate areas: pre-constructionplanning, budgeting, scheduling, job mobilization, documenting, quality, productivity, safety,material management, and project closeout. Although these activities can be further broken down intothe concepts of project management and field management, this study has combined these twoaspects and asked the participants to combine both when ranking the different activities.Figure 1 indicates that the activities involved with building the work have a natural progressiondirectly related to the size of the company and size of the project. The highest ranking activities werebudgeting, scheduling, quality and safety. It was also determined that as a company grows andcontinues in business, more emphasis is placed on the budgeting and scheduling, while smallercompanies place more emphasis on the quality. Safety consistently ranked highly regardless of thesize of a company. This factor demonstrates the importance of safety not only for the well being ofemployees, but also for the direct effect on cost and time associated with an accident, both short andlong term.Pre-construction, job mobilization, material management, and project close-out all ranked morehighly among larger companies. These factors are more important to larger companies due to the sizeand complexity of a project. Documenting and productivity were both ranked as moderate concerns.2.3. Tracking the workThe “tracking the work” portion of the study consists of accounting, administration duties, taxreporting, cash management, asset management, billing, and legal issues.3. Methodology and logical analytic processBased on the literature review and analysis a questionnaire has been developed and presented viainterview to executive-level individuals who were responsible for organization-level concerns.Questions were categorized according to the three major functions while respondents were asked torank the importance of each item using a 9 point scale. In addition to asking the interview participantsto rank the various activities, they were also asked to recommend strategies for success for new firms30

in respect to the corresponding categories. Based on analysis of their responses and the data gatheredfrom questionnaires, nine activity were listed as the main factor affecting the success of aconstruction company. While any size organization can use the following information to establishsound guidelines for their operations, it will be of most benefit for smaller to mid-size companies juststarting out.4. SampleCompanies were divided into three categories based on their size: 50+, 11-50, and 1-10 see figure 1.It was decided that the number of employees would be used as the classification. This is due to thefact that the number of direct employees usually corresponds to the size and amount of workcompleted.5. Critical success factorsThe following nine activities were ranked as the highest concerns of professionals in executive levelpositions. The following list breaks each down and briefly summarizes the findings. Especially, it isin this last activity where several construction companies typically fail (Stevens 2007).5.1. Acquiring the workFigure 2 graphs the three highest ranked activities in this section which are planning, estimating, andpricing. The increase in the ranking of planning with the size of the company can be attributed to thecomplexity of projects and to the varied people involved in the operations. Smaller to midsizecompanies ranked estimating higher due to less room for error with smaller projects. Pricing wasranked higher by larger companies as said companies found it increasingly important to cover largeroverhead with tighter profit margins.31

Figure 2: Acquisition Activity Ranked Per Company Size5.1.1. PlanningThe importance of planning was ranked highly by all participants. The questionnaire definedplanning as any formal organization level plan, versus a project level plan, which could include agrowth plan, strategic plan, or any combination of formal planning. The responses from thequestionnaire and information gathered from the literature review and interviews were used toestablish a guideline for a formal business plan. For new companies just starting out it is critical totheir success to establish a plan and constantly review and modify the same if necessary. A goodbusiness plan should consist of the following: executive summary, company description, targetmarket, competition, marketing and sales plan, operations, management structure, future developmentor growth and financials. Sometimes an organization becomes so focused on planning their actualwork,that members of the same company can forget to plan for structure and operation of theorganization.5.1.2. EstimatingThe words estimating and bidding are frequently used interchangeably in the construction industry,especially by smaller, less experienced owners. It is necessary for a company to understand thedifference between the two. “Estimating” is defined as “determining the company’s direct costs andallocating corporate overhead to the job”. It is important to know just what a company’s overheadcosts are. Intuition and judgment should not be part of an estimate as they are in pricing. Rather,estimates should be based on hard numbers and job cost records. For smaller companies with limitedresources, and historical cost data, this area leaves a huge vulnerability for failure. Ways to reducethis risk are to stay within a company’s area of expertise. If growing into new markets create a planand consult with other professionals with experience. Guess work should be eliminated fromestimates. Estimating is about reducing risks and eliminating as many variables as possible. Forsmaller companies, care must be taken when the same person is responsible for both estimating andpricing and the two activities should be seen as separate.5.1.3. PricingPricing consists of determining what a company believes its services are worth. Pricing is based bothon competitor information and on company needs. The construction business is full of risks;therefore, to justify these risks and to ensure the long term success of an organization, a reasonableprofit must be obtained. When pricing work in the construction industry, research has revealedseveral factors which a company must take into consideration; these include: the difficulty ofconstruction, market rates, length of construction, labor content, location, and current backlog. Byhaving both accurate financial data and being able to interpret the same, management is allowed to32

make an educated decision when deciding the desired profit on a job as opposed to “needing thework.” A company needs to be aware of its hit rate and constantly monitor its success of winning in acompetitive bid situation. If a hit rate is too high, that could mean that the pricing is too low; theopposite may result for pricing, if the hit rate is too low.5.2. Building the workFigure 4 illustrates how safety can be consistently ranked higher regardless of the size of thecompany. It is one of the few things that can have such a big impact on cost, schedule, and quality.Quality can be seen to decrease in ranking with the growing size of a company, a factor which ismisleading, because quality is often assumed for larger companies and projects. This is due to betterdefined scopes of work and contracts. Scheduling ranked high for all companies.Figure 3: Building Activity Ranked Per Company Size5.2.1. SchedulingScheduling has to be a combined effort between both project management and field management.Finding the right balance between cost, time, and quality is critical to the success of any constructioncompany. It is essential to identify any material procurement issues early on to avoid schedulingdelays. The key to successful scheduling is the ability to properly forecast available resources withexpected demands. It is necessary to be diligent in updating the schedules and in monitoring theprogress as compared to the initial baseline.5.2.2. QualityQuality has to be non-negotiable. It plays an important part in establishing a company’s identity. Asstated above, quality is one of the three factors that must be taken into consideration when balancing33

5.3.1. AccountingIt is important to understand the unique financial aspects of the construction industry. The smallercompanies that participated in the study recommended that the key to financial success is to use anaccountant familiar with the construction industry; of equal importance, it was understood that thecompany owner/operator should be very involved with the finances. In order to best understand theprimary goals of accounting, the owner/operator must have useful data regarding the following:Track job costsEstimate new projectsAnalyze cash flowInsurance auditsTax returnsBy developing an understanding of business finances, the owner/operator can then avoid the mistakeof concentrating simply on the current bank balance and will be better able to evaluate the company’soverall financial performance and to make sound decisions based on the future instead of immediateneeds.5.3.2. Cash managementThis was ranked as the highest single cause of failure. An organization’s ability to manage its cash,both with initial capitalization and ongoing operations has been regarded as crucial according tostudy data.Initial capitalization is crucial to the success of a business. According to the United States SmallBusiness Administration, the lack of adequate working capital is one of the top causes of smallbusiness failures. An individual should have at least enough cash reserves to cover oneself and anyinitial employees for several months, including initial operating capital for advertising, insurance,licensing, office expense, and enough reserves to cover labor and material prior to billings.Forecasting initial operating expenses can be quite difficult if a good financial plan has not beenestablished. By using an established business plan -- in particular knowing the volume necessary tosustain goals for the year -- will determine the new business owner’s initial cash reserves as they areneeded.Once it is established and the company has sustained a regular cash flow, managing the operatingcash requires a developed understanding of the relationship between a project’s cash flow duringduration of each project; moreover, minimizing the lag between peaks is especially important. To dothis a company must maximize and accelerate cash inflow, control cash outflow, and accuratelyforecast cash needs. Through the responses from the participants in conjunction with the literaturereview, the following suggestions have been made to permit the accomplishment of this:35

1. Accelerate and maximize cash inflowNegotiate favorable payment termsEstablish and approve the schedule of values early on and submit your first request soon afterManage billings, receivables, and change orders diligentlyManage the project schedule, as taking longer than the scheduled time is bad for effectivecash flowManage punch list items to minimize delays on retain2. Control cash outflowUse cash-flow projections to time large expensesUtilize payment terms; don’t pay too early, but make sure to take advantage of discountsIdentify cost savings early on in a project3. Forecast cash needs Identify cash surpluses and deficits early on and adjust accordingly5.3.3. BillingTimely billing and managing account receivables are both aspects that can affect an organization’scash flow. The ultimate goal of managing a company’s billing is to limit the funding of projects fromits own cash reserves and transferring the funding to the clients. Companies need to make sure theyare getting paid in a timely manner; in order to be able to guarantee this, all billing must be made in atimely manner.ReferencesAtallah P (2006) Building a Successful Construction Company, Chicago: Kaplan.BizMiner (2006) Construction Industry Specific Statistics.Boynton A C and Zmund R W (1984) “An assessment of critical success factors”, Sloan ManagementReview, 25 (4): 17-27.Dun & Bradstreet (2007) Report of Contractor Failures.Ganaway N (1996) Construction Business Management. Massachusetts: R S Means.Gerber M (2003) The E Myth Contractor, Why Most Contractors Business Don't Work and What toDo About It, New York: HarperCollins.Langford D and Male S (2001) Strategic Management in Construction, 2nd ed., Oxford, UK:Blackwell Science Ltd.36

Schleifer T (1990) Construction Contractors Survival Guide, New York: John Wiley & Sons.Stevens M (2007) Managing a Construction Firm on Just 24 Hours a Day, New York: McGraw Hill.U.S. Bureau of the Census (2007) 2007 Economic Census, U.S. Department of Commerce, Bureau ofthe Census, Washington, D.C.37

New High Technology Product Development: The Caseof Light Emitting DiodesShu-Ling, L.The University of Salford, UK(email: s.l.lu@salford.ac.uk)Sexton, M.University of Reading, UK(email: m.g.sexton@reading.ac.uk)AbstractNew high technology products usher in novel possibilities to transform the design, production anduse of buildings. The high technology companies which design, develop and introduce these newproducts by generating and applying novel scientific and technical knowledge are faced withsignificant market uncertainty, technological uncertainty and competitive volatility. Thesecharacteristics present unique innovation challenges compared to low- and medium technologycompanies. This paper reports on an ongoing Construction Knowledge Exchange funded projectwhich is tracking, real time, the new product development process of a new family of light emittingdiode (LEDs) technologies. LEDs offer significant functional and environmental performanceimprovements over incumbent tungsten and halogen lamps. Hitherto, the use of energy efficient,low maintenance LEDs has been constrained by technical limitations. Rapid improvements in basicscience and technology mean that for the first time LEDs can provide realistic general and accentlighting solutions. Interim results will be presented on the complex, emergent new high technologyproduct development processes which are being revealed by the integrated supply chain of a LEDmodule manufacture, a luminaire (light fitting) manufacture and end user involved in the project.Keywords: high technology, light emitting diodes, new product development (NPD)38

1. IntroductionSystemic challenges are creating the need for new technologies and technology systems. Globalwarming, for example, is stimulating new technologies to progress the low carbon agenda.Successful new product development, diffusion and use of such technologies is an urgent priority.This demand is very much found in lighting which accounts for around 20% of the UK‟s energyconsumption (DEFA, 2008; Carbon Trust, 2007b). The future trend is upward despite improvementsin energy efficiency per lumens output with projections that "global demand for artificial light will be80% higher by 2030" (IEA, 2006: 26). A group of lighting technologies which is seen as havingsignificant potential to enhance energy efficiency is light emitting diodes (LEDs). LEDs are poisedto make a significant contribution to carbon reduction (BIS and DECC, 2009: 47).LEDs offer significant functional and environmental performance improvements over incumbentlighting technologies such as halogen lamps. White LEDs, for example, have a practical operationallife of 50,000 hours compared with 1000 or 2-4000 for incandescent and halogen lamps respectively.White LEDs are over 400% more efficient than incandescent lamps and 300% more than halogen(TSB / DIUS, 2007).The focus of this paper will be to preset a broad overview of the LED technology and its advantagesand disadvantage over existing lighting technologies. From this, interim results from a ConstructionKnowledge Exchange funded project investigating LEDs new product development through thesupply chain through to final use will be presented. The picture that is emerging from the research isthat LEDs have significantly better functional and through-life performance compared to existingtechnologies. However, „soft‟ client and designer resistance combined with „hard‟ capital cost issuesare resulting in the slow uptake of LEDs.2. Literature review and synthesis2.1 Lighting technologies2.1.1 Traditional lighting technologiesThere are two main types of lamp: filament and discharge (Carbon Trust, 2007b: 7). In filamentlamps light is produced when the filament gets so hot it glows. This method has been criticised asinefficient method because the filament has high resistance to electricity. Filament lamps are verycommon, although their poor efficacy means that they are increasingly being replaced with moreefficient alternatives such as compact fluorescent lamps. There are many types of filament lamp.The most common are known are General Lighting Services (GLS) and Decorative (e.g. Candlelamps) (LIF, 2001: 19). The disadvantages of such lamp include low/poor efficacy and relativelyshort life. Filament lamps are mainly used for domestic and display lighting (LIF, 2001: 19). Indischarge lamps electricity creates a charge which, when applied to a gas filled lamp at the correct39

voltage, causes the gas to emit energy. Most of this energy is light but some heat and noise is alsoproduced. To obtain and maintain the correct voltage, additional control gear called a ballast (orsometimes „starter‟ or „choke‟) is needed. This is how most non-tungsten lights work includingfluorescent, sodium metal halide and mercury.2.1.2 New lighting technologies - solid-state lighting (Light Emitting Diode)Light Emitting Diodes (LEDs) are solid-state semi-conductor devices that produce light. The firstpractical LED was invented by Nick Holonyak in 1962 (Held, 2009: 5). The breakthrough of LEDtechnology occurred in 1993 when Shuji Nakamura discovered „bright blue‟ LEDs. By then, LEDshad 3 principal colours (green, red and blue) to generate white light. Since then, LEDs have beenmanufactured using different inorganic semiconductor materials to generate a wide variety of colour,including red, green, orange, yellow and white (FGL, 2006: 2). LED technology has significantfunctional benefits over traditional lighting technologies such as incumbent incandescent and halogentechnologies (TSB / DIUS, 2007). Table 1 summarises the key issues of the use of LEDs identifiedin the literatures.2.2 New product development modelsThe new product development (NPD) has been argued as the key to competitive success and is thelifeblood of companies. The NPD is defined as “a series of interdependent and often overlappingstages during which a new product (or process or service) is brought from the “idea” stage toreadiness for full-scale production or service delivery” (Handfield et al., 1999: 62). There are manydifferent NPD models. Bingham and Quigley (1989), for example, identify that the NPD processconsists of eight stages: idea generation, screening, concept development and testing, marketingstrategy, business analysis, product development, market testing and commercialisation. Urban andHauser (1993), for instance, propose that the NPD process consists of five groups of activities:opportunity identification and screening, product design, testing, commercialization and post-launchcontrol. Handfield et al. (1999) extend the above view and further propose the need of involvingsuppliers in NPD. Figure 1 shows a generic NPD process, including idea generation,business/technical assessment, concept development, engineering and design; and prototype / rampup.As the product concept moves through these stages, the product design is done, prototyping andtesting are finished, and preparations for full-scale operations are finalised.12345Ideageneration:Voice of thecustomerPreliminarybusiness/technicalassessmentProduct/process/ serviceconceptdevelopmentProduct /process/serviceengineering,design and/oractionPrototype build,test and pilot/ramp-up foroperationsFull scaleproduction /operationsFigure 1 Generic new product development process (Handfield et al., 1999: 62 & 77)40

Table 1 Summary of key issues of the use of LEDsSourcesCarbon Trust(2007a: 12)Held (2009)BetaLED /KramerLED(2008)Key issuesAdvantages An efficient option where coloured light is requiredCan provide changing colours under automatic controlCan have long life (over 50,000 hours) - can reduce maintenancecostsCan be focused onto display areaDisadvantage Not suitable for high light output applicationsKeychallengesHigh purchase costManufacturers' literature is not standardised (difficult tocompare products)An LED may lose a significant proportion of its original lightoutput without failing completelyLamp colour may vary from batch to batchLight extractionLuminosityWhite light generationIntellectual property (IP) disputesLack of standardsAdvantage High source efficacyOther LEDattributes andadvantagesOptical controlExtremely long operating lifeDelivered lumensEnvironmentally friendlyVariety of colour temperaturesColour renditionLow maintenance and disposal costsCompatible with photovoltaicsCompatible with lighting control systemsLEDs can be dimmed41

3. Research methodologyThis research project aims to investigate how we understand and use light – a change that will affectthe lighting supply chain, from the lamp manufacturer, fixture company producers (luminariesmanufacturers) and end-users. This led to the following research questions:1. How does the lighting supply chain (including LED module manufacturer, luminairemanufacturers, specifiers and ender-users) engage with new LED technology?2. What are the drivers and barriers underlying end-users decisions to adopt / reject suchtechnology?The project brought together representatives from the key parts of the supply chain: a LED modulemanufacture, a luminaire (light fitting) manufacturer and four end-users. Data collection techniquesinclude interviews, meetings, workshops and company documentation.4. Interim results4.1 Successful new LED product development phasesThe key findings indicate four principal phases of new LED product development (see Figure 2):determining technical end-user needs, developing luminaire prototype, end-user validation and finalluminaire specification phases. End-users could be usefully grouped into two types: technical endusers(e.g. specifier, lighting designer, architect) and non-technical end-user (e.g. end user of LEDlighting product: client). The four phases within a new product development process do not takeplace in four, sequential phases but rather in an iterative cycle. Each phase of new productdevelopment activities is summarised in Table 2.Phase 1:Interfaces Interfaces InterfacesPhase 2:Phase 3:Phase 4:Determining technicalend-user needsDevelopingluminaire prototypeEnd-user validationFinal luminairespecificationFigure 2 New LED product development phases42

Table 2 New LED product development phases and activitiesPhasesActivities1: Determining technical end-user needs Define luminaire brief2: Developing luminaire prototype Build 1 prototype luminaire Build test luminaires3: End-user validation Select trail sites Install on sites Validationo Initial validation from end-user marketingdepartmento If necessary: second validation from customers4: Final luminaire specification Consolidate trial feedback and derive luminaireredesign necessary Make prototype of final design and validate with enduser4.2 Determining technical end-user needsThis phase is not the „beginning‟ of the specification process, rather it is the module manufacturerand luminaire designer coming up with an initial list of technical requirements based on knowledgeand experience drawn from previous and ongoing projects. The design input is based on not onlythings that went well before, but also lessons learnt from projects that did not meet client needs.What was interesting is that, in most cases, the client itself does know what it wants prior toinstallation. It is only when the lighting installation is in place that the client knows whether it wasthe right or wrong solution. This situation is amplified in the case of LEDs as this is, in most cases,a totally novel technology for the client. The lack of awareness/knowledge of the client about theLED product is evident in interviewee B, stating that:“I don’t know a single end user who would have any awareness at all [of LEDs]. In the old dayswhen we used to talk about metal halides, people had first hand experience … now, with this, it’s justnot on their radar … when you talk to end users … you talk to people who are lighting professionalsand that’s what they do, they’ll embrace it but, again, how well they communicate it to their clientbecause, at the end of the day the client, after a while, glazes over and just thinks “Oh yes, it looksnice, it’s pretty!”The above discussion indicates that the important role that marketing and consumer education canplay in increasing consumer acceptance of a new technology.43

4.3 Developing luminaire prototypeThe development of the luminaire prototype against the initial technical requirements is veryexperimental in nature. The luminaire manufacturer and the module manufacturer work closelytogether to integrate the two technology subsystems. The integration at this stage is incremental.The subsystems in themselves are not changed to a significant degree; rather, the interface betweenthe technologies is the focus of attention. This focus is to reduce costs of changes to subsystems atthis early stage and, in so doing, reduce risk.A recurring technical interface during this phase of incremental experimentation was the design ofthe heat sink to dissipate the heat generated by the LED module. (If the heat is not dissipatedadequately, the life of the module is significantly reduced.) Although this task is located within theluminaire manufactures domain, the module manufacturer offer significant technical assistance.Both parties benefited from this process of co-production and learning.The final prototype is used to demonstrate the LEDs technology to specifiers and potential clients.The demonstration role of the prototype, in particular, is used to compare and contrast the functionalbenefits of LEDs against incumbent lighting technologies. Interviewee A, for example, noted that:“Each time you get a new technology there’s a learning point and with this the big learning pointwas heat sinks. It’s not that it’s more difficult to use than other technologies, but there are newaspects the industry has to get used to, and indeed there’s dialogue between our companies here.”Electrical engineers can be significant influencers on LED purchases both by the choices they makefor lighting fixtures in new construction, so lack of awareness or enthusiasm on their part can be abarrier to LED technology adoption. This is evident in interviewee C, arguing:“Our approach to product, because the lighting market place and engineers are conservative peoplewho get very comfortable with certain pieces of technology, to move them radically in differentdirection becomes a problem to them … so it’s easier for them to embrace the idea of a low voltageor a diachronic replacement … let’s try and replicate something that works, that is more in theircomfort zone to get a higher market uptake.”4.4 End-user validationIn this phase the prototype luminaire is piloted on potential client sites. The purpose of the pilot istwofold. For the potential client, the pilot allows the technology to be evaluated in a real worldsetting and to validate its performance on a small scale. This reduces the costs and risks of nonperformancefrom a new technology. From a different perspective, the pilot provides valuable „inuse‟ experience of the technology for the module and luminaire manufactures.It is interesting to note that the evaluation by the client tends to benchmark the lighting solutionagainst the lighting installations already in place in the building rather than against the technical44

performance of the LED lighting as set out in the specification. There are two reasons for this.First, the pilot is too short in duration to test a number of the LED features, in particular the lifeduration of 50,000 hours. Further, the infrastructure is not in place to isolate the pilot area to, forinstance, measure the energy efficiency of eight pilot lamps in a ceiling where there may be hundredsof existing lamps. Second, as mentioned in the „development of the prototype‟ phase, clients oftennarrow their evaluation to the current technologies in their „comfort zone.‟ This is evident ininterviewee E, stating:“… small scale trials … there are so many different products with different ways to get the samegoals … it’s difficult from our point of view to actually decide which one is the right one … thetechnology is moving so quickly, again, small trials and eventually saying “that’s the one for us.”The research findings showed that end-users were skeptical of claims of long life. Interviewee G, forexample, argued:“… the first criteria would have to be “can I trust the life” … that would be the first one because youget quoted lots of things … a golden number of 50,000 hour life on a LED … it’s easy to quote anumber … it’s hard to prove that number, I guess, isn’t it? So the first criteria is “do I believethat?””4.5 Final luminaire specificationThe two-way feedback from the pilots is consolidated and forms the basis for refinements to theluminaire specification and the continued operation on client sites. The liminaire (light fitting)manufacturer and installer is developing a suite of luminaires using LED technologies. The portfolionot only captures technical feedback from the pilots, but also client suggestions for potentialapplication areas.This is further evident in interviewee G, arguing:“… my interaction with [the liminaire (light fitting) manufacturer and installer] is to enhance theaesthetics of the luminaire … not to always make something that has been around for years, anotherdown lighter that is like that … why not make something that’s a bit different perhaps?””5. ConclusionsThe new product development process for novel, high technology LEDs is principally characterisedby a collective, iterative effort of knowledge sharing and innovation between the module andluminaire manufacturer. The co-production is geared towards developing internal capability in theLEDs technology and making the lighting solutions more credible and robust for the client. Theclient inputs into this process by progressively articulating user requirements.45

It is this collective effort which is making transparent the very real technical benefits of LEDscompared to existing lighting solutions, particularly their high-energy efficiency and long service life.It is only through this evidence-base that clients will build up the confidence to move out of the„comfort zone‟ of existing lighting solutions and move to LEDs technologies.The LEDs sector is currently in a state of volatility, with different module manufacturers striving toestablish the dominant technology which will dictate the market. It is the client base, however,which will decide the fate of LEDs technology. This reality requires the whole LEDs supply chainto jointly innovate with the client.AcknowledgementsThe authors are grateful to the Construction Knowledge Exchange (CKE) (www.cke.org.uk) whofunded the „Demand led Light Emitting Diodes (LED) lighting new project development for the retailsector‟ project on which this paper is based. The authors would also like to express our gratitude toall interviewees for their contribution of time, resources and, most of all, enthusiasm. Without theirco-operation and support this study would not have been possible.ReferencesBetaLED/KramerLED (2008), LEED Certification GuideL LED Lighting Systems in SustainableBuilding Design, BetaLED/KramerLED, USA.BIS and DECC: Department for Business, Innovation and Skills / Department of Energy and ClimateChange (2009), The UK Low Carbon Industrial Strategy, BIS and DECC, July. (available athttp://www.berr.gov.uk/files/file52002.pdf, viewed 20/07/09)Carbon Trust (2007a), Display Lighting: Creating Maximum Impact with Minimal EnergyConsumption, In-depth technology guide CTG010, March, HMSO, London, UK.Carbon Trust (2007b), Lighting: Bright Ideas for More Efficient Illumination, CTV021 TechnologyOverview, March, HMSO, London, UK.DEFA (2008), Climate Change Bill 2008 (c. 27), HMSO, London. (available athttp://www.opsi.gov.uk/acts/acts2008/pdf/ukpga_20080027_en.pdf)FGL: Fördergemeinschaft Gutes Licht (2006), LED – Light from the Light Emitting Diode, FGL,Germany. (available at http://www.lif.co.uk/dbimages/pdf/LED%20BROCHURE%20ENGLISH.pdf)Handfield, R.B., Ragatz, G.L., Petersen, K.J. and Monczka, R.M. (1999), “Involving suppliers in newproduct development”, California Management Review, Fall, 42/1: 59-82.46

Held, G. (2009), Introduction to Light Emitting Diode Technology and Applications, Taylor &Francis Group, Boca Raton, FL.IEA: International Energy Agency (2006), Light's Labour's Lost: Policies for Energy - efficientLighting, Organisation for Economic Co-Economic Co-Operation and Development / IEA (availableat http://www.iea.org/textbase/nppdf/free/2006/light2006.pdf, viewed: 02/08/2009)LIF: Lighting Industry Federation (2001), LIF Lamp Guide, 4 th edition, LIF, London. (available athttp://www.lif.co.uk/dbimages/pdf/lif_2001_guide.pdf)TSB / DIUS: Technology Strategy Board / Department of Innovation, Universities and Skills (2007),Research into Technologies to Improve the Energy Efficiency of Light Sources, TSB / DIUS, HMSO,London.Urban, G. and Hauser, J. (1993), Design and Marketing of New Products, Prentice-Hall, EnglewoodCliffs, NJ.47

Once They Were Heroes: What Happened to theCompanies that Built the Sydney Opera House?Tombesi, P.Faculty of Architecture, Building and Planning, The University of Melbourne(p.tombesi@unimelb.edu.au)Fowler, M.Faculty of Architecture, Building and Planning, The University of Melbourne(bfowler@unimelb.edu.au)Nigra, M.Faculty of Architecture, Building and Planning, The University of Melbourne(m.nigra@pgrad.unimelb.edu.au)Teoh, D.Faculty of Architecture, Building and Planning, The University of Melbourne(dteoh@unimelb.edu.au)Saunders, V.(vsaundersducos@unimelb.edu.au)Faculty of Architecture, Building and Planning, The University of MelbourneAbstractAt the 2006 CIB W96 Conference in Lyngby (Denmark), a method for articulating the value ofparticular buildings to the whole construction industry was presented using the construction of theSydney Opera House as an ideal-typical example. The underlying argument was that „industrial‟ valueshould be measured not only against current project costs but also against the benefits deriving fromthe future application of the experience thus produced. Operatively, the articulation of value relied onsetting up a framework of historical data connecting the various technologies used for the project to aseries of building industry proxies, and defining, over time, the market trajectories of the firms thattook part in it. A detailed review of 240 firms participating in the project has now been completed todocument what happened to these firms over the 35 years following the completion of the artscomplex. Organised according to several parameters, the analysis shows how greatly the destiny of thevarious firms varies, implicitly reducing the weight of the specific project experience in their„industrial‟ life subsequent to it. On the other hand, clear patterns also emerge that suggest thatdifferent families of firms may have benefited differently from their involvement with the process.Such families can be divided by size, function and type of work. If the rate of companies‟ completetransformation or disappearance from the market over the period examined is high, it is particularlyhigh at the small-medium enterprise level, and when it comes to building contractors and consultantsas opposed to suppliers. While additional research is needed on the possible relationships betweenspecific project tasks, technological specialization, knowledge management, and firms‟ performanceover time, the findings presented already support the hypothesis that construction sector dynamics48

work differently depending on the group under analysis and, that, by extension, industrialdevelopment policies should be articulated accordingly.Keywords: project-based analysis, construction markets, industrial trajectories, firms‟ evolution,industrial policy1. Introduction: the reasons of a studyIn 2004, the Australian Research Council sponsored an investigation program that sought to definemethods for articulating the impact of unique, high-profile buildings over the industry that constructsthem. The premise of the work was that individual projects represent the way in which theconstruction industry assembles its output, verifies its specific procedures and moves forward. Hence,they perform a critically significant function in the development of technical knowledge specific tothe process of building (Tombesi 2006). This may be true in particular for large public buildings.Their very nature, in fact, puts them in a position to establish or represent collective values,overcoming the private and business-oriented nature of much building activity, and playing a crucialrole in the promotion of innovation (Tombesi 2004). Accordingly, the proponents of the researchwanted to see to what extent it was possible to work with the documentary evidence and industrialmemory of a particular building, selected on the basis of explicit characteristics, in order toaccomplish three things: 1) analyse the type and amount of technical knowledge produced through itsdevelopment process; 2) examine whether and how such knowledge had been utilised after thebuilding‟s completion; and 3) determine whether this use had generated industrial value for theconstruction sector the building was embedded in, or the parties involved in its development.The research project used the Opera house built by the New South Wales Government in Sydneybetween 1957 and 1973 as an ideal type case study. There were multiple reasons for this choice. Tostart with, the Sydney Opera House is a large, visible, and public building artefact that contributed todefining, in many ways, the image of modern Australia (Figures 1 and 2). Secondly, it was a verycomplex project that had required significant involvement from the industry, with about two-hundredand-fortycompanies contracted for the works. Moreover, by posing problems that had never beforebeen encountered or considered in Australia (when not in the world), the Sydney Opera House defacto acted as a research laboratory and a test bed for design and building practice, forcing the localindustry to deal with very innovative solutions at product and process levels. If these conditions werepartially responsible for the project‟s long and controversial procurement history, they also generatedpublic presence, copious technical documentation, and extended records of the various stages ofprocurement, plus a legacy of ingenuity that was celebrated in June 2007 with the inscription of thebuilding on UNESCO‟s World Heritage List. 11 Started in 1957 with the selection of an architectural winner from the initial design competition, Jørn Utzon,the procurement of the building was organized in three stages, which essentially followed the three mainelements of the original design ― a large podium, upon which rested three series of sheltering shells, with thetheatres nestled underneath. Stage I (1959-1962) saw the site cleared and the construction of the podium; StageII (1962-1967) primarily involved the design and erection of the shell structures, whereas Stage III (1967-1972)concerned paving and cladding, the glazing of the open ends of the sails, roof shell interior and building fit-out.49

Figure 1: The shells under construction, 1960s Figure 2: Christo, Wrapped Opera House, 1991Against this picture, genuine scholarship on industry participation to the project, as well as on theproject‟s impact on participating companies, was limited at best, and for the most part anecdotal. Inspite of the plethora of books on the original architect‟s design, only two publications have looked atthe Sydney Opera House explicitly as the output of a complex industry. 2 Still, no study had yetanalysed systematically the contractual anatomy of the development process, the robustness of thetechnologies employed throughout the three stages of construction, and its overall industrial legacy.Official publications maintain that the building was groundbreaking, yet there still is no updated indexdetailing, systematically, the scope or the import of the discoveries to which it ostensibly contributed.We know that some companies benefited significantly from their association with the Sydney OperaHouse while others waited years to reap any benefits from it, some stagnated and others went intoreceivership. Yet no one has examined the dynamics by which this happened, or the clusteringresulting out of subsequent market behaviour. We assume that technology was copiously transferredin and out of the project, yet we don‟t have a map to follow all the threads.The research program was developed in response to such conditions, partly to complete thehistoriographic record of the building, but partly also to assess whether significant linkages betweenthe project and the industry could be detected, whether contract performance and firms‟ organization(or position within the project‟s organization) could be related, and whether project-specificknowledge had been reused on other projects. Together, such company-tailored data were deemeduseful to set up hypotheses of technological path development. The relationship between firms‟responsibilities on the project and firms‟ subsequent behaviour in the market, for instance, could beIn 1966, after the podium was built and a year before the completion of the roof shells, Utzon resigned overconflicts concerning changes to fundamental management and work procedures, and was replaced by a team ofgovernment architects: Ted Farmer, Peter Hall, David Littlemore and Lionel Todd. To this date, developmentprocedures and results of the Sydney Opera House construction process, as well as its costs and eventualbenefits, are still subject to contrasting evaluations. See, for instance, the completely different accounts providedin Technology in Australia 1788-1988 (AATSE 1988) and What made Gertie gallop: lessons from projectfailures (Pinto and Kharabanda 1996). As Murray (2004) contends, the public history of the Sydney OperaHouse is a tale of individual heroes and villains embedded in myth rather than a history of collectiveaccomplishments and long-lasting contributions.2 AATSE 1988; Watson A (2006) Building a masterpiece: the Sydney Opera House, Powerhouse Publishing,Sydney.50

used to point out possible connections between the pursuit of technological innovation and thecreation of market comparative advantages. By extension, it could help policy-making actors establishwhether or not buildings with particular levels of technical innovation can spur industrial growth. Inturn, the ability of the companies to exploit the situation thus created would provide empiricalindications on two complementary fronts: 1) whether innovative building development should beaccompanied or preceded by the definition of supportive industrial policies; and 2) whether failure toput supportive policies in place could hurt the potential contributions of these buildings to the industryand the economy. 3The research was designed as a process developing and integrating four tasks – one concerned withthe definition of the „innovation content‟ of each contract awarded on the Sydney Opera House; oneinvolving a diachronic analysis of the technologies employed on the project (from the 1970s untiltoday); one examining the industrial trajectories of the businesses involved in it and the marketscaptured by them ever since; and one following the occupational dynamics of selected workforce.Upon completion, these tasks would connect each contract item to the industrial performance of itsunderlying technology over thirty or forty years, the company (or companies) that developed it,selected individuals that worked on it, and other buildings that employed it. The resulting inventorycould then be examined in light of enumerable variables ― sensitive systems successfully introduced,technologies brought to maturation, research spin-offs, company take-offs, instigation of statutoryacts, etcetera ― and be used to quantify the impact of the project on „its‟ industry, or to determinewhether correlations can be drawn between technologies, policies, types of companies, and workforcedevelopment.This specific contribution to CIB 2010 documents the results of the research stage concerned with theanalysis of the companies involved in the Sydney Opera House at any point between 1957 and 1973,and their current status. The census was initially organised around the 165 firms contained in a NSWgovernment project summary report published in 1973, but had to be eventually extended to 240 firmsto incorporate other agencies that appeared in the project documentation records. By the same token,the current list may not be exhaustive. Yet it does provide a uniquely broad project-based crosssectionof the contracting industry at the time, which gains additional relevance when considering theprofile of the building and the attention placed on the selection of project contributors.2. Identifying and following the industrial threadsThe collection of companies‟ data required a number of progressive steps, involving the analysis ofsecondary and primary sources. As mentioned above, a first extensive cut of industry participants wasobtained by reviewing two documents published at the end of the procurement process by the public3 For a detailed account of the methodological underpinnings and staging of the work, see: Tombesi P (2005)“Project costs and industrial benefits: Analyzing the technological function of the Sydney Opera House thirtyyears after its completion.” CIB W096 Architectural Management Meeting, Designing Value: New Directions inArchitectural Management, Danish Technical University, Lyngby: 69-80.51

client and the general contractor in charge of Stages 2 and 3. 4 By adding and cross-checking thenames of all the companies featured in such documents, a comprehensive list was assembled thatcould work as an organisational lead when examining the technical literature produced on specificaspects of the project but, above all, when reviewing the project files held at the New South WalesState Records out of Sydney. (These files were made available by the State Government to the publicin 1997 and remain, for a large part, uncatalogued).In reviewing the names of process contributors against the documented history of the project, another80 companies were added to the 165 comprising the initial list, taking the total to over 240. Thenames of these 240 companies were then entered into an ad-hoc produced database that formed theskeleton for a detailed census of the industrial sample thus collated.A great deal of company-specific information was gleaned online from sources such as the AustralianSecurities and Investment Corporation (ASIC) and the Australian Business Registrar (ABR). For largecompanies registered on the Australian Stock Exchange (ASX), published annual reports givingdetails of the company structure, turnover, business locations of parent company and subsidiarieswere also accessed. Smaller companies were located through their company websites or Yellow Pageslistings. At this point, the research team spent considerable amounts of time directly contacting thecompanies and the individuals involved with them, either historically or at present. Survey forms wereprepared and distributed to all those willing to participate, and summaries of written correspondenceand telephone interviews were recorded in the database.In structuring the survey, the research team was interested in collecting sets of data that could be usedcomparatively across time, and information that could help determine the character of the workcarried out by each company as well as its position in the market. Accordingly, for each company inthe list, details were recorded that defined the company‟s scope of work in the project under analysisbut also its industrial profile both at the time of involvement in the Sydney Opera and currently: rolein the building process, type of ownership, base of operation, size, main business concerns andoperations, industry classification, market geographic coverage, trading arrangements, work methodsand, where possible, control over the technology in use. Combined data were then organised in such away as to make them respond to simple binary questions: Still active or not? Industry leader or not?Same base of operation or not? Smaller or larger? Same market coverage or not? Broader or narrowerscope? Trading independently or as a subsidiary?Category definitions were imported from the agencies that maintain registers of businesses, and whichrequire reporting from companies, agencies that collect and/or aggregate statistical data, and agenciesthat use standard definitions of elements in industries. This decision reflected an attempt tostandardise the data obtained from the case study, so that project-specific figures could eventually becompared with those published in national surveys or produced within the construction industry.4 New South Wales Public Works Department (1973) Sydney Opera House – Anatomy of Stage ThreeConstruction and Completion - A General Index, Sydney, Public Works Department; and The HornibrookGroup (1973) Building the Sydney Opera House, Sydney, Hornibrook Group.52

Out of the original 240 companies, 214 provided usable data over time. The details of thesecompanies were tabulated on spreadsheets for ease of reference, and eventually translated into a seriesof tables from which graphic diagrams, charts and maps were produced (Figures 3, 4, 6; Table 5).53

Figure 3: Geographical distribution of SOH companies by functional roles in the 1970s (top) and2010 (bottom).54

Figure 4: Geographical distribution of SOH companies by building elements in the 1970s (top) and2010 (bottom).55

Table 5 (left): World distribution of SOH participating companies in the 1970s and 2010 byheadquarters location and company size.Figure 6 (right): Geographic market coverage of the companies involved by size and marketpercentage weight.3. Pulling all the company stringsThe company survey provides a clear picture of the technical coalition formed for the Sydney OperaHouse project. Of the firms involved, a little over 10% consisted of primary and specialisedconsultants, while the rest was almost equally distributed between building contractors andsuppliers/manufacturers. The vast majority of them (more than 80%) were Australian, whereas closeto 15% was based in Europe, and a small group in North America. Interestingly, professionalconsulting firms were equally divided between Australia and Europe. Within Australia, the state ofNew South Wales acted as the clear industrial basin for the project, with 85% of the companiesregistered within its boundaries (leaving the state of Victoria a distant second with 13%). As expected,most of the firms surveyed (approximately 70%) worked on tasks related to the second part of theconstruction process, the one concerned with the completion of the building‟s envelope and internalfitout, from the mid-1960s to 1973. (The distribution of firms by building parts sees „services‟,56

„finishes‟ and „fitting‟ trades prevail over „structure‟ and „envelope‟ by 1/3. If the architectural partsof the envelope are added to „finishes‟, the ratio becomes 1 to 2.) Company size-wise, the SydneyOpera House was built by a section of the industry consisting almost entirely of medium-size andlarge-size companies (31% and 56% of the total number). 5When this picture is considered against current market presence, industrial longevity defines differentgroups of companies. Roughly 60% of the firms at work on the Opera house between 1957 and 1973are still in business today, either in the same or a modified form; yet less than 50% remains in theconstruction industry. This means that, while at least 40% has been incorporated by other commercialconcerns or has ceased operations altogether, another 10% has changed activity sector within theeconomy. The percentage of companies no longer in business today is higher with companiesheadquartered in New South Wales at the time of the Sydney Opera House project.In terms of functional roles, professional consulting firms have experienced the largest contraction(well over 50%), followed by building contractors (just below 50%) and system-component suppliers(33%). Services-related and building envelope-related firms seem to have best withstood the passageof time, as their numbers were reduced by 1/4 and 1/3 respectively; by contrast, 45% of the firms atwork on structure, finishes or fittings are no longer trading. Size group variations implicitly provide arationale for building element-based firm dynamics. In fact, the 25% reduction in the overall numberof firms has been attained by-and-large through the disappearance of most small firms (-77%), andone-third of medium sized ones (-36%). In turn, the number of large firms has not changedsignificantly (-8%). It is possible, of course, that the numbers provided here reflect natural trajectoriesof growth, whereby small firms turn into medium ones, and medium firms into large ones. Theresearch team is currently investigating this hypothesis. Some support for it is provided by thechanges occurred in the patterns of business geographic spread of the sample within the three decadesunder analysis (Figure 7). The mainly „local‟ or „state‟ coverage offered by the business of 96 smalland-mediumsize firms and 24 large firms in the 1970s today applies only to 14 of them. And whilethe number of firms providing „national‟ coverage has also been reduced (albeit in line with theattrition rate of the overall sample), international markets have become the new standard for businesscoverage, at least within the sample of companies considered, moving from 22% to 52% of its total,and from 40% to 57% when the focus narrows on large firms.4. Questions vs answers: theoretical relevance of the resultsIf taken at face value, the numbers employed in the previous section to describe the firm compositionof the Sydney Opera House project team or the industry survival rates of their members are likely toleave readers unimpressed. If anything, the data show that no common long-term behavioural patternscan be discerned to establish a cause-effect relation between participation in the project and5 In compiling the groups, Australian Bureau of Statistics (ABS) recommendations on the proxy quantitativemeasure of employee numbers were used: small firms - less than 20 employees; large firms - over 200employees; medium firms – 20 to 200 employees. (Also considered was the ABS note that small businesses arethose with direct or close relationships between the principals and the financial ownership, and the day-to-daycontrol of functional operations.)57

subsequent industrial fortune and/or company life span. (This, incidentally, should surprise no one,given that the collection of firms was technically heterogeneous in the first place, and that they allworked on different tasks by using different skills.) In this sense, even the decision to organiseoriginal data against companies‟ current active status may appear arbitrary, given that a lot of thingscould and did certainly happen to any firm within such a long interval of time, to discount anypossible direct impact of the project on the operating profile of the firm.Yet the problem, or the interest in collating these data, is another one. From the point of view of theanalysis, the Sydney Opera House is but a pretext to select a broad cross-section of firms, operating inthe Australian market at a particular point in time, which can be almost invariably defined by the highlevel of skill they possess in their respective trades, their dedication to work, and their willingness tostay at the forefront of their own technological domain. As stated earlier, in fact, the complexity of thebuilding, the imperative to develop it well, and the public scrutiny applied to it at the time, wouldhave made it very hard for any company not in full control of its craft to play at the level required bythe project. This makes the field of participants – the heroes that built the Sydney Opera House – aconsistent field of analysis. If this is the case, though, then the question informing the research can beturned upside down. What determined diverging industrial trajectories within a sample of firms likelyto be characterised by quality output and technological leadership across the board, and at work in aregion at least geographically buffered from intense competition? In other words, what made somefirms disappear and others thrive, some change industrial sector and others grow by specialising?Natural processes of industrial consolidation? Geographic shifts and firms‟ mobility (or lack thereof)?Technological maturity or obsolescence? Decrease of technological rents? Economic cycles affectingpush or pull dynamics? Features connected to size? Focus on either product or process? Internalknowledge management strategies?By clustering together industry participants that would not normally be considered side by side, thedata organised to date provide few immediate answers but plenty of investigative clues to follow inthe next stage of the research, where the characteristics of the work developed by each firm on theSydney Opera House will be examined in terms of innovation content and operational requirements,then to be linked to the subsequent activities of the same firm as well as the market curve of thetechnologies employed. The idea is that, once such „specific‟ categories are fed into the database andprocessed through, smaller but more cohesive patterns may emerge to reveal the specific weight ofgiven factors or combinatory constants for firms‟ industrial sustenance, growth, success andlongevity. In doing so, the research will be laying out theoretical grounds for comparative discussionon firms‟ performance and performance determinants.The data already available seem to suggest that, in Sydney, the uneven destinies of the entrepreneurialsample under scrutiny are the result of industrial paths, micro-management or micro-economicdifferences and macro-economic conditions, which have also been informed by project-specificand/or geographic opportunities. For instance, while some of the successful medium-size firms havebeen taken over by larger multinational companies and amalgamated into international networks ofsubsidiaries, many small, naturally „local‟ firms seem to have been pushed out of a metropolitanmarket that has grown in a different direction, thereby facilitating the entry of commercial volumeplayers to the detriment of traditional ones, or generating opportunity cost pressures that caused firms58

to reassess their technical mission. In general, Australian firms do not appear to have benefited greatlyfrom their participation in the project, with the exception of those enjoying an already solid reputationor occupying quasi-monopolistic positions in their product niches, or those bought out by foreignconcerns. This will, of course, have to be verified by the analysis of the entire data set. But be that asit may, the information collected thus far already provides an incontrovertible truth: both projects‟impact and construction sector dynamics differ depending on the group of economic actors underanalysis. Thus, any construction sector development policy conceived with the wellbeing of theindustrial fabric at its hearth should reflect such heterogeneity and work with it by design. In the end,it could be that the heroes of the Sydney Opera House are not only those who built the most daringbuilding structure in the world but also those who continue to make it possible for those samecontributors to withstand the passage of time and disseminate their knowledge across the industry.1. AcknowledgementsResearch activity in support of this paper was conducted at the Faculty of Architecture, Building andPlanning of the University of Melbourne, under sponsorship from the 2005 Australian ResearchCouncil Discovery Project Program (Grant DP0557617).2. ReferencesFellows of the Australian Academy of Technological Sciences and Engineering (AATSE) (1988)Technology in Australia 1788-1988, Melbourne.Murray P (2004) The saga of Sydney Opera House, London, Spon Press.New South Wales Public Works Department (1973) Sydney Opera House – Anatomy of Stage ThreeConstruction and Completion - A General Index, Sydney, Public Works Department.Pinto J, Kharabanda OP (1996) What made Gertie gallop? Lessons from project failures, John Wileyand Sons.The Hornibrook Group (1973) Building the Sydney Opera House, Sydney, The Hornibrook Group.Tombesi P (2004) “Iconic public buildings as sites of technological innovation”, Harvard DesignMagazine 21 (Fall 2004/Winter 2005) (digital article)Tombesi P (2005) “Project costs and industrial benefits: Analyzing the technological function of theSydney Opera House thirty years after its completion”, CIB W096 Architectural ManagementMeeting, Designing Value: New Directions in Architectural Management, Danish TechnicalUniversity, Lyngby, DK: 69-80.Tombesi P (2006) “Good thinking and poor value: on the socialization of knowledge in construction”,Building Research & Information, No. 34: 272–286.Watson A (2006) Building a masterpiece: the Sydney Opera House, Sydney, Powerhouse Publishing.59

Do Projects Matter? Tracing Firms’ IndustrialTrajectories from the Australian Federal ParliamentHouseTombesi, P.Faculty of Architecture, Building and Planning, The University of Melbourne(p.tombesi@unimelb.edu.au)Hutson, A.Faculty of Architecture, Building and Planning, The University of Melbourne(aehuts@unimelb.edu.au)Nigra, M.Faculty of Architecture, Building and Planning, The University of Melbourne(m.nigra@pgrad.unimelb.edu.au)Fowler, M.Faculty of Architecture, Building and Planning, The University of Melbourne(bfowler@unimelb.edu.au)Teoh, D.Faculty of Architecture, Building and Planning, The University of Melbourne(dteoh@unimelb.edu.au)Saunders, V.(v.saundersducos@unimelb.edu.au)Faculty of Architecture, Building and Planning, The University of MelbourneAbstractAustralia‟s current federal parliament house, built on Canberra‟s Capital Hill between 1980 and 1988,is the largest, most expensive and organisationally demanding single building construction effort everattempted in Australia. A tight development timeframe, program complexity and public profile turnedParliament House into a laboratory for new construction delivery methods, contractual agreements,building standards, industrial relations, tendering procedures, labour training programs, informationmanagement methods, building systems, component manufacturing, materials handling, and siteassembly strategies. Yet, what impact did Parliament House have on the companies contracted todevelop it? By following analytical criteria and protocols perfected on a previous similar study of theSydney Opera House, an analysis was conducted across over 400 participating firms, trying to gaugethe distance (if any) between what these firms were doing at the time of their involvement with thebuilding and what they are doing today. The results show that the industrial coalition that builtParliament House has changed dramatically in twenty years, particularly at local level, wheresignificant percentages of the original small and medium size firms are no longer trading. This issomewhat surprising in light of the procurement policies adopted at the time, which were based on thepremise that Parliament House was to work not only as a construction laboratory but also as a trainingground for Australian firms. The findings raise questions about governments‟ ability to plan or foresee60

industrial performance, while reiterating the need to formulate analytical categories capable of doingjustice to the relationship between project-based opportunities and firms‟ behaviour in the market.Keywords: Australian construction industry, SMEs, firm transformations, technological innovation,public policy1. Introduction: The research project1.1 Technological innovation and large public buildingsIn 2007, the Australian Research Council (ARC) sponsored an investigation program that sought toarticulate the impact of the design and procurement of the Federal Parliament House in Canberra(FPH) on the Australian construction industry. 1 This project built on the technique and researchmethodology of a previous ARC Project undertaken by key members of this research team to assessthe innovation value of the Sydney Opera House (SOH), a recognised milestone in the history ofconstruction technology in Australia. 2The selection of Parliament House as a subsequent case study in building innovation was notaccidental. Built on Canberra‟s Capital Hill between 1980 and 1988, the parliamentary complex is oneof the most important buildings of the nation. This is not only because of the immediaterecognisability of its image and the cultural value associated with its institutional function, but alsobecause the building instigated significant research in related construction technologies andprocurement systems. In fact, at the time of its construction, Parliament House was the largest, mostexpensive and organisationally demanding single building effort ever attempted in Australia. A tightdevelopment timeframe, program complexity, and the building‟s public profile turned it into alaboratory for new construction delivery methods, contractual agreements, building standards,industrial relations, tendering procedures, labour training programs, information managementmethods, building systems, component manufacturing, materials handling, and site assemblystrategies. The breadth of the industrial innovation required and the depth of the research undertakeninvite comparison with the Sydney Opera House, a construction experience that had come to fruitionseven years before the start of FPH, and which was used as a benchmark during its planning stages(Kouzmin 1979).Our research project was to analyse FPH as a critical case-study from a range of design andconstruction perspectives. Almost twenty years after its opening ceremony, there had been nothorough analysis of the overall technical processes that led to its realization, nor any scholarlydiscussion on the possible impact of the knowledge developed for the occasion on the Australianindustry and building environment as a whole. Prior to our research, there was no framework for a1 Australian Research Council Discovery Project Grant DP0770425, „A special talent for innovation? Analysingthe other public function of the Australian Parliament House‟, Chief Investigators: Tombesi and Hutson, 2007-2009.2 Australian Research Council Discovery Project Grant DP0557617, „From tourist siren to technological beacon:analysing the industrial function of the Sydney Opera House thirty years after its completion‟, ChiefInvestigator: Paolo Tombesi, 2005-2007.61

study on how to measure whether and how the procurement of Parliament House impacted on thepractices of the building industry and, by extension, on the market dynamics of the entrepreneurialsubjects involved. Had the industry absorbed or utilised the formidable experience gained through itsconstruction? What happened to its design and construction workforce? Did the knowledge developedor the lessons learnt reverberate on other building competitions, or projects, and industrial policies?In order to fill what was perceived as an objective gap in the nation‟s industrial knowledge, theproject was designed as a combination of multiple stages. The first stage consisted in tracing adetailed history of its design and building procurement process. Then, not unlike what had been doneon the Sydney Opera House research project, we set out to: 1) analyse the types of technicalknowledge produced through such process; 2) examine how this knowledge has been utilised withinthe construction industry after the project‟s completion; and 3) determine whether its acquisition hadgenerated industrial value for the parties involved in these developments and/or the broader Australianconstruction sector. The approach employed was multi-sided: we extensively reviewed theconstruction authority‟s project records, so as to locate/relate actors and issues, and define thecontextual scope of their work; then we undertook an analysis, yet to be completed, of how much thetechnologies employed on the project have changed since. In parallel, we compiled a list of theoriginal companies and considered what happened to their businesses. Last, we are interested infollowing the post-Parliament House employment histories of selected workforce.1.2 ForegroundsWhile the underlying methodology of the investigation is integrative in nature, data collection tasksyield intermediate findings that can contribute to specific debates, thus warranting dissemination anddiscussion in their own right. This paper concentrates on one of these tasks, and precisely the analysisof the status of the companies that worked on FPH from its completion in 1988 until the current day.Although the interest in tracking companies‟ „fortunes‟ is largely instrumental in this case, the data ascollated still raise questions regarding the rubric of market behaviours encountered in the sample, andthe ability to suggest links with the specific project, the project‟s location, the policies behind theprocurement of the building, or with autonomous technologies. Indeed, in the case of ParliamentHouse, the idea that the construction industry can take advantage of extra-ordinary trainingopportunities to strengthen multiple cohorts of firms had encountered policy favour. Twenty yearsupon its completion, then, it may be important to check the empirical variance of firms‟ industrialresponses by geographic location, growth patterns, and type or scope of work, with a view to use suchdifferences to inform theoretical debate on the determinants of firms‟ sustenance or growth.2. Firms’ data collection and organisationIn spite of all the explicit ties that should regulate relations and transactions between parties in abuilding process, defining the overall composition of a project coalition is a difficult task: not everyagency relates to every other agency, and contributions are scattered across time. While supply chainsand sub-contractual relations define clusters that are partially hidden from project view ― and oftenconnected only through the leading entity, project organizational charts tend to be a reflection of thetime in which they were prepared.62

To ascertain which companies worked on Parliament House, the team cross-checked and integratedinformation from multiple sources and key documents: various project participants‟ or contract listscompiled by the architect or the construction authority, and a summary company list contained in adraft appendix to the book Parliament House Canberra: A Building for the Nation (Beck 1988),prepared in time for its opening. As a result, the names of approximately 400 parties were entered intoan ad-hoc produced database that formed the skeleton for a detailed census of the industrial samplethus collated (Figure 1). As data collection progressed, more companies were identified and added tothe list while others were taken out as duplications under a different name of companies alreadypresent.Figure 1: Typical census entry of individual companies on the databaseIn developing the census, the research team was interested in firms‟ historic (e.g. 1980s) and current(e.g. 2000s) activity status, ownership structure and location, size bracket (according to the AustralianBureau of Census categories – small, e.g. less than 20 employees, medium, e.g. 20-200 employees,large, e.g. 200+ employees), spread of operations, industry sector classification, and type ofinvolvement on Parliament House. Once a company was inserted in the database, company-specificinformation would be gleaned online from sources such as the Australian Securities and InvestmentCorporation (ASIC) and the Australian Business Registrar (ABR). For large companies registered onthe Australian Stock Exchange (ASX), published annual reports giving details of the companystructure, turnover, business locations of parent company and subsidiaries were also accessed. Smallercompanies were located through their company websites or Yellow Pages listings. At this point, theresearch team spent considerable amounts of time directly contacting the companies and theindividuals involved with them, either historically or at present. Survey forms were prepared anddistributed to all those willing to participate, and summaries of written correspondence and telephoneinterviews were recorded in the database, in the form of notes the team could go back to later on formore specific enquiries. Standard business category and statistical data definitions were used as muchas possible, so as to facilitate possible future comparisons with national surveys‟ figures, and with63

those produced within or for the construction industry. All the details of individual companies on thedatabase were tabulated on spreadsheets for ease of reference and eventually translated as numericalinformation into a series of tables from which graphic diagrams, charts and maps were produced(Table 2; Figures 3, 4, 5). It is these resulting data that now form one of the contextual layers of theresearch as well as the basis for the reflections to follow.64

Table 2a (top left): FPH-contracted companies distribution by headquarters location and size in the1980s and 2010. Table 2b (top right): Same distribution by functional roles.Figure 3 (bottom): Geographic market coverage of the companies involved with Parliament Houseorganised by size in the 1980s and 2010. (The number of companies is limited by the data available.)65

Figure 4a (left): State distribution of FPH-contracted companies across Australia by headquarterslocation and size. The first column indicates the situation in the 1980s, at the time of construction;the second column reflects the situation today (2010).Figure 4b (right): Same distribution and variation according to functional roles rather than size.66

Figure 5: State distribution of FPH-contracted companies across Australia by building elements inthe 1980s and 2010. (These data do not consider the contracts part of the artwork programme.)67

3. Reading variations in the industrial landscape ofParliament HouseThe industrial coalition assembled for the procurement of Parliament House was not atypical of alarge and complex building, with approximately 10% of the firms providing professional consultingservices, 57% construction services, and 33% building supplies (Table 2b, Figure 4b). Australianparticipation in the project was overwhelming, with 95% of the companies registered in the country.A large number of these came from the states of New South Wales (43%) and Canberra‟s ownAustralian Capital Territory (ACT) (27%), followed by the state of Victoria (22%) (Table 2a, Figure4a). (It is worth noting that Canberra is located within a territory, the Australian Capital Territory(ACT), established to contain the national government after Australia‟s federation in 1901. Thisterritory is in turn surrounded by the larger state of New South Wales (NSW), the capital of which,Sydney, is the most populous city in Australia. Given the location of the new Parliament House inCanberra it is not surprising to find that the majority of firms came from the ACT/NSW.)The geographic origin of building contractors follows an order similar to overall figures ― NewSouth Wales (44%), ACT (31%) and Victoria (17%), whereas Victoria‟s participation increases whenit comes to specialist consultants (30% from New South Wales, 39% from Victoria and 22% fromACT) and component suppliers (46% from New South Wales, 28% from Victoria and 11% fromACT). In terms of building elements, 32% of the companies were involved in services (whichcomprised 60% of all foreign companies, mostly at work on electronic non-building items), followedby structure (21%), finishes (13%), fitting (12%), and envelope (8%) (Figure 5).Of the over 350 firms surveyed, 20 years after the completion of the building more than 40% are nolonger trading, with building contractors experiencing the largest contraction (50%), followed bysuppliers (40%) and specialist consultants (26%) (Table 2b, Figure 4b). Construction trades-wise, thereduction in the number of operating firms has taken place across the board but in differentpercentages: structure (56%), envelope (36%), finishes (49%), services (48%) and external works(37%) (Figure 5).3.1 Small and medium firmsThe data become interesting when considered against company size-based performance because, atleast on the surface, they suggest that small and medium firms have experienced the greatest volatilityover the study period. At the time of the construction process, participating firms were fairly balancedbetween small, medium and large ones (26%, 38%, 36%). Twenty years on, the numbers of largecompanies have been reduced by less than 10% vis-à-vis a reduction of 60% in medium-sizecompanies and 55% in small-size companies. (Of course this does not mean that all large companieshave remained in business. At least a quarter of the current pool comes from smaller size clusters.Moreover, small and medium businesses bought up by larger companies are also included in thenumber.) Given that the amount of international firms was initially limited in size and scope, and thatit stayed that way in the 2000s, overall reductions in numbers and/or changes in the size of the sample68

(48%). (Unlike firm size, variations in functional role numbers reflect almost invariably companies‟exit from the market.)4. Making sense of numbers and possible comparisonsAs intimated in the previous section, the aggregate results of the Parliament House companies‟ censuscan only go thus far in explaining themselves. Their figures may evoke determinate scenarios andraise questions, particularly in light of the explicit ancillary objectives of the building developmentprogram, yet they are inevitably partial in providing the qualifications needed to draw assertiveconclusions out of them. For such conclusions to be possible, companies‟ detailed histories need to beadded or extracted from the database, and used to qualify individual trajectories as well as selectedgroups‟ behaviour. In fact, as stated at the beginning, the data presented in this paper are there mainlyto inform, contextualise and support our research rather than conclude it.Still, some of the elements of this broad brush-stroked scenario cannot be overlooked. The first is thehigh rate of company attrition for a project that, as stated in all official commentaries, was supposedto be „Australian‟ not only in light of its location and institutional mandate but also for its ability tofacilitate capacity building and strengthen the existing industrial fabric in the country (PHCA 1986).As Beck (1988:18) wrote right before its opening, "Australia will not build another Parliament House,but the architectural principles, construction techniques and building practices nurtured here can applyto nearly any major commercial or public building project. If this occurs, Australians will be betteroff". Indeed the resources necessary to make this happen were not spared, and a lot of attention wentinto firms‟ selection, procurement procedures, technical husbandry, and work monitoring. Yet, twentyyears later, 40% of the large group of companies ostensibly selected for the project in light of theirexpertise, track record and financial solvency are no longer in business, with higher peaks withinparticular groups (construction services contractors) or particular regions (NSW and ACT). Whenthese two components are put together, the disjunction between Parliament House as anunprecedented industrial opportunity and Canberra‟s ACT as the geographic location of suchopportunity become self-evident. In the absence of a territory or an economy large enough to sustainthe technical resources brought into being with and for the procurement of the building complex, thecommercial structures in which those resources were embedded could not remain viable within thelocal territory, at least as building contractors. Surrounding state NSW, however, did not do muchbetter, even though at the time its capital Sydney was one of Australia‟s leading economic basecontributors. Within the sample, the number of NSW-based companies was reduced as drastically as itwas for ACT, although perhaps for different reasons. Our initial data suggest that strategic marketconsolidation obtained through aggressive take-overs had a role to play, but the number of small andmedium size firms that simply disappeared also should not be forgotten. This means that, howeverone looks at the construction of Parliament House, its business legacy requires serious analysis.Incidentally, the difference between firm evolution patterns behind Parliament House and thoseidentified by a previous study for the coalition that procured the Sydney Opera House provides usefulmaterial for reflection. 3 Within the periods under analysis, the Sydney Opera House-related sample3 See the research group‟s other contribution to CIB 2010: Tombesi P, Fowler M, Nigra M, Teoh D, Saunders V(2009) “Once they were heroes: What happened to the companies that built the Sydney Opera House?”70

lost fewer companies (25%) than the Parliament House-related one (40%), even though the latterproject had been set up strategically to try and do the opposite. Given that the nature of the workrequired for each project varied significantly in terms of innovation content (Tombesi 2003), the issuebecomes whether a verifiable link can be established between individual buildings‟ approach totechnology and contracted firms‟ ability to withstand competition or build market demand as a resultof the work developed on such buildings. This, of course, is the ultimate objective of our research. Onthe other hand, whether or not the link exists or can be identified, construction operators will continueto be part of a turbulent industrial landscape, where firms‟ dissolution may be reduced orprogrammed, but will always be there as a physiological trait of the industry. Hence, the workpresented here also underlies the importance of delving one step further in the analysis of technicalknowledge, industrial evolution and markets‟ behaviour in construction. Firms are likely to changestatus, ownership and business location in their life, thus providing institutional frameworks fortechnical activities that are temporary by-and-large; yet much work intelligence remains embedded inthe human resources that contributed to such activities, which are bound to travel across the industrybecause of the volatility of its economic structure. As our final research tasks will hopefully makeclear, the study of people‟s trajectories is thus as relevant to construction and technological innovationas is the study of institutions.AcknowledgementsResearch activity in support of this paper was conducted at the Faculty of Architecture Building andPlanning of the University of Melbourne, under sponsorship from the 2007 Australian ResearchCouncil Discovery Project Program (Grant DP0770425).ReferencesBeck H (1988) Parliament House Canberra: A Building for the Nation, Collins Australia, Sydney.Beck H (1988) Parliament House Canberra: A Building for the Nation, (photocopy of unidentifieddraft version) Appendix I and II, pp 170–176.Berg P (2004) The Architects’ Design Intent for Parliament House Canberra: Central ReferenceDocument Canberra, Department of Parliamentary Services.Kouzmin A (1979) Building the New Parliament House: An Opera House Revisited?' in GeoffreyHawker (ed), Working Papers on Parliament, Canberra Series in Administrative Studies 5, CanberraCollege of Advanced Education, pp 115-171.Mitchell Giurgola & Thorp Architects, Parliament House Contract List, computer printoutphotocopy.Parliament House Construction Authority (1986) Australia’s New Parliament House, AustralianGovernment Publishing Service, Canberra.71

Parliament House Construction Authority (1980-1989) Site Newsletter.Tombesi P (2003) “Back to the future: the pragmatic classicism of Australia‟s Parliament House”,Architectural Research Quarterly, 7(2): 150-164.72

Learning from Collective Action: Lessons from CamaraColombiana de la Construccion record 1957- 2007Vargas, H.Universidad de los Andes(email: hvargas@uniandes.edu.co)Paez, H.Universidad de los Andes(email: hpaez@uniandes.edu.co)AbstractColombian Construction Industry Association (Camacol) basic goals, restrictions and achievements(1957-2007) are synthetically discussed in this work. Colombian building organization andeffectiveness would have significantly changed across five decades of sustained urbanization withindemographical, economical and political transitions. From archival and secondary sources, relevantdocumented processes of means development, diversity of builders, demand patterns, growth andfluctuations, urbanization processes, housing, institutional investment, technological change, firms,professions, labor, materials, components and processes, building by-laws, standardization, positionin national economy and private sector advance, are assessed to understand salient Colombianbuilding sector culture, responses, innovations, improvements and challenges. This article showssynthetically research results related to the Colombian building industry evolution during the 1957-2007 decades. It considers changes in groups of actors and processes (Powell, 1996) consideringfirms, trades, products of urbanization and housing processes and labour. Its purpose is to identifyand reference salient events and processes to support a characterization of Colombian buildingarticulating elements from its context and internal structure during the period. General elements of itstechnological evolution, industrial modernization and entrepreneurial change are analysed toexamine innovation and adaptation dynamics.Keywords: building industry, building actors, building processes, urbanization, Colombia73

1. Tasks for the trade: The case of CamacolColombian building registered important changes in its scale, organization and technology since late1940s (Vargas, 2000) (Vargas et al, 2007). Its recognition and organization as a productive sectorwas relatively late. Professional associations in civil engineering (1887) and architecture (1905 and1934) started to promote local resources in front of its foreign competitors. Responding to complexmacroeconomic, governmental, taxation and regulatory changes a trade for the building sectorappeared in 1957 to include industrial, commercial and building members. Colombian tradeassociation was behind countries like Argentina, Chile and Venezuela when Camacol was founded(Papi, 1994) (Collados, 2006). At its fifteenth anniversary a balance of activities was proposed, out ofannual proceedings. The trade has created consciousness about the importance of the building sector,stimulated a sense of solidarity, enhanced the value of public works for development processes, haddecisively intervened for new laws on public works contracting, discussed the new urban reformproposals, obtained regulations on condominium buildings, defended Colombian firms andengineering, demanded larger and new housing financial resources, supported programs for buildingproductivity improvements, promoted standardization and new materials (Ramírez, 1963). Still, itwas recognized that a lot was to be done to improve the efficiency of the sector, material production,labor training, statistics and indexes to all regions (Van Ettinger, 1964) (Luque, 1970).1.1 Diversity of buildersThroughout the 20st century and particularly after 1945 a change in types of building organization isclearly recorded. During the Colonial times, architects and engineers have been very rare, given thelimited importance attributed to public works. Builders were asked to submit costly bonds to supporttheir contracts within a frame of itinerant groups of master builders or alarifes. Equally weak inNueva Granada were guilds as a compared to their peers in Mexico, Lima or Quito (Ortiz, 2004)(Ortega, 1965). On other hand, in Colombia there were no trade schools for builders as the onesorganized by religious communities in places like Mexico and Peru as truly technical training centers(AGN, 1990). A total exception was fortification systems in the Caribbean where first classorganization, experience and knowledge were applied in successive improvements though withnegligible impact in building techniques in inner Colombia.However, under the Republic, various attempts to establish engineering schools (1814, 1847, 1867and 1889) were made to form military, civil and mining engineers to slowly attend demands onbuilding and infrastructure. In a first stage, Colombian engineers had a minimal role in railwaybuilding (since 1847). Since the 1880s, nationalism is visible through the creation of newly bornSociedad Colombiana de Ingenieros (1889) and Escuela de Minas (1889) fully devoted to promoteand defend local capacities in front of foreign contractors.Few cases of real estate promoters appeared during the 19th Century, within narrow urbanperimeters. By the turn of the century, new urbanization patterns were visible for working class74

subdivisions and suburbs, to confront demographic changes associated with initial industrializationand health concerns. The Public Nacional University controlled engineering and architectural trainingup to 1948, orienting its programmes towards a generalist approach for diverse kind of Works, beforethe appearance of engineering specialties in the 1950s. Alter the railway building boom of the 1920s,when dispersed railway networks were built in several regions, the 1929 crisis stopped the Works andannounced a new emphasis in road building. During the 1930s, the local basis for cement and steelmanufacturing were reinforced and public programs on tourism, education, public buildings, health,harbors, represented the state effort as promoter of national development, designed by public officeswhere a local technical elite received from foreign experts. By these times it was clear that alreadyexisted a large number of self-trained or professional land developers. It is significant during thisperiod the emergence of architects and engineering firms, usually generationally o academicallybased, as custom builders or contractors, gradually incorporating modern designs, materials,equipment and organizations. These first families of firms will act in the urban market practicallywithout foreign competition, reinforced with the knowledge of a generation of just arrived Europeanengineers and technicians. This coincidence will permit to update and advance in concretetechnology, material manufacturing, equipment management and prefabrication. We havedocumented the transformation of one-person firms or small groups or architectural and engineeringorganizations, dominating Colombian building for three decades since 1945. Infrastructure buildinghas a different way. Initially controlled by foreign groups like Ulen, Raymond, Snare, Pearson orCampenon Bernard, it will have a boom of small subcontractors under large plans of public workslaunched around 1950. By then, under the BIRF (Banco Internacional de Reconstrucción y Fomento)first development mission, it was mandated to have associations between international and local firmsto promote best practices transfer and training on costing, equipment, planning, of lastingconsequences in later decades.In any case, a current practice was to have firms either in infrastructure or in building with rare casesof crossed experiences. Building firms had special opportunities with the rise of public housingschemes since late 1940s when institutions and contractors became increasingly specialized.Substantial increase in urban perimeters in major cities resulted from the rural-urban migration oftentransforming with extended new streets to form a landscape of detached houses, afterwards changedinto small groups or buildings. After a time in which independent professionals were in charge ofindividual house design and building, counting on abundant loting, urban developers appeared asdominant by means of their power to plan, urbanize, build and sell infrastructure and housing inlarger series. Aside the informal self-built city, including squatters covering near one half on theentire urban area, the incubation and launching in 1972 of a national savings and loan system orientedto housing (UPAC or fixed value unit) meant a massive flow of fresh resources on house building anddeeply affected building sector productive basis. One consequence was the transformation of formerprofessional firms into developers to access credit funding. Up to 1994 the system had a variablesuccess when it was revised to embody overall financial sector reforms in a new firm environment oflarger, capitalized, real estate based organizations, oriented towards risk management, alliances andscale economies.New urban land by the end of 19th century was required since colonial and republican cities weredensely packed. Tramways and railways promoted new peripheral developments for a wide set of75

social classes, through the work of developers trained in rural, trade and industrial activities. Duringthe 1930s and 1940s new permanent land developers appeared, increasingly building their ownprojects. New building firms (Vargas, 2007) were established to replace gradually the precedentprofessional model, in some cases learning from foreign organizations in large works as in hospitals,hotels, airports and new industrial construction. Due to the lack of material and technical means fortheir works, it was salient in various cases their activities to promote imports or manufacture anddistribute techniques, equipment, expertise. Bricks, prefabs, steel products, cranes, are examples ofthese ventures during the fertile 1950s.As new paradigm, management was already mentioned in the 1970s (Garcia et al, 1976) and somedevelopers introduced themselves as able to cope with markets, prospects, investments, returns,stating formal promotional stages. To have efficient and organized work they listed turnkey, fixedprice, project management, among various schemes. There is a transition from persons to groups,from firms that design and build into specialized contractors and consultants. From landdevelopment to large projects, from housing to banking, from detached housing to shopping malls,from roads to urbanizations, from local to regional and international activity, some firms show areaction to opportunities and new entrepreneurial visions. During the 1990s crisis, alliances proved anew set of firms interested in revised models and strategies (Manrique and Mendez, 2006). In its firststeps, by the mid 1950s, consulting was one of many situations inside an architectural andengineering firm. For larger and more complex cases, American firms supported design andspecifications, as a basis for future specialized engineering departments that will allow potentdevelopments to solve geotechnical, structural, mechanical, building and managerial requirements.At the beginning, Europeans directed specialties, increasingly replaced by nationals coming backwith new technical training from North America.During the 1960s, feasibility studies claimed to offer scientific and specialized analyses on market,land use and transit for large developments. By this time combinations of loans, barters and saleswere attempted to finance investments. Since 1972, not only housing but industrial and commercialbuildings were supported by the new savings and loan building finance system, Building schedulingservices appeared by the mid 1960s, originally through network manual computing (Velasquez,1967). Project management and quality schemes were introduced in mining, oil and industrial casesduring the 1980s and, finally, were adopted in urban building counting increasingly on managementinstead of previous emphasis on controlling and inspection.Real estate management started slowly. For structure building some firms kept up to the 1970s thedouble role of designers and constructors. By law, public works had to have designers in charge ofinspections but unable to build their own designs. Public works regulations took decades to updateconsidering joint ventures. Finally, after constitutional reforms of 1991, under globalization models,it was more frequent to have European, Asiatic, American and Latin-American firms competing enmass transit, hydro, ports, tunnelling, water supply, energy, concrete and steel technology, industrialbuildings (Bateman, 1969) allowing technology transfer to be valued in firms and institutions.76

1.2 Demand patterns and cyclesDuring Colonial times, Church buildings were significant for its own basis in cult, education andsocial services. For a long time after Independence in 1819, central and local State had no resourcesor organization to envision significant public works. In this sense, it was crucial the founding of theMinistry of Public Works in 1905, charged to systematize plans for infrastructures and buildings inthe entire nation, followed by numerous new specialized institutions for communications, buildings,water supply and housing during the next decades. The role of the State (Nino, 1991) contributed, upto the privatization era, to set standards and processes as the one of the educational buildingsacquired. Fast population and urbanization growth after 1945 accumulated a large housing shortage.Though first national housing financial institutions were created since the 1930s, it was only from1972 on that urban building could sustainably grow. By then, this sudden boom revealed seriousbottlenecks in material and labor supply. In major urban areas, new types like supermarkets andshopping centres, and verticalization due to land prices, were an opportunity for private developers.Generally ahead of local urban planning, developers shaped practically the larger urban areas. Ruralconstruction, still en the public agenda during the 1940s, was abandoned and public housing meanturban dwelling projects. Urban renewal only appeared by the 1960s having a very limiteddevelopment for decades under restrictions for public-private partnerships within undulatingregulatory frames. Interurban mobility has shown important proportions, leaving sectors and stocks tonew groups of rural migration, sustainably developing suburbia.Total building area examined since the 1940s show variations associated with macroeconomic cyclesand, at the same time, specific political facts (Giraldo and Hernandez, 1982). According to UNHabitat calculations, from 1950 to 2005 Colombia has had ten building cycles with very differenttime durations and oscillation magnitude. The most erratic movements were among 1974 and 1986,corresponding to macroeconomic changes, monetary policies and successive interventions of thesavings and loans system. Instead of long and stable cycles like the one of 14 years initiated in 1962,from 1986 on it results a roller coaster behaviour, with deeper an taller peaks, as the depression in1991, the highest boom in 1994 and the continued fall down to 2000. Under counter recessionpolicies, there is a growing tendency from that date on. Construction participation in GNP (Torres,2009) is under countries like Venezuela, Ecuador, Chile, Peru, Mexico and Argentina. In 1997 itreached 5.7% but, under the crisis it has went into only 3.7%. These indexes show sector sensibilityin front of interest rates and public policies that have slowly recognized long term goals on builtenvironment.1.3 Housing: laboratory for institutions, models and techniquesCINVA (Centro Interamericano de Vivienda y Planeamiento), established by OEA (Organizacion deEstados Americanos) since 19511, began to transmit prototypes and ideas like self-building, soilcement,building scheduling, labor training, community research, regional building. ICT (Instituto deCredito Territorial) (Vargas, 2006) accomplished a first cycle of large projects valuable asprototypes of the alliance of the modern State, interested in advancing its management tools,77

technicians and industry. A landmark in 1971 was the minimal standards study that consideredmodels for progressive urbanism and services corresponding to popular involvement in urbandevelopment. From 1949, types and scales of public housing projects (Saldarriaga, 1996)demonstrated significant cases in major cities focused initially on single family units. After projectsfinanced by Alianza para el Progreso during the early 1960s, multifamily types were increasing anddemanded some industrialization. Major series like Quiroga (1951), CUAN (1952), Kennedy (1961),Niza 1(1964), Metaima (1969), Roma (1976), Bucarica (1979), Niza IX (1982), Tunal (1983), Bachue(1986) and Carlos Lleras (1994) were outstanding in terms of technological propositions,management models and public facilities. It has been studied (Alfonso, 2007) since the 1960s a cleartransition in housing development types from dominant isolated dwellings in urban lots to rowhouses, house groupings, enclosed compounds, buildings and building ensembles.By 1971 Colombian housing industry was considered as a diverse, disperse and unarticulatedcomplex of institutions, activities, needs, objectives, criteria, standards and conditions, lackingadequate financial and human resources and a systemic organization to rationalize its action. Still inits first transitional phases from craftmanshift to industry, there was a noticeable lack of anyproduction planning, programming and control in the manufacture of building materials andconstruction, with traditional building procedures, encompassing a large number of small firmshaving low operational capacity working without adequate systems to collect, evaluate and uselearned lessons.Public housing management models (Goetz, 1971) combined at that time institutional directprograms, self-building initiatives, loans to lot owners, associative programs of third parties P3,workers housing plans, squatter improvement schemes. Contrasting with systematic failures in firmsin charge of social housing, P3 models were an opportunity for organization and growth so that smalland medium contractors could grow to serve in larger projects. By mid 1970s, the new policy of openbids admitted industrialized building proposals so as to consolidate strong groups by mid 1980s (DelValle, 1984).After the welfare state, the dismantlement of public housing institutions in the 1990s meant a void ofsignificant scale in planning and building of residential projects and a loss of experience in publicand private realms. With the new subsidy to housing demand, land development and social housingproduction were very slow and insufficient. Apart from the sectors strong crisis of this decade, newproposals from private actors has been limited by land management and swings in public policies. Atthe beginning of the new century, low cost housing building systems had been multiplied, partly as aresult of globalization, strong competition and new seismic requirements (Echeverry and Sarria,2000).1.4 Industrialization, urbanization and innovationsWhereas by 1950 it was common to import structures, windows, glass, telephone and powerequipments, local materials will show a wide portfolio ten years ahead. Though Bogota was notspecially noted for having early high buildings, constructions were continuously increasing its height78

eaching 47 stories in 1978, confronting soft soils and more demanding structures. The savings andloan system had an unstable regulatory frame, condemned to rising interest rates and competition forits resources. Though in the 1950s and 1960s there were some careers and traditions within somefirms and building mecenae, after 1972 it was clear a new landscape of office space commercialpromotion, counting on mobile conditions on land market, regulations, financing and demand(Giraldo and Hernandez, 1982). From 1950 to 1970 supermarkets and neighbourhood shoppingcentres started in new barrios built out of a new grid of streets.This type of urbanization surpassed shy previous urban enlargements with shopping nuclei, church,cinemas, as civic and community units, well expressed in Wiener and Sert Plan Regulador of 1953.New urban models in the 1970s proposed to direct fast urbanization into multicenters within the city.American shopping mall models came to Medellin since 1972 associating investors, designers andbusinesses, with lasting consequences in real estate prices and new linear retail commercesettlements. As urban renewal, some projects proposed rehabilitation of central áreas, mixing usesand space types. Some examples of management and innovation as Ciudad Salitre, demonstrated itsconvenience of central situation, physical standards, variety of uses, densities and formulations onoccupation, height and public space. Since the mid 1990s, larger commercial spaces werecharacterized by short schedules integrating powerful developers in increasing formats within aredefined urban economic space.1.5 Technological changeTechnological change in Colombian building during the 20th century (Vargas, 2000), has beenassociated to some salient periods. Up to 1920, industrialization was negligible with some starts insteel, cement, brick, pipe, glass, asphalts and minimal worksite mechanization. Panama’scompensation funds fuelled several works that required foreign firms in charge of buildings andinfrastructure. After 1930s crisis, during the new time of custom protection, new local industriesemerged as in asbestos and wood processing. However, it was Second World War what requirednational manufacturing to replace imported items in paintings, locks, coatings, chemicals, electricity,building equipment. By then the first organized efforts to establish concrete prefabrication are madeto support public plans in low cost housing. With national support as in steel, and a wide web offactories as in cement, 1950s growth ensured an increasing inner market for local manufactures so asto have full self provision by 1970.It is known that before this technical independence, diverse commercial firms represented a verywide set of international trade marks and industries, mostly Americans, in aluminium, cables, steels,copper, elevators, pumps, plumbing equipment. Slowly, the firms offered product packages, creditsystems, technical services, including permanent showrooms. Its offerings included a mix ofwallpapers, house equipments, carpets, synthetic flooring, waterproofing products, hardware,ceramics and shop fronts. Buildings had been modernized with these new resources. By 1970,though, Colombia produced elevators, electrical materials, plastics, thermal insulations and hasstandardized some product families. Under successive trade openings during the 1970s, 1980s and1990s, local industry had to accept finally competence from globalization, stated by constitutional79

eforms in 1991, incorporating increasing elements from techniques as drywall construction and steelstructural systems.Local invention and ingenuity was mostly concentrated during the 1950s and 1960s on improvementpatents for light building systems for walling, roofs and slabs, when a flow of foreign engineers andbuilders offered relevant European experiences. As Colombian contributions in building techniques,there has been recognized original work in shells, foundations and high rise buildings since 1950 to1975 in new building types, soft soils and faster building processes (Vargas, 2006). Apart from itsadaptation of Californian seismic standards, and the extended use of reinforced masonry, as a vintageof the 1980s, there are some significant local adaptations like soil cement blocks, asbestos roofingsheets and bamboo building structures that have been incubated since the 1940s.1.6 Building regulationsWhereas since 1823 there were regulations on road building privileges, and in 1845 a first nationalroad plan was stated, only up to 1905 the Ministry of Public Works was established. A first nationalcode on urbanism was promulgated in 1918 and a system for public works financing based onbeneficiaries contributions, valorizacion, was passed in 1921. National mortgage banking wasinitiated in 1931 to cope with 1929s crisis effects. Accounting controls for public works contractingwere enforced since 1935. Structural calculations were required for works licensing in 1937. Nextyear steel industry was adopted as national priority. Social security was adopted in 1946 and a law forbuilding condominiums in 1948. Under the influence of a set of urban consultants as Brunner, LeCorbusier, Wiener and Sert, pilot plans were stated for major cities in 1951, followed by a nationalsanitary code regulating housing standards. Inspired by the TVA (Tennessee Valley Authority)precedent, in 1954 regional authorities are set. Public industrial training for the workforce wasorganized in 1957. Historical buildings and patrimonies were protected under a law from 1959. Ruralland reform was instituted in 1961 and authorities on statistics, technical standards were establishedin 1962. City associations and urban development bodies were defined in 1967. In the crucial 1972, anational development plan based on building as main economic sector was enacted. Though after theAvianca tower fire in 1973 proposals were made to have a local building code, it was only enforcedin 1995. Cities were obliged to have their development plans since 1978. Turnkey contracts weredefined in building laws in 1983. After the Popayan earthquake in 1983, the first seismic code wasadopted in 1984, supporting a seismic national network and continual regulation updating as in 1998and 2009. Since 1984 it was significant drift control as a dominant element in structural stiffeningwhere light partitions emerged to be used for internal subdivisions. In 1991 low cost housing turnedsubsidized, in 1993 environmental permits were required for new large projects, and in 1994 a newnational electric code was adopted. Disabilities standards were adopted in 1996, water conservationin 1997 and energy savings in 2005. A very important new institution, curaduria urbana, wasestablished in 1995 to study and approve building permit applications.80

1.7 Human resources and productivityColombian development and urbanization showed since the 1940s a sustained rural immigrationlooking for employment, with a slow acculturation where building trades offered opportunities fortemporary adaptation. Canadian professor Currie proposed Operacion Colombia at the early 1960s asa part of an economic and social model to channel these flows to offer work, attend housing demandsand stimulate local material productions. A study on full employment (OIT, 1968) stated that buildingsector had a low degree of professional qualification in its manpower, low density of invested capitalas related to occupied labor, scarce changes in work productivity, rare improvements in techniques orproductive processes, high probability to have migrant peasants entering to work into the sector. Thiswas associated to lack of systematization and rationalization of the building activity, proliferation ofindependent entities, unstable and unpredictable market. Building productivity appeared as one of thelowest in the overall economy, only surpassed by craftsmanship and agriculture.When the Colegio de Ingenieros y Arquitectos, a Camacol predecessor, was founded in 1948, aninitial analysis of the construction workers feeble conditions was conducted promoting contacts withBrazilian SENAI. Courses started (Russo, 1959) with ILO support and the new Servicio Nacional deAprendizaje SENA characterizing trades (SENA, 1966). By 1973 classification of workers categories,higher salaries, safety standards, health campaigns, apprenticeship training was claimed. Institutionalchanges in the public agency focused on self-help building during the 1980s (Mora, 2008). Its lowimpact on quality and quantity of human resource training was questioned as compared with resultsin other production sectors. Construction employment as part of economically active population hasascended from 2.7% in 1938 up to 6.2% in 1974 when there was an estimated 437.000 man-yearemployments. Still, in 1995 it was observed that a large 30% of total construction workers wereilliterate. This secular picture of difficulties about education, training and working environment forthe construction trade (Baron, 2005) proves that Colombian building industry has to increasesubstantially his social responsibility programs to reach benefits and productivity at a sustainablehorizon.2. ConclusionsAfter five decades, different situations, moments, paradigms and generations are added. In 1957,Colombia required civil support to State modernization and industrial organization for a strongresponse to its lacks and growth. Camacol was early involved on national urban development andhousing models finding that its rules and finance were critical conditions to reach appropriate qualityand scale. Through an extended dialogue with government structures this trade organization proposedimproved tools for information and consensus within technical activities implying a stronger publicprivate partnership. As a regional, urban and industrial observatory, Camacol witnessed effectiveeconomic development as confronted to public policies. In these reviews it contributed permanentlyto build up clearer focus on basic issues like standardization, real state law, labor training, buildingindustrialization and public contracting.81

After 1972 and a long incubation inside the industry association, when a savings and loans systemwas implemented, for a long time emphasis was placed upon its operation and direction. This newinstrument offered its own and dynamic financial resource though plagued of resulting oscillationsand voids. During the sixties it became clear that a stronger information apparatus was required tobase Camacol public action within political ups and downs. Planning needs at sectorial, regional andlocal levels appeared as resource bottlenecks and social, economic and institutional crisis confirmedgrowth unevenness.The nineties represented glory and hell successively when going inmediatly from the highest buildingactivity scores to the worst times of sector dismantling. It is clear now that, in spite of variousannouncing signs, both trade and country had inappropriate and slow reactions resulting into hugeentrepreneurial, financial, social, human and technical losses.A leading and protagonic State up to the late eighties was followed by institutional and planningtransformations with private housing production, state reforms, foreign trade opening andderegulation. Colombian building activity is again in the process of finding urban development andhousing public policies. A renewed trade emerged after its fall of late nineties counting on ideasabout entrepreneurial duties in an environment of competition, globalization and social responsibility.Demographic, political, macroeconomic and cultural transformations in Colombia have beenreflected in different mentalities and responses of Colombian building industry actors within diverseadequation and affectivity in front of its operational and institutional framework. The experience ofsuccessive proposals for this sector transformation, seen from its actors, processes and products, setan important knowledge base to examine its learning and opportunities for improvement.As reference to other Latin American cases, Colombian building industry trade history can help toexplain the opportunities and limitations of this activity to follow national growth patterns, to developits organization and resources, to find political voice and to identify critical phases of its maturityprocess. A trade association like Camacol represented an effort for collective action, surpassingisolated professional or firm manifestoes and supporting steady programs to comply with its diversityof builders, demand shifts, housing experiences, industrialization, regulations and resources.ReferencesAGN (1990) “Fondo Fábrica de Iglesias” Archivo General de la Nación, Colombia.Alfonso, Oscar (2007) “Urbanizacion y desarrollo inmobiliario residencial en Colombia 1950-2005:Evidencia de aportes y transformaciones institucionales e ideologicas” en “Cincuenta años en laconstruccion de Colombia, Camacol 1957-2000” 83-110, 2007, Camara Colombiana de laConstruccion, Colombia.Baron L (2005) “Propuesta de mejoramiento para la situacion del trabajador de la construccion enColombia”, Tesis de Magister en Ingeniería Civil, Universidad de los Andes, Colombia.82

Bateman A (1969) Desarrollo de las obras publicas en Colombia, 1969, ACIC, Banco deConstruccion y Desarrollo, Seguros Colombia.Collados A (2006) “55 años de la Camara Chilena de la Construccion Camara Chilena de laConstruccion”, 59 2006, Chile.Del Valle C (1984) “Nuevas tecnologias en la actividad edificadora colombiana”, Tesis Magister enEconomia, Universidad de los Andes, Colombia.Echeverry D, Sarria A (2000) Vivienda de interes social: inventario de sistemas constructivos,Universidad de los Andes, Colombia.Garcia, J. Manrique, F., Nieto, F.(1976) Curso de Administración de Construcción, Materiales delcurso . Universidad de los Andes, Departamento de Ingeniería Civil, Colombia.Giraldo F, Hernandez A (1982) “El ciclo economico de la edificacion urbana en Colombia”,Vicepresidencia Tecnica. Presidencia Nacional Camacol, Colombia.Goetz K (1971) Programa Integral de Urbanizacion y de prefabricacion de vivienda, ProgramaIntegral de Urbanización y de prefabricación de vivienda, 1971, Peru, Alemania y Colombia.Luque S (1970), “Vivienda industrializada”, Industrializacion de la vivienda, 11-18 1970, CentroColombiano de la Construccion, Colombia.Manrique de Llinas, H, Mendez, L. S. (2006) “Entrevistas con empresarios de la construcción”, inDiálogos Gerenciales 5. Universidad Externado de Colombia, ColombiaMora S (2008) “Análisis socio-económico sobre la capacitación tecnica del SENA en Colombia, conenfoque en la ciudad de Bogotá” Proyecto de grado Ingeniero Civil, Universidad de los Andes,Colombia.Nino C (1991) “Arquitectura y Estado: Contexto y significado de las construcciones del Ministerio deObras Públicas 1905-1960”, Universidad Nacional, Colombia.OIT (1968) “Hacia el pleno empleo”, Informe de la Organizacion Internacional del Trabajo, BancoPopular, Divulgación Economica y Social, Colombia.Ortega C (1965) Diccionario de artistas en Colombia: Pintores, escultores, grabadores, arquitectoscoloniales, ingenieros militares (siglos XVI-XVIII), ceramistas, orfebres, plateros, caricaturitas ydibujantes, 44 1965, Litografia Arco, ColombiaOrtiz L (2004) “Promotores, proyectistas, constructores y supervisores”, La historia del arquitectomexicano siglos XVI – XX, 29 2004, Grupo Editorial Proyección de Mexico.83

Papi E (1994) “Historia de la construcción en Venezuela: Edición conmemorativa del cincuentenariode la fundacion de la Camara Venezolana de la Construccion”, 67 1994, Editorial Papi, Venezuela.Powell C (1996) “The British Building Industry Since 1800: An economic history”, SPON Press, 1,1996.Ramírez M (1963) “La industria del cemento en Colombia”, 1963, Camacol, Colombia.Russo I (1959) “La Productividad en la Industria de la Construcción”, Informe Periodico No. 4.Convenio OIT SENA CINVA, Colombia.Saldarriaga A (1996) “Estado, ciudad y vivienda: urbanismo y arquitectura de la vivienda estatal enColombia, 1918-1980”, Programas del ICT, Citce Inurbe, 76 1996, Colombia.SENA (1966) Estudio de la ocupacion del constructor (maestro de obra), Division Industrial,Colombia.Torres J (2009) “El contexto económico, social y tecnologico de la produccion de vivienda social enAmerica Latina”, Proceedings of ELAGEC III, 2009, Universidad de los Andes, Colombia.Van Ettinger J (1964) “Hacia un mundo habitable”, Instituto de la Construccion, 64 1964,Universidad del Valle, Colombia.Vargas H (2000) “Cambio tecnico en la edificacion colombiana en el siglo XX, en Cien años dearquitectura en Colombia”, XVII Bienal de Arquitectura 2000, 365 2000, SCA, Colombia.Vargas H (2007) “Obras destacadas de arquitectura, ingenieria y construccion en Colombia, enCincuenta años en la construccion de Colombia, Camacol 1957-200” 274-281 2007, CamaraColombiana de la Construccion, Colombia.Vargas H (2006) “De la tapia pisada a la piedra líquida: el reto tecnologico de la construccion enconcreto en Colombia, 11-43 2006, Asocreto, Colombia.Velasquez J (1967) Sistemas Manuales de Planeación y Control de la Construccion, Facultad deIngenieria - Universidad de los Andes, Colombia.84

Small and Medium Size Contractors in South Africa: 15Years of LearningThwala, W. D.University of Johannesburg, Department of Construction Management and Quantity SurveyingJohannesburg, South Africa(email: didibhukut@uj.ac.za)Phaladi, M. J.University of Johannesburg, Department of Construction Management and Quantity SurveyingJohannesburg, South AfricaAbstractPurpose: The main purpose of this study is to examine the lessons learned through the management ofSmall and Medium Size Contractors over the past 15 years focusing on the North West Province as a casestudy. Methodology: A comprehensive literature study was conducted and it was supplemented byprimary data gathering. A questionnaire was sent to over 100 contractors in the North West Province.Problem investigated: Since 1995 various contractor development programmes have been initiated inSouth Africa with little success. Various challenges and problems have been documented by variousresearchers. This study will document the lessons learned as to increase the success rate of Small andMedium Size contractors in South Africa. Findings: Small businesses have been advocated as animportant means of generating employment in which the North West Province is not an exception. Themain findings of the study highlighted that there are different critical success factors that makes small andmedium sized contractors to be success. They range from experience in the construction sector, technicaland management skills, mentoring, access to finance. The study also found that although there aredifferent initiatives that are in place to assist small and medium sized contractors but the problems andchallenges are still there. Research limitations: The scope of this study only focused on small andmedium size contractors in North West Province. Conclusion: The aim of the study was to document thelessons learned in managing Small and Medium Size Contractors in South Africa. These will ensure thatthe programmes are relevant and effective.Keywords: Contractors, Small and Medium Size, Emerging Contractor Development Programme,Enterprises.85

1. IntroductionThe South African government has committed to ensuring that black-owned companies have access to theconstruction sector. Under its black economic empowerment (BEE) programme, the South Africangovernment has set targets for the percentage of each industry to be controlled by black-ownedbusinesses. Large, predominately white-owned corporations have sold assets to achieve this objective,with the first sale occurring in late 2000. From 1995 the democratic government through its variousdepartments has initiated some contractors’ development programmes by which it awards certain levels ofits construction projects to the historically disadvantaged black contractors in order to enable developcompetent skills, build viable construction companies, create jobs and redistribute wealth (Department ofPublic Works (DPW), 1996).A construction company’s decision to expand into international markets must be based on a goodunderstanding of the opportunities and threats associated with international business, as well as thedevelopment of company strengths relative to international activities (Luger, 1997). The study was doneby surveying the executives in charge of international construction of large United States basedcontractors. The findings indicate that track record, specialist expertise, project management capabilityare the most important company strengths; loss of key personnel, shortage of financial resources, andinflation and currency fluctuations are the most important threats relative to international markets; andincreased long term profitability, the ability to maintain shareholders’ returns, and the globalization andopenness of the markets are the most important opportunities available in international works (Luger,1997). The vast majority of construction firms are small enterprises that rely on outsourcing personnel asrequired. This has severely affected skills training and the retention of expertise in the industry asconstruction workers become highly mobile, walking in and out of the industry, depending onperformance in other sectors of the economy. The impact can be seen in the rigid adherence tomanagement techniques and construction practices handed down from colonial times which, as a result ofinadequate skills and capacity. Delays with interim and final payments, as well as onerous contractconditions faced by construction firms, can also impose huge constraints on the industry. Manyconstruction firms have suffered financial ruin and bankruptcy because of delays in payment, which arecommon with government contracts (Luger, 1997).2. Research methodologyThe sample consisted of purposively selected 100 small and medium sized contractors from the databaseof National Department of Public Works (NDPW), Mmabatho Regional Office: Emerging ContractorsDevelopment Programme; Local Municipalities: Contractors Development Programmes (CIP), andConstruction Industry Development Board (CIDB) contractors register/database. The main instrumentused in collecting data was questionnaire which was self-administered by the owners/managers of thesecompanies. The number of questionnaire was distributed to companies that are categorized as SMEsbased in North West Province. Also guided interviews were conducted on different contractor’s86

compulsory site inspections/briefings around the province with the owners/managers of the companies.The focus of the interview was to probe further on the nature of such innovation and source. Theresponses from the interview were used to supplement the data supplied in the questionnaire. A secondarysource was used for data collection through articles, journals, construction magazines, books andperiodicals to obtain historical data and other relevant information. Interviews were conducted ondifferent contractor’s compulsory site inspections/briefings around the province with theowners/managers of the companies to collect primary data on contractors.3. Literature Review(Dlungwana and Rwelamila, 2003) states that contractors can be distinguished from each other byvariables such as the size of annual turnover, capacity and capability. The challenges facing small andmedium-sized contractors can be distinguished between those that affect small-scale contractors and thosethat affect medium-sized contractors. Some key features of small-scale contractors are that they arelargely unregistered, operate in the informal sector of the economy and have very little formal businesssystems. The small-scale sector comprises the largest percentage of total contractors, although theyemploy very few permanent staff, usually less than ten employees. The conditions in developing countriespresent additional challenges, which include, amongst others, the lack of resources for trainingcontractors, such as funds, poor construction procurement systems and lack of management capacity andresources to equip managers to operate their business enterprises effectively and efficiently.4. Challenges faced by emerging contractors in South AfricaThe challenges faced by small and medium contractors can be distinguished between those that affectsmall-scale contractors and those that affect medium-sized contractors. Small and medium contractors arefacing increased competition due to the long-term real decline in demand, and many contractors haveresponded by shedding labour. The larger contractors have also responded by moving into theinternational market. Small local contractors, in particular, are furthermore subject to volatilities due tothe geographic distribution of construction and the peak workloads that characterize construction projects,which has further reduced their ability to build capacity. Emerging contractors are subject to the samemarket forces described above for small contractors. However, in addition, while emerging contractordevelopment policies were intended for black economic empowerment, small government contracts havein fact been used as a job creation opportunities. This has resulted in an overcrowding of this market, andincreased financial failures of emerging contractors.Lack of effective management during their early stages is a major cause of business failure for small andmedium sized contractors. Owners tend to manage their businesses themselves as a measure of reducingoperational costs. Poor record keeping is also a cause for startup business failure. In most cases, this is notonly due to the low priority attached by new and fresh entrepreneurs, but also a lack of the basic businessmanagement skills. Most business people, therefore, end up losing track of their daily transactions and87

cannot account for their expenses and their profits at the end of the month. During the early stages ofsome business start ups, owners were unable to separate their business and family/domestic situations.Business funds were put to personal use and thus used in settling domestic issues. This has a negativeimpact on profitability and sustainability. Some owners/managers employ family members simplybecause of kinship relations. In some cases, these have turned out to be undisciplined and ineffectual, afactor that has led to eventual and sometimes rapid failure of businesses. This relative lack of successfacing emerging contractors in South Africa was discussed by (Rwelamila, 2002; Miles, 1980; Croswelland McCutchen, 2001; Mphahlele, 2001 and Ofori, 1991); International Labour Organization –ILO-(1987); as follows: Inadequate finance and inability to get credit from suppliers; Inability to employcompetent workers; Poor pricing, tendering, and contract documentation skills; Poor mentoring; andfronting for established contractors; Lack of entrepreneurial skills; Lack of proper training;Lack of resources for either large or complex construction work; Lack of technical, financial, contractual,and managerial skills; and late payment for work done.The Department of Public Works (DPW) has since 1995 has been actively involved in conceptualizingand implementing programmes to promote emerging contractors in the built environment. Through theseprogrammes, the DPW has increased participation of previously disadvantaged individuals in themainstream economy. Moreover, it increased economic activity in an economically depressedenvironment. Previous contractor development programmes have focused on the under R500 000 range,which has been found not to be a sustainable market given the number of new entrants to the market.This resulted in few of the contractors being sustainable and the cost of contractor developmentconsequently being extremely high compared to the sustainable result.The challenges faced by the emerging contractors include: the co-ordination and management of the manyfacets of the different programme; maintaining focus on sustainability against pressures to roll-out toorapidly; reaching target market with information about the opportunity; sourcing mentors with therequisite skills and experience; the large numbers of contractors targeted requires large numbers oftrainers and mentors which are not readily available, and are costly; the available resources to effectivelyand efficiently monitor, evaluate and facilitate programmes are limited; An integrated developmentapproach requires considerable support from senior management of public sector clients and considerableinputs from officials; programmes lack sustainability; while public sector clients have done a lot forcontractor development, particularly in the area of policy, there are still many issues that must beaddressed at operational level, such as late payment cycles; procurement policies should encourage longercontract periods and move away from frequent tendering which is both expensive and disruptive; morequalifications need to be developed that are targeted at the specific needs of small and emergingcontractors; there is a lack of access to affordable finance; emerging contractors lack demonstrable creditand track records. The following are the major constraints faced by emerging contractors’ developmentand growth:88

5. Skills related barriers to construction emerging contractors’development and growthSouth Africa is characterized by a systematic under-investment in human capital. This has resulted in alabour force with a skewed distribution of craft skills, career opportunities and work-place experience.While the promulgation of the Skills Development Act of 1997 is commendable, micro enterprisesalready express concern about the administration costs of recovering levies in the form of grants fortraining undertaken, the costs of designing a workplace training programme as an alternative to usingexternal training institutions and the relatively high charges by private training institutions after theclosure of the former industrial training boards which had been subsidized through levies from industry(Kesper, 2000).6. Financial barriers to construction emerging contractors’development and growthEfforts to promote SMME access to finance might have more impact on development and growth butaccess is limited and cost of capital is high. While government has made some efforts to increaseaccessibility to finances, the targeted programmes have had limited success because awareness and usageof existing promotional programmes is very low. In addition to insufficient access, high interest rates alsopose a constraint to micro enterprise growth. Moreover, (Gounden, 2000) reports that there are coredifficulties seen in terms of discrimination by financial institutions against micro enterprises with littlecollateral, difficulties in accessing information and lack of market exposure. The inadequacy of externalfinance at the critical growth/transformation stages of micro enterprises deters the enterprises with growthpotential from expanding (Nissanke, 2001).7. Legal barriers to construction emerging contractors’development and growthWith regard to legal barriers, a commonly perceived constraint of micro enterprises is the labour lawswhich are said to raise the cost of employment artificially prolong retrenchments or corrective action anddo not allow for adequate flexibility especially in wage settings and the arrangement of working time(Bhorat et al., 2002). As a result enterprises feel a profit squeeze and impact on the willingness to createjobs.8. Critical success factors for small and medium contractors(Young and Hall, 1991; Abidali and Haris, 1995) suggest that contractor’s project and financialmanagement ability is a critical success factor. (Kotler, 2002; Cromie, 1991) state that the ability of acontractor is to market himself among the industry role players is a critical success factor. (Yussof, 1995)89

state that experience and management expertise of the owner is critical success factor. (Rotter, 1966;Barkham, 1994; and Jaafer et al, 2004) state that entrepreneurial characteristics in forms of creativity andneed for achievement are critical success factor. (Yisa et al., 1996; Day, 1997; Kale, 1999; Winter andPreece, 2000) state that the ability of a contractor to maintain good relationship with clients, suppliers,and other role players is a critical success factor. (Upson, 1987) insists on the ability for financialgathering and management as critical success factor for small, medium and large contractors.(Jaafer and Abdul- Aziz, 2005) surveyed 172 SME’s contractors in Malaysia and concluded from whatthey call Resource-Based-View that contractor success lies in project and financial managementcapability, marketing and supply chain relationship; however, they state that educational background andowner-manager characteristics are not necessarily success factors because competent skill can beemployed to run the firm. (Miller, 1962) from his 35 year construction experience examines the views ofcontractors who emphasized that their survival in this competitive industry depends on the understandingof requirements, progressive in estimating, scheduling, purchasing, organizing, controlling projectactivities, knowing what has been done and how, and being flexible enough to adjust to changingsituations, are all important success factors. (Holroyd, 2003) says that success depends on competentskills, adequate resources, proper timing of activity planning and performance, teamwork, effectivecommunication, fair dealing with people, honesty and integrity are essential.9. Findings from the North West studyThe graph below shows that the small and medium size industry in South Africa is still male dominatedwith 78% male and 22% female owned. The age of the people interviewed ranges from 20 to 59 yearsold. 98.3% of the people interviewed were Black and 1.7% percent Coloured people. The figure clearlyshows that the small and medium size contractors in the North West Province are dominated by Blackpeople. 71.2 % of the people interviewed were managing directors; 6.8% were managing partners; 8.5%were Construction Project Managers and 10.2% were Construction managers.90

22%MaleFemale78%Figure 1: Gender in the North West ProvinceThe results also shows that 16.9% of the owners of the contractors had a Grade 11 or lower qualification;28.8% had Grade 12 qualification; 28.8% had Post-Matric Diploma or Certificate; 8.5% had a Bachelor’sdegree and 11.9% had a post graduate degree. The results also shows that 45.7% of the owners had aqualification that is up to Grade 12. The results shows that 74.6% of the contractors manage between 0-2projects; 18.6% of the contractors manage between 3-19 projects; 3.4% of the contractors managebetween 11-15 projects and 1.7% of the contractors manage above 20 projects at a time. Most of thecontractors at the lower grading lack the capacity to manage many projects at one time. The research alsofind that 27.1% of the owners of the contractors have less than three years experience; 33.9% of theowners have between 3 and 5 years experience; 18.6 % of the owners have between 11 and 15 years and10.2% have above 15 years experience in the construction sector. The results show that 61% of theowners of contractors have less than 5 years experience in the construction industry. 81.4% of thecontractors are based in the urban towns and 18.6% are based in rural towns. The number of peopleemployed by the contractors ranges from 1 and 50. 47.5% of the contractors had participated in thecontractor development programme in the past. More than 45.8% have never participated in the contractordevelopment programme. The results shows that contractors lack basic construction skills with only30.5% construction management; 47.5% business management; 30.5% project management; 30.5% healthsafety; 37.3% tendering and 27.8% site management. And it is clear that majority of the contractors in theNorth West Province lack important skills that will enable their contractors to be successful. The resultsshows that scarce skills in the construction industry it’s a main challenge, as most of small and mediumsized contractors cannot afford to hire qualified artisans and construction professionals due to the highdemand of built environment professionals. And it leaves small and medium sized contractors with nooption but to outsource their work to the well established contractors.91

10. Conclusions and recommendationsThis paper has shown that after 13 years into new democratic South Africa, the state of small and mediumsized contractors continues to be unsustainable and even with existence of supportive programmes (i.econtractor development programme and emerging contractor development programme). The SouthAfrican construction industry will continue to provide jobs for Historically Disadvantaged Individuals(HDI) but without such intervention, small and medium sized contractors will remain unsustainable andtheir performance unsatisfactory. The study finds that lack of effective management during their earlystages is a major cause of business failure for small and medium sized contractors. Owners tend tomanage their businesses themselves as a measure of reducing operational costs. Poor record keeping isalso a cause for startup business failure. And lack of financial management; lack of entrepreneurial skills;lack of proper training; lack of resources; lack of technical skills, lack of contractual and managerialskills; late payment for work done which are common with government contracts; inability to get creditfrom suppliers and fronting for established contractors are also contributing factors for the failure of smalland medium sized contractors in the North West Province.The author considers the following points as the main reason for the success of the small and mediumsized contractors in the North West Province:Business skills: location of business premises is very important, set specific targets for yourbusiness, carrying out market research, employ qualified personnel and put them in positionaccording to their skills, know and understand existing skills needed and attend refresher courseson business management skills.Management skills: financial management should be emphasized, networking with other peoplewith similar businesses and keeping records of workers to help in evaluation of the performance.Access to capital: merge with others that have similar businesses, negotiate favourable creditpurchases from the supplier, source affordable loans from financial institutions and negotiateadvance payments from the clients.Good record keeping: financial record should be prioritized and establish a record of books ofaccounts on a daily basis, weekly, monthly and annual basis.Well managed Cash flow: prepare cash flow forecast and budgets, prepare a cost-benefit analysis,lease equipment and other financial assets to improve your cash flow, negotiate outstanding loansthrough payment procedures and scale down operational costs.Family/domestic situation: separate business activities and family obligations and look foralternatives sources of income to cater for family basic need.92

ReferencesCheetam, T. and Mabuntana, L, (2006), Developmental initiative towards accelerate and shared growthinitiative of South Africa (ASGISA), Department of Public Works, Pretoria.Construction Industry Development Board (CIDB), (2004), SA Construction Industry Status Report –2004: Synthesis Review on the South African Construction Industry and its Development. DiscussionDocument, South Africa.CIDB, 2006, In Focus; Newsletter of the Construction Industry Development Board, March.Croswell, J. and McCutcheon, RT. (2001), Small Contractor Development and Employment: A BriefSurvey of Sub-Saharan Experiences in relation to Civil Construction.Department of Public Works DPW (1996), Procurement Task Team. Public Sector Procurement Reformsin South Africa: Specification for the Implantation of an Affirmative Procurement. Policy – APP2: JointVenture (general) May 1996.Dlungwana, W.S. and Rwelamila, P.D. (2003), The role of performance assessment tools in improvingcontractor performance in developing countries, CSIR Boutek: Pretoria.Dlungwana, W.S., Noyana, C., Oloo, V. (2004), The Emerging Contractor Development Model –Planning and Implementation Manual. CSIR Boutek: Pretoria.Gounden, S, (2000), The impact of the National Department of Public Works’ Affrimative procurementpolicy on the participation and growth of affirmable business enterprises in the construction sector,Unpublished PhD thesis, University of Natal, Durban.Govender, J.N. and Watermeyer, R.B, (2001), Potential procurement strategies for construction industrydevelopment in the SADC region, Unpublished paper, Department of Public Works, Pretoria.International Labour Organization (ILO), (2001), The Construction Industry in the Twenty-first Century:Its image, Employment Prospects and Skill Requirements. Geneva.Jaafar, M. and Abdul Aziz A.R. (2005), Resource Based View and Critical Success Factors: A case studyof Small and Medium Sized Contracting Enterprise (SMCEs) in Malaysia www.bre.polyu.edu.hk/criocm/English/journal.Luger, L. (1997), Report on the small and medium enterprise, international study tour: Singapore,Malaysia and Bangladesh.93

Miller, L (1962), Successful Management for Contractors. McGraw-Hill Book Company, Inc USA.Mphahlele, G (2001), Contractor Development in South Africa. Conference onDeveloping the Construction Industries in Southern Africa. DPW, April 2001.Rebelo, E. (2005), Small business, SA’s biggest test; in Creamer Media’s Engineering News; 25 (1); 16-17.Rwelamila, P.D and Dlugwana, D.W (2002), The Role of the Performance Assessment Tools inimproving Contractor Performance in Developing Countries. 1st CIB-W107 International conference.Creating a Sustainable Construction Industry in Developing Countries. 11-13 November. Stellenbosch,South Africa.Young B and Hall G (1991), Factors associated with insolvency amongst contractors in the constructionindustry” Building Research and Information, 9(5), 315-318.Yusoff A (1995), Critical Success Factors for Small Business: Perception of South Pacific Enterprises.Journal of Small Business Management, 33(3), 68-73.94

Between Fit and Misfit –Small Contractors Using MobileTechnologyKoch, C.Institute of Business and Technology, Aarhus University(email: christian@hih.au.dk)Tambo, T.Institute of Business and Technology, Aarhus University(email: torbento@hih.au.dk)Buser, M.Institute of Business and Technology, Aarhus University(email: torbento@hih.au.dk)AbstractThis paper analyzes the use of information systems with mobile computing elements in smallcontractors. Statistical material on ICT-developments in construction reveals a quite scattered andpatterned picture of coexistence of generic and dedicated systems and considerable lagging behindother sectors. A literature review understands mobility in three parts, micro, local and remote mobilityunderpinning a theoretical fit between construction processes and mobile technology. Theconstruction information systems with a mobile element encompasses a communication technologyand the mobile element spanning between various location and mobilities on site, the site managementoffice, one or more headquarters of construction firms and the mobile space of in between thesemultiple locations. The qualitative empirical study cover three constellations of small general andcraft contractors, their mobile technology use and their IT-suppliers. The cases demonstrate a fit withthe dedicated mobile technology, spanning all the types of mobility. The work rhythm and placementof the mobile technology with the craftsmen‟s work procedures seems to be a proper fit. Moreover,designing a system to the craftsmen not only expands the system potential from local mobility tomicro mobility, but also creates a more adequate coverage of the non space in between. The casecompanies studies covered all three types of mobility. Barriers for diffusion of mobile computinginclude: Management strategy, which in the SMEs was crucial in both directions, adoption or nonadoption. Employees were in all case less of a barrier than expected. Performance linked incentivewage system proves to be problematic in one case. Finally there seems to be little demand from largecontractors in projects for small contractor to adopt mobile computing. Collaboration between thesmall contractors and the IT-suppliers had less emphasis on the development than expected. The ITsuppliersseem predominantly to play a relatively passive role in the case enterprises.The contractorsseems never the less to be largely satisfied with a slow tempo of innovation. In that sense the caseconstellations are dual and symbiotic.Keywords: mobile technology, mobility, contractors, Denmark95

1. IntroductionIn order to promote excellent construction, and avoid poor, communications and coordination of allkinds play a paramount role. A host of contractual, managerial, organisational and technologicaltrajectories can be followed improving communication and coordination. This paper chooses to focuson information and communication technologies, ICT, with a view to the seamless relations toorganisation and management. There has been a lot of construction focus in Denmark andinternationally on software applications and interoperability in the main information handling streamin construction projects, including Building information models, 4DCaD and project web (Kazi et al2009). The general ICT trends however point at mobile computing as opening a host of new optionsfor using the mobile phone and integrating it in a comprehensive IT-architecture, developing forexample collaborative mobile content creation (Kaneshige 2009, Kazi et al 2009, Puikkonen et al.2008). This article focuses more on the practical operation of generic mobile computingencompassing telecommunication, devices, IT-architecture and software. Telecommunication such ascellular phone communication technologies and wireless communication; prices of powerful pocket-PC‟s, smart phones, iphones, and blackberry‟s continue to drop, and their functionality approaches thelaptops. And those generic technologies have become commonly used. Denmark is ranked among thetop 5 of the most informatisized societies in the world (World Economic Forum 2009). By july 2009Denmark possessed around 126 mobile phone subscriptions pr. 100 inhabitants (Danmarks Statistik2009). This should provide background for the systems in construction as well.The aim of this paper is to evaluate the use of mobile computing at small construction contractors.The paper carries out a literature review on information systems with mobile computing inconstruction and on mobility and presents a quantitative evaluative study of both SME use of ICTrelated to construction sites and qualitative experiences with the implementation and use of three(mixed dedicated and generic) ICT systems based on the use of mobile devices. The paper analysesopportunities and barriers for mobile computing and discuss generic versus dedicated systems. Theempirical study has two main parts: First some quantitative data on small contractors use of ICT.Second three constellations of small general and craft contractors, their mobile technology use andtheir IT-suppliers is presented and analysed. The three contractors are Karl Erik Bech, Hustømrerneand CEG. Their systems, and their IT-suppliers are respectively Easytime/ Easytime Aps, Reeft/ReeftA/S and Etjek/BASIT. The selected small contractors are assumed to be spearheading using dedicatedmobile computing software.2. Theoretical framework2.1 Information systems with mobile computingICT developments are fast, and especially mobile computing (Kanshige 2009, Kazi et al 2009).Research on the issues thus permanently risks to be lacking behind technological development. Yetpractical innovation in construction industry is lagging behind, creating a space for research andinnovation activities. A recent special issue of ITCON (Kazi et al 2009) demonstrates thisencompassing article of prototype systems from laboratory setting as well as from practical context.96

Another way to approach the dilemma of a fast moving target for research is to turn to followingbusiness offers. Buser et al (2006) thus maps 30 different IT-suppliers providing mobile computingsystems on the “market”, demonstrating at a time existence of practical innovation and the limitedpenetration of the construction sector. Many studies of mobile technologies tend to focus entirely onthe mobile device (Sørensen & Pica 2005). Here the focus is on mobile technologies and informationsystems, viewed as an element to a wider IT-architecture. This is to better understand the informationflow, the interaction with users and to improve their design. This means in most cases, presentedbelow, architecture of traditional information systems, interfaces, telecommunications element andhandheld mobile devices. The different elements are more or less stationary and mobile. And the “inbetween” places are important to incorporate in the analysis. Moreover, mobile technology artefactsare often placed in the periphery of work, whereas traditional information systems would be in thecentre of many users‟ work, at least information manipulation employees (Weilenmann 2003).Challenges of design of information systems with mobile elements relate strongly to the broadersystem, not only the handheld element. Authors have advocated various mobile technologies inconstruction (Lee et al 2009, Dong 2009, Song et al. 2008, Wang 2008). Many of the representativesof “IT in construction”-scholars, point at the possibilities of using various technologies inconstruction, rather than studying how the technologies work in practice. Important exceptions are,however, Löfgren (2006), and Ward et al. (2004), COMIT (2009). Many sources discuss IT inconstruction as a single technology-based innovation. We would like to see it in a context of a broaderunderstanding of innovation within technology as well as the social (economical, legal,communication, knowledge, control) institutions (see also Hislop 2008). It has been shown that smallenterprises depends more on relationships with other firms, making ICT- use a relationshipmanagement issue (Ritchie & Brindley 2005, Clausen & Koch 1999). Small ICT suppliers often relyon close collaboration with their customer (Clausen & Koch 1999).2.2 Understanding work, mobility and the spanning between placesFundamentally mobility is the distance between the core and the place of mobility in the businessconstruction; not only the physical distance, but the separation between sociality, actors, processesand information. Given the corporate construction the mobile unit will normally be subordinated tothe stationary unit. Synchronizing over and minimizing of the distance barrier in the realityunderstanding between the mobile and the stationary is often a critical problem - both technologicallyand organizationally. “In between” is our observation of the void that intermediates the stationary andthe mobile. Studies have tried to identify the feasible and less feasible tasks, and/or processes of workthat would be fit within mobile technology. Luff & Heath (1998) in suggests wandering, visiting andtraveling as generic mobile activities. Wandering is extensive local movement. Visiting meanslocation-bound, time finite activity performance. Travelling means incessant location shiftingprobably using a vehicle, e.g. a service van. Sørensen & Pica create a matrix of four types of tasks;active-passive, structured-unstructured tasks and processes in their analyses of police work. Theysuggest that non-structured processes with only passive presence in the periphery of the work are bestsuited. They find, moreover, that an element of rhythm in the use of the mobile technology occurs.From these examples there seems to be a well-developed understanding of interaction between directwork and the mobile artifact. What is lacking, is the rest of the architecture and the interplay within it,and especially the role of the new spatial and temporal boundaries and the spanning across them, or97

just the “in-between”. A number of authors in broader social science have proposed concepts,including Latour (2005) and Castells (1999). Here it is just sought to maintain a focus on multipleplaces, thus seeking to keep the analyses of “space of flows” (Castells 1999) onboard and maintainthat space of flow and other places should be understood as “flat” and establishing appropriate“clamps” between them (Latour 2005).2.2.1 Mobility in constructionRealizing built products need the constellation of many companies located on multiple stationaryaddresses in combination with a building site, which is per definition a temporary and remotelocation. The employees and managers of Architectural, Engineering, Contracting and Retailingenterprises have a highly mobile work pattern. Using Luff & Heath (1998) distinctions betweenmicro, local and remote mobility, these types of mobility in construction can be identified: Remotemobility is involved in construction when new sites encompasses shifting workplaces; employees andmanagers moving from building site to building site and sites often sharing resources; workers andespecially managers, architects, consulting engineers, and QA officers work at several sites in parallel.Transport to the sites from domicile includes extensive commuting (i.e. travelling). During work on asite, material and equipment logistics from suppliers at more or less remote addresses is frequent. Thestationary main offices or multiple, but stationary locations (i.e. a corporation with local departments)represent destination of the transport pattern. Assignment of tasks to employees is done using e.g. cellphones; specifications of assignments like drawings, instructions, information, customer requirementsmostly done using personal communication requiring travelling. It would represent a cost cuttingpotential, if done through mobile devices (Olofsen & Emborg 2004). Operating on the site wouldinvolve local mobility. Usually crews of crafts work progressively at various rooms or locationswithin a building as it transforms. Physical and information logistics and interaction with the sitemanagement hut and for breaks involve local mobility. Foremen and site management would circulateon site to observe and assist in solving problems (Luff & Heath 1998). Coordination is done throughpersonal communication, where this would be more effective than communication through mobilesystems. In other instances, however, even the local separation in space could be overcome bycommunication over net. As Luff & Heath put it, there is a delicate shift of practices where directinteraction would work and where systems could be used. Some tasks are moreover rather looselyconnected to the rest and do not require tight synchronization. Micro mobility occurs during the directoperation and execution, many types of construction work at the site require the use of hands instructured ways in long periods of time (hours) and/or the use of mobile device could compromisesafety. The building under construction is under continual transformation. The workers progressthrough the building task dependent. Significant differences in the feasibility of inclusion of mobiletechnology exist within the mix of basic operations; concentrated, repetitive mounting, fastening orsurface treatment operations are assumed less suitable for mobile technology than operations movingto the boundaries of micro mobility as picking, moving, reading, requesting and registration. Themobility types combined with the organizational characteristics of construction enterprises andprojects; represent spatial and social split between a number of elements, such as the main offices ofthe enterprise and the project on a remote site. A number of work routines would have to span thesesplits and create an in-between assuring that information is established and the social context ismaintained. The spanning today is mostly paper-based, voice messages, interpersonal communication98

and intrinsic / absent information; embedded potentials for mobile technology extending corporateinformation system to the sites are obvious.3. MethodThis paper adopts a multidisciplinary interpretive approach including IT in construction research,sociology of mobility and information system approaches. A number of classical method suggestionswithin information systems implicitly operate with a single place approach (Walsham 1993). Thewave of studies of mobile technology has rightly argued that there is need for changing this whenstudying mobile technologies (Sørensen & Pica 2005, Weilenmann 2003). Data on companies,systems, and IT-suppliers was gathered through desk research, interviews and use of previous reports.The three companies and IT-supplier were interviewed end-2009. CEG and Etjek has thus beenreported in Vogelius (2005) and Koch and Vogelius (2006). Etjek, Reeft and Easytime has beenstudied in Heldgaard (2005) as well as Hustømrerne og Kaj Bech. Also Krabbe (2009) reports onHustømrerne and their use of Reeft. CEG is defunct since february 2008.4. ICT in Danish constructionThe section falls in two parts. First general statistics on use of ICT in Danish construction ispresented. Second an investigation on IT use at small contractors in Denmark is presented. Finallysome implications are drawn before moving on to the qualitative data. Recent statistics covering theDanish construction sector shows it is lagging behind other sectors. The annual report from the officefor statistics of Denmark (Danmarks Statistik 2009) makes at status for each sector of the industry.This shows, for all sizes of companies:37% of the employees in construction companies use webpages (compares to 66 % inaverage)79 % of the construction companies operates a local area network (the lowest of any sector) 26% operates intranet (average for Danish industry is 42%) 9 % operates extranet (average for DK is 24 %)98% have internet access (as the average of DK)70% have broadband internet access (80% is the average)Construction companies lag seriously behind in terms of facilities on their webpage, such asaccess to product catalogues, recruitment, customer service and on-line trading.22% of the companies use e-learning (compares to 37% in average)99

The statistics also show the distribution on enterprise size across industries. Small enterprises (up to50 employees) have lower IT use than those above 50. The group of enterprise from 50-100 arehowever on average with the larger companies. An investigation carried out in 2006 (B3D 2006)show similar results of across different types of companies in construction, covering a range ofsoftware applications for construction processes (including CAD, project management, and projectweb, B3D 2006). Amongst the small contractors use of ICT in Denmark is gradually becoming moreand more widespread. Site management and subcontractors offices are core users, but also the genericICT-systems become more widely used. Berard & Hansen (2005) thus finds that 85% of the buildingworkers and managers use a mobile phone at work, whereas the use of PDA-s and PCs are muchlower, around 10 %, and restricted to site management (PC) or the management of the company(PDA). Berard & Hansens study covers 457 small Danish contractors (under 100 employees);carpenters, masons, and general contractors. 13% of the small contractors, had at the time used projectweb, and had ambiguous experiences. The most frequently used software, was office-packages,spreadsheets and calculation and salary programmes, which 64% of the companies have. 47% usesystems for quantity surveying. 24% could receive CAD-files and browse them. 19 % of thecompanies responded the use 2D-CAD programs; none responded the use of 3D or digital buildingmodels (Berard & Hansen 2005). This can be interpreted as a differentiation along systems usebetween construction dedicated system and generic communication tools, where the first, the moreprofessional use, lacks behind. ICT onsite have encountered a number of barriers. These statisticstouch relatively little on the issue of dedicated software for mobile computing. The figures showshowever a widespread use of generic mobile phones for various communication. Also it underlines ascattered constellation of systems at the small contractors, where even if several systems are in use itis difficult to understand it as an integrated architecture tackling the prevalent issues ofinteroperabilility.5. Case studiesThree constellations of small contractors, information systems with mobile elements and a IT-supplierare presented. The three dedicated systems for construction are characterized by being developed bysmall entrepreneurial companies in the early 2000‟s, still managed by these smaller IT-suppliers, stillhaving the systems as main product. All systems use standard hardware from regular cell phones totouch-screen smartphones to various options of networked laptops or desktop PC‟s. All mobileconnectivity is via the GSM net. The three suppliers and systems are “semi-competitive” partiallyoverlapping in functionality and envisioned markets. Reeft and Easytime have the vision to expandhorizontally i.e to offer mobile computing support for more tasks in the customer organization. Allsuppliers and case companies are resident in Denmark.5.1 Case Kaj Bech A/S and EasytimeKaj Bech is a general contractor employing about 160. The contractor division deals with earthworks,concrete, bricklaying and landscaping for industrial buildings and infrastructure projects. Road andpark division maintain outdoor facilities a. o. as outsourcing partner for municipalities. The companyhas since 2006 used Easytime for planning, task assignment and resource (hour) registration.Easytime normally operates on “simple” mobile phones; it interfaces to other information systems as100

ERP. It supports a large range of tasks and different models of task allocation, basically referring to a“case” and a “team”. The “team” function in Easytime supports the foreman as sole user, controlling asmall group of craftsmen, working more or less autonomously. The IT-supplier, Easytime Aps,employs around 5 persons, but cooperates with partners. The supplier claim that Easytime is easilyintegrated with host ERP systems, and have data structured to reflect most smaller ERP systems.Integration is realized at Kaj Bech and generally marketed as smooth, reflecting that integration ismandatory with most customers. The contractor, Kaj Bech, use Easytime all workers for allocation ofassignments and for registration of resources spent. First day of employment workers are given astandard, low cost cellphone with access to Easytime; co-worker training is assumed. “From this pointon we never hear anything.” (interview Kaj Bech representative). Easytime is by now naturallyembedded in the work procedures. The employees and managers regard the use of Easytime as aconvenient “data carrier” between its ERP system and the employees no matter if working on sites oron the move between sites. Work organization has changed and supervisor‟s role is now more distant,coaching than direct management. In interviews Kaj Bech representatives describes how toappropriate Easytime to their requirements: The meticulous use of “case” and “team” is dissolved intoa lax, free-allocation approach, mirroring that employees are operating universally on different sitesand tasks. This rules out formalized management; the role of the dispatcher or supervisor in the taskassignment is embossed. Kaj Bech encompasses a high degree of mobility, and the system works atthe exact jobsite concurrently with performing the construction task; when reporting, e.g. hourregistration, done more or less detached. Places can be the site, the site hut, the service van, or theworkers home on a PC, even less frequently. Using Easytime as described, Kaj Bech fills out parts ofthe void of the non space between localities of the distributed organization. The work processes inEasytime represent a two-way duality regarding task assignment and task/resource data collectionbetween main office and a representation of several mobilities. No customers have asked Kaj Bechaccentuate “real time” mobile computing.Kaj Bech plans to use material consumption registration, equipment registration, quality assuranceand site work safety documentation whenever these features are released and matured from Easytime.Easytime emphasizes a close customer interaction by having regular “brainstorm” meetings.5.2 Case: Hustømrerne and ReeftHustømrerne employes 200 persons and is a cooperatively held carpentry and facilities managemententerprise, working on everything from construction of large housing complexes down to repair andmaintenance. Hustømrerne has implemented Reeft in 2006. Reeft (“Resource Efficiency Tool”) is aplanning and monitoring system for the construction industry running with webbrowser technology onplain cellphones, smartphones or PC‟s. It uses the ordinary telecommunication systems for mobilephones to connect to other information systems. Reeft has gathered popularity within construction aswell as service industries with main focus on smaller customers, but with one showcase customer ofproperty services with 900 users. From a core focus on task management and reporting Reeft isdeveloping into areas like Quality Assurance, inventory management, GPS tracking, planning usingGantt charts and sales.101

The IT supplier Reeft A/S employes some 16 persons. Reeft A/S claims that the system Reeft can beintegrated with host ERP systems, and have data structured along with the principles of most regularsmaller ERP systems. Prepacked ERP integrations are offered for small ERP systems. ERP integrationis marketed as smooth, and reflects that this integration is mandatory with most customers. Also atHustømrerne such integration is implemented.In the morning supervisors and dispatchers at Hustømrerne, have assigned tasks for all craftsmen ontheir PDA‟s. The craftsmen start the workday by looking at the PDA to see the assigned task. At eachtask the PDA is used to “stamp” in and out of the task. Consumption of materials is also registered.Basically the complete invoicing material is ready when the craftsman leaves the site of the task. Thisapplies to both smaller tasks and larger projects; i.e. from a few hours to several days. The work onthe site is generally viewed as being independent of duration. Hustømrerne has obtained manybenefits from using Reeft. Accurate and quick billing information and potentially increased financialliquidity is given as a distinct benefit. Smooth task assignment, small scale project planning andincreased versatility of employees. Also in the Hustømrerne case the mobile system is an extension ofthe ERP system supporting a two way dataflow. Reeft can be used on PDA‟s and regular cell phones;employees with a high degree of visiting tend to use a small laptop (netbook) in their service vans.Especially the maintance activities of Hustømrerne involves a number of small tasks with longdistances in between them. The degree of remote mobility is thus high. The system is intended for useon the exact jobsite almost concurrently or integrated in the performing of theconstruction/maintenance task; other parts of the task are more freely detached from using the systemsand could be solved in a more remote spatial context (like in the van). Hustømrerne currently do notpursue plans for further use of Reeft. Particularly test have been done on the QA processes usingEtjek; there was a general reluctance for switching from the existing paper- and headquarter based QAsystem. Their link to Reeft A/S is thus more of that as acting as reference case.5.3 Case: CEG and EtjekCEG was until 2008 a medium sized craft contractor within construction and renovation projects withinternal and hire-in capabilities: Multi-storey housing and commercial projects. CEG had own skillswithin a range of crafts, but used subcontractors to various tasks e.g. bricklaying or tiling. Contrary tothe two cases above, this case is a single instance; CEG and Etjek worked together to gain experiencefrom using Etjek in a specific case; documented in (Vogelius 2005 and Koch & Vogelius 2006).Etjek, is a quality control tool, running on smartphones using touchscreen. Etjek communicate with aconstruction configuration database predefined from the contractor headquarter to assist workers infilling out mandatory QA-reports. Etjek is based on an industry standard quality managementframework. Each QA task implies a configuration process to be done. Normally QA is done by thesite management group (Dong et.al. 2009). Etjek suggest QA should be done by craftsmen. Dongfurthermore points out a strong financial potential of defect management of mobile QA systems.Theexperiment covered 36 bathrooms: Tiles were to be mounted on drywalls; adapted to doors, windows,technical installations. Using Etjek bricklayers of the subcontractor reported defects in drywalls andinstallations. User interface a.o. was adapted to fit the bricklayers. A compensation agreement for thenew job function was made with the bricklayers; otherwise compensated by performance. The102

icklayers found the system intuitive and well-suited for the process. The positive attitude might beconnected to compensation. Another issue is pre- or post-QA. Pre-QA (checking other people‟s work)is probably easier than post-QA, where own performance has to be documented. This case ischaracterized by improving the micro mobility at site. Clearly the bricklayers using the system wouldcommunicate quality problems and conformance far more efficient, minimizing direct interactionbetween site management and craftsmen. CEG operates with a high degree of all three types ofmobility; Etjek is intended for bridging use on exact jobsite almost concurrently or integrated in theperforming of the construction task, with the site management and headquarter of the contractor.Using the system can be more or less freely detached from the construction task and a broader remotespatial context applies, also in case of overall reporting.CEG‟s management found Etjek unsuited forfurther application, even if the employees were ready to proceed. Management preferred otherinvestments. Etjek was improved and enhanced during the experiment. The Etjek company has withlittle success subsequently tried to sell the system to the contractor market; Etjek was defunct sinceapril „09. The activities are continued by BASIT; a small IT supplier with point of departure in anapplied science unit, Technological Institute. In a case described in Krabbe (2009), BASIT helpedimplement Etjek at another contractor; the findings are similar to the CEG case. Etjek is regarded as agood idea, but project database configuration and use of mobile technology on actual micro-site isunsuccessful.6. DiscussionThe statistics for the general situation touched relatively little on the issue of dedicated software formobile computing. The figures support however a widespread use of generic mobile phones forvarious communication tasks. Also it underlines a rather scattered constellation of systems at thesmall contractors, where even if several systems are in use it is difficult to understand it as anintegrated architecture tackling the prevalent issues of interoperability. On this background the threecase studies do actually represent spearheading experiences of using dedicated software for mobilecomputing as part of an information system architecture, even if the enterprise not in general ICT use,are ahead of other construction companies or other sectors. The general status juxtaposed with thecases brings in focus, that generic systems is a widespread and well emulated platform, and an activecompetitor to the dedicated. It is for example a widespread practice to use mobile phone to makephotos, or even videos of site details (Puikkonen et al 2008). However phones for generalcommunication are also phones for dedicated systems, so there should be room for a coexistence ofgeneric and dedicated mobile computing. Moreover the mobile systems studied here, supportscompany internal processes rather than the along project processes across companies. This might bethe straight way to success, but doesn‟t directly provide benefit in larger project organizations,particularly not in a joint and cooperative setting in medium to larger construction sites and projects.Here even at larger sites too company specific systems might hamper integration of ICT-use acrosscompanies. Within the cases the work rhythm and placement of the mobile technology with thecraftsmen‟s work procedures seems to be a proper fit referring to (Heath and Luff 1998 and Sørensen& Pica 2005) a.o. categories. In this sense our cases illustrate a recent innovation in ICT inconstruction, as most systems are designed to site management, such as quality inspectors and othersupervisor staff (Dong 2009). Designing a system to the craftsmen not only expands the system103

potential from local mobility to micro mobility, but also covers the non space in between. The casescover all three types of mobility. Etjek is particularly focused on supporting micro mobility, i.e. theclose support of work functions directly on the work place. However, Etjek requires substantialconfiguration work, which brings Etjek into spanning between headquarter and site; henceforth do itfill the non space in the distributed organisations with respect to communication and restrictedknowledge in the particular domain of QA. Likewise do Easytime and Reeft act as span of the “inbetween” headquarter and construction work, just might the job management domain lie farther awayfrom the actual site, which proposes a more free movement between mobilities. The Hustømrernecase is definitely the most rigid in terms of a direct coupling between execution and invoicing; againsuggesting a more free flow among mobilities bringing in mind that each mobility do exist at eachsite. Wandering, visiting and travelling is present in all cases; financial turmoil might strengthen theneed for companies to have systems that support continuous reallocation of staff between smaller andlarger tasks and different sites. The systems as a whole represents a potential for a much more directlinkages of procedures between the main offices and the building project, thus using the systems tospan one of the most serious ruptures in construction communication, i.e. the distance between projectand enterprise and even during transport (Olofsson & Emborg 2004). Easytime and Reeft raiseproductivity by securing an updated overview in the headquarter of work performance, and a directline through the business processes. They are thus process innovations (easier and timely taskallocation and invoicing), although incremental in character. The fair market penetration done byReeft and Easytime reflect a demand, with a bit slower penetration of “site oriented” features. Etjekdid not manage to penetrate the market so far. The representative of Kaj Bech views the situation as atechnology lag – not fully acknowledged by the supplier. It is sometimes argued the mobiletechnology implementation only succeed if aligned with business strategy; management reluctancemore than employees‟ is shown as main inhibitor. Senior management support is granted in the casesReeft and Easytime. IT governance in construction is of a laissez faire type (Berard & Hansen 2005)and often relies on project implementation. Another driving factor, but absent here, could be largecontractors asking small to use mobile computing systems. The IT-suppliers seem to predominantlyplay a relatively passive role in the case enterprises, even if the Etjek development process wasinteractive and improvements were realized. The contractor SMEs seems to be largely satisfied with aslow tempo of innovation and the IT-suppliers have limited resources. Designing information systems– also with mobile elements – in areas which are poorly formalized areas are often a problem. Qualityassurance for example appears well structured, but possess rather unstructured practices. Also KarlBech / Easytime and Hustømrerne / Reeft display that only highly formalized elements are included inthe system.7. ConclusionThe paper analyses information systems with mobile elements in small contractors on the backgroundon many other ICT-developments in construction. The statistical material thus revealed as quitescattered picture of coexistence of generic and dedicated systems and a lagging behind other sectors.Amongst dedicated systems, there is a competition between function specific and generic constructionsystems. The statistics underpinned that our three cases are indeed spearheading in the area ofdedicated mobile computing. The literature review elaborated on mobility, underpinning a theoreticalfit between construction processes and mobile technology. The construction information systems with104

a mobile element encompasses a communication technology and the mobile element spanningbetween various locations and mobilities on site, the site management office, one or moreheadquarters of construction firms and the mobile space of in between these multiple locations. Eventhe cases demonstrated a fit with the mobile technology, spanning all the types of mobility. Themobile technology sits well with the craftsmen‟s work procedures. This not only expands the systemcoverage from local mobility to micro mobility, but of the entire non space. Barriers includeManagement strategy in the SMEs as crucial, with CEGs non choice of the Etjek system underliningthis. Employees were in all case less of a barrier than expected. Finally large contractors inconstruction projects do not push the small contractors. Collaboration between the small contractorsand the IT-suppliers had less emphasis than expected. IT-suppliers seem to play a relatively passiverole in the case enterprises. The contractors are largely satisfied with a slow tempo of innovation. Inthat sense the case constellations are symbiotic. Experiments with organization and informationsystems with mobile elements are important to remove the barriers.ReferencesB3D (2006) IT-undersøgelse i byggeriet. Det digitale byggeri. København.Berard O and M Hansen (2005). Use of IT in small and medium size contracting enterprises. -seen inthe light of “Digital Construction”. B.sc. Thesis. DTU. Lyngby.Buser M, C Koch and CS Larsen (2006). Nye informations- og kommunikationssystemer påbyggepladsen. BYG-DTU. Lyngby.Castells (1999) The Network Society. Blackwell. OxfordClausen C & C Koch (1999) The Role of Occasions and Spaces in the Transformation of InformationTechnologies. Technology Analysis and Strategic Management 11: 463-482.COMIT (2009) Construction Opportunities for Mobile IT –projectsite. Comitproject.org.uk/.Danmarks Statistik (2009) Danske Virksomheders brug af IT. Danmarks Statistik. København.Dong A, M Maher, M Kim, N Gu and X Wang (2009). Construction defect management using atelematic digital workbench. Automation in Construction. 18 (2009): 814-824.Heldgård J (2005). IT på byggepladsen. Slutrapport maj 2005. Vitus Bering. Horsens.Hislop D (2008) Mobility and Technology in the Workplace. Routledge. London.Kaneshige T. (2009) The Next Decade in Mobile: Mobclix's Outrageous (Yet Possible) Predictions.CIO Magazine 15 december. Downloaded from http://www.cio.com.105

Kazi A., G. Aouad & A. Baldwin (2009). Editorial - Next Generation Construction IT. Technologyforesight, future studies, roadmapping. Journal of Information Technology in Construction. August2009 at http://www.itcon.org/2009/12Koch C. & P. Vogelius (2006) Evaluation of Web and PDA-based Quality Assurance on a BuildingSite. In D. Boyd (ed) Proceedings 22th Annual Conference, ARCOM. Vol 2. Pp 685-696. Universityof Central England. Birmingham.Krabbe S (2009) Kan arbejdsgange støttes på byggepladsen ved brug af IKT. Department of CivilEngineering, Aalborg University. Aalborg.Latour B (2005) Reassembling the Social. An introduction to Actor-Network-Theory. OxfordUniversity Press. Oxford.Lee U., J. Kim, H. Choo and K. Kang (2009) Development of a mobile safety monitoring system forconstruction sites. Automation in Construction 18: 258–264.Luff P & C Heath (1998) Mobility in Collaboration, in Proceedings of ACM Conference on ComputerSupported Cooperative work. CSCW‟ 98, Seattle, Washington, ACM press. 1998Löfgren, A (2006) Mobile computing and Project communication – mixing oil and water?, Licentiatethesis, Royal Institute of Technology, Stockholm.Olofsson T & M Emborg (2004) Feasibility Study if Field Force Automation in the SwedishConstruction Sector. ITCON 9: 285-295.Puikkonen A., J. Beekhuyzen & J. Häkkilä (2008) User Created Videos with Mobile Phones – TwoCase Studies. Mobile Multimedia – Content Creation and Use. MobileHCI. Amsterdam.Ritchie B & Brindley C (2005) ICT adoption by SMEs: implications for relationships andmanagement, New Technology, Work and Employment 20:205-217.Song J. et.al. (2008) Automating the task of tracking the delivery and receipt of fabricated pipe spoolsin industrial projects Automation in Construction 15:166 – 177.Sørensen C & D. Pica (2005) Tales from the police: mobile technologies and contexts of work.Information and Organization. 15: 125–149.Vogelius P (2005) Nye informations- og kommunikationssystemer på byggepladsen. Rapport 1.BYG.DTU. Lyngby.Walsham G (1993) Interpreting Information Systems in Organizations. Wiley, Chichester.106

Wang L. (2008) Enhancing construction quality inspection and management using RFID technology.Automation in Construction 17. pp 467–479Ward M, Thorpe T, Price A & Wren C (2004) Implementation and control of wireless data collectionon construction sites, ITcon , Spec. Iss. Mobile Computing in Construction 9: 297-311.Weilenmann A (2003) Doing Mobility. Gothenburg Studies in Informatics -PhD Thesis. Gothenburg,Gothenburg University. Sweden: 182.World Economic Forum (2009) The Global Information Technology Report 2008 – 2009.http://www.weforum.org/en/initiatives/gcp/GlobalInformationTechnologyReport/index.htm.107

Applying the Principle of Subsidiarity in the BuildingIndustry: a way to improve competitiveness in BrazilHaito, R. J. O.PhD student of Postgraduate Program in Civil Engineering - Escola Politécnica; Universidade de SãoPaulo(e-mail: mltca1@yahoo.com)Cardoso, F. F.Professor of Postgraduate Program in Civil Engineering - Escola Politécnica; Universidade de SãoPaulo(e-mail: francisco.cardoso@poli.usp.br)AbstractThe Brazilian building industry culture is marked by the extensive use of firms that build trades(hereafter FBT), generally subcontractors and specialty contractors, most of which are small or microfirms. For this reason, the core of the industry, the construction process itself, is in the hands ofseveral firms that are not always able to ensure that what they have to do, generating a greatoperational risk to every project. This condition is mainly due they not having enough resources suchas competences in management and on-site operations, skilled labor, etc. and, even worse, they havelimited access to get them, a condition that involves 94% of the Brazilian firms that build trades.Despite these characteristics, other agents in the building industry do have those capacities, amongthem general contractors, material manufacturers and suppliers, AEC firms, etc. Then, if a FBT firmis not capable of doing its job well, because of lacking of those resources, some other agent will haveto employ some effort to correct it, resulting in extra life cycle costs in the project, and, generally,making the industry lose competitiveness as a whole. This paper discusses a way to articulate anintervention among several interested parties of the building industry to support and develop FBT byusing the principle of Subsidiarity, which expresses the obligation of greater authority to help theminor to do their job when it is unable to do it. For that, some potential collaboration relationshipsare linked in form of a tool, a matrix, showing the relationship between the interested parties andsome elements of the FBT service scope that could be subsidized. The methodology used is anextensive literature review and the proposal of a matrix as an instrument for designing Public –Private actions oriented to integrate the efforts of all the agents of the building industry and the otherinterested parties, as a way of improving the competitiveness, quality, and sustainability of the sector,through improving the efficiency in the use of resources.Keywords: subsidiarity, competitiveness, subcontractors, specialty contractors, Brazil.108

1. IntroductionSustainable development (SD) represents an unavoidable challenge, even for the building industry(BI). BI is a sector that has a major role in it, because BI is one of the largest consumers of naturalresources (Augenbroe and Pearce, 1998) and has a large potential for improving the quality of life ofthe population (ABRAMAT, 2008; Abiko et al., 2005), etc. In this sense, the construction phase of abuilding accounts for a significant portion of the negative impacts, such as the loss of materials,waste generation and the consequent interference in his surrounding area (Cardoso and Araújo,2007), all of them consequences of its role as a transforming activity of nature for human benefit.As in other markets, the pursuit of the so-called competitive advantage (Porter, 1985) generated thesearch for alternative organizational forms in several agents of the BI (Cardoso, 1997). In Brazil, oneof the strategies used was to focus on the core business activities (Pralahad and Hamel, 1990),delegating some of their activities to other firms, in delegating strategies such as outsourcing,subcontracting, among others (Serra, 2001; Pereira, 2003). However, the outsourcing or delegation ofactivities traditionally performed by contractors, related to the execution of several components of abuilding, was not developed in terms of ensuring the transfer of competences needed for these newresponsible for construction, the firms that build trades - FBT (generally known as sub-contractorsand specialist contractors), to assume their role in at least the same conditions as their contractors.However, competition for lower price (Lordsleem, 2002; Filippi, 2003) was imposed to FBT. Thiscondition made many of the FBT not to be prepared to undertake the activities assigned (by theintrinsic restrictions of FBT, because they are mostly micro and small enterprises - SME (Cardoso,2003)). This not only increases the risk of the operation of FBT (as in Brazil, the lack of resourcescauses the failure of 50% of FBT in its fourth year (SEBRAE-SP, 2008)), but the weakening of thesystemic capacity of the sector to obtain the desired result, which is a building in full operation, witha service life suited to the needs of the SD.To overcome this difficulty, it is necessary to seek ways to better use the existing resources in acollaborative manner for the mutual benefit of all involved. Thus, a natural question would be how tointegrate the BI agents to meet the SD challenge. In this sense, a principle of the Catholic Churchcalled the Principle of Subsidiarity (PS) has particular utility. The purpose of this article is to discussa potential application of the Principle of Subsidiarity to integrate actions among the stakeholders inBI, for the benefit of the FBT. Therefore, the methodology involves an extensive literature reviewfocused on the concept of PS, conducting a theoretical discussion about its potential for application inBI, according to three steps: the relationship between the interested parties, the concept of PS, and theconfiguration of subsidiary warranties around the service provided by FBT.2. Relations between the interested parties in the buildingindustryBI has an important social and economic role in Brazil, as one of the sectors of the economy withgreater potential for income generation, employment and better conditions of life (ABRAMAT,109

2008). This sector is composed of agents that perform construction activities, industrial activitiesassociated with it (those that provide raw materials and equipment for its production process) and bythe services that support them (CBIC, 2001). In addition, each activity is performed by differentagents. ABRAMAT (2008) and SENAI (2005) describe them: the first according to the generalphases of construction project life cycle, the second describes the agents of the building segment.In addition, Oviedo Haito, Cardoso and Silva (2008) stated that "all these agents [of BI] are potentialcustomers among themselves in the process of generating value, and also, they all work together togenerate the value received by the end customer". Thus, as mutual customers, BI agents sharecommon interests. Therefore, the results or consequences of the actions of an agent of the sector canpositively or negatively influence the outcome and, consequently, the interests of others. These"people or groups who have an interest in the performance or success of an organization" are namedin ISO 9000 interested parties (ABNT, 2000). Furthermore, Russell (1991) observed that:“Contractor failure also impacts the U.S. construction industry‟s productivity, leading to higher costs.Assuming that businesses recover bad debts resulting from contractor failures in futures pricing, consultants‟fees such as insurance and surety bonds, accountants, engineers, and attorneys are inflated as well as materialcost including concrete, lumber, and steel. Also increasing are equipment manufacturers‟ and suppliers‟costs. These higher costs are passed on to subsequent constructed projects” (Russel 1991, p179)Similarly, Kale and Arditi (1998) indicate that the failure of a party does not only affect the part thatfailed, it causes negative consequences to the other parts [interested]. Dainty, Briscoe and Millet(2001) said that in supply chains, especially in relation FBT – main contractor, inefficiencies in theperformance of an agent are transmitted to others. Moreover, "Efficient subcontractor operation isexpected to be beneficial to all parties involved in the construction process, including the owner,general contractor, and subcontractors" (Arditi and Chotibhongs 2005, p.876).These statements allow understanding the interrelationship between the agents of BI, illustrating theimpact that the activities of an agent have on others. Such impacts, when negative, exerts pressure oncosts and competition conditions and therefore, in a broad perspective, make the BI as a whole losecompetitiveness. In this sense, analyzing all the agents in the BI as a string, Cardoso (2003) discussedthe need for the development of all agents in BI, preventing the resistance of its 'weak link', the FBT,defining the strength of the chain.Based on these latter statements, two points are founded: firstly, is that the relationship between thedifferent interested parties in BI (IP) covers more than just the agents of the sector, involving otheractors in society and economic agents, because they also suffer the impacts of their activity. Amongthe IP, the following can be detached: Subcontractor and Specialty contractors, Main Contractor,Building Materials and Equipment manufacturers, Building Material and Equipment Suppliers,Training and P&D Institutions, Construction professionals, Construction Labor, Services(Engineering and Design), Real Estate Developer, Insurance companies, Government, FacilitiesUsers, Society, Entrepreneurs, etc.The second point is the systemic importance of the FBT in the BI performance. This is verified, interalia, because: the construction activity represents 59.9% of Brazilian BI GDP -or US$ 78 billion- and110

69.3% of the workforce in the industry (ABRAMAT, 2009), FBT accounting for the bulk ofconstruction activity, most of them are SME, 93% have fewer than 29 workers (Cardoso et al., 2007),their participation is central in the production process of the 'building product' (Cardoso, 1997, Hinzeand Gambatese, 2003), accounts for much of the success of projects (Haltenhoff, 1995; Love, 1997),and because increasing the competitiveness of BI requires the modernization of these firms (Cardoso,2003).Therefore, the integration of those involved in improving the sector depends on configuring actionsthat coordinate the IP, being the FBT a 'weak link', a natural target to be treated. Thus, a set ofpossibilities can be developed from the use of principles that guide the IP for convergent goals, oneof which is the Principle of Subsidiarity, potentially useful to guarantee the outcome by integrating PIaround mutually beneficial actions.3. The principle of subsidiarity in the building industry3.1 The principle of subsidiarityAccording to Schäfer (2006), the PS is an institutional expression inherent to competition applicableto societies based on labor division ; hence, it seeks that an entity within a cluster, a particular chain,or a link of it, may perform tasks for which it has competitive advantages against other entities,observing the principles of market economy, which are determined by market forces (Porter, 1980)and by institutional forces (DiMaggio and Powell, 1983).In the economic theory of federalism, the PS is understood as an orientation to common goals toestablish responsibilities within a multi-level structure (Schäfer, 2006), such as the BI. Thus, the PSwas introduced in the European Union Constitution, being used in the allocation of powers betweenthe countries and their institutions (KARLSSON, 2007). For Henke (2006), the PS is a principle ofdelegation, in which the power of the members of a community should be enhanced to prevent thecentral authority to assume more and more functions. That is carried out through the allocation ofresources and the definition of requirements and duties or responsibilities that must be met (e.g. todetermine the ideal composition between public and private goods and services).PS can be interpreted as saying that a higher authority must intervene in a subordinate one when thelatter is ineffective to complete a particular obligation; doing it, however, respecting its initiativesand capabilities. For Schäfer (2006), such an intervention implies that the choice of the agent thatwill carry it out should follow the principle of selection, being the most capable in the competitionthe one chosen for performing it, thus providing a subsidiary, plural and differentiated competition.Such an intervention aims not to restrain, but to facilitate the conditions so that market forces are ableto exercise their freedom. In this sense, the Vatican Council II (1965) defined the PS as "the sum totalof social conditions which allow people, either as groups or as individuals, to reach their fulfillmentmore fully and more easily" (Constitution ‘Gaudium et spes’, n.26).111

In this sense, the common good is closely related to human self-realization, which is an important anddesirable goal for any society and human activity, including production processes (MELÉ, 2005). ForMelé (2005), the expression that best represents the spirit of the PS in the social teaching of theCatholic Church is the following:„„A community of a higher order should not interfere in the internal life of a community of a lower order,depriving the latter of its functions, but rather should support it in the case of need and help to coordinate itsactivity with the activities of the rest of society, always with a view to the common good.‟‟ (Pope John PaulII, 1991, Title V)In order to better understand the applicability of this principle, Melé (2005) performed an analysis onthe nine dimensions of the PS:1) All human beings possess reason and freedom. Therefore, the dignity, uniqueness and diversity of eachperson and group of people should be respected and promoted, framed in respect to the community.2) The PS is an ethical principle, not a pragmatic rule, in seeking the common good.3) It is not the only social-ethical principle, it should be considered in a balanced way with other principlessuch as authority, solidarity, participation, reflection, etc.4) It is a principle of reflection and, therefore, should not be applied as a mechanical rule, but considering therelevant circumstances in each situation.5) What can be done by a smaller social group should not be absorbed by transferring their duties to anorganizational or social entity.6) The Authority shall ensure that the initiatives of individuals and groups contribute to the welfare of thewhole community, requiring coordination and the maintenance of order within the community.7) The PS indirectly requires that individuals and social groups do as much as they can. To this end, the PSentails both freedom and the correspondent responsibility and accountability.8) The PS stresses the duty of the superior entity to favor the initiatives of the inferior groups by fostering,encouraging and stimulating their initiatives and activities.9) Finally, the PS also reflects the consideration that if an individual or an inferior group cannot perform anecessary activity, even if provided with appropriate help, then the superior group can and ought to carry outthe activity. (pp300-301)In this sense, some of the principles compatible with the PS are defined as: Solidarity: each groupshould contribute to the common good of the community in proportion to their respectivecapabilities; Authority: authority is necessary to coordinate efforts towards the common goals in acommunity; Participation: it is necessary for community members to appropriately participate in itsmanagement; Reflection: each solution should be applied considering the relevant circumstances ofeach situation (MELÉ, 2005); Culpability: those guilty of a problem must assume a greater share ofresponsibility to solve it, and; Capacity: those agents that have the ability to solve a problemeffectively or more efficiently should do so, even if they have not the blame (Karlsson, 2007).Thus, faced with the challenge of the SD, the ninth dimension of the PS is particularly important forthe development of this article. This is because BI should respond as a whole, as a chain, to therequirements of society, as it is necessary to provide support to those who need some subsidy tobetter develop their activities. Consequently, the application of this principle involves the idea ofsupplementation, to complement the efforts and to add capabilities to the receiver.112

Summarizing, the application of PS involves: a) a community b) responsibility and commitment tothe common good, c) awareness of responsibilities and risks of their activity to the community d) asuperior organization (who subsidizes) and a minor one (which receives the subsidy) and an authoritythat coordinates the subsidiary efforts, e) existence of a leader who takes the initiative (respecting theother participants‟ initiatives and capabilities ), f) need for communication and coordination amongstakeholders, and g) a solidary, democratic, participatory, autonomous and free decision-makingprocess. In general, the PS provides ethical guidance to promote the strengthening of BI from freeparticipation of all involved and the initiative to support those agents, or IP, that can provide it. Thisdiscussion is aimed at the sector level in BI. However, the reasoning expressed in the previousparagraph could, for example, be applied at the supply chain of a main contractor. Thus, thecommunity would be represented by the PI; the superior organization could be the main contractor,who could lead the subsidiary actions for a smaller organization, which could be represented by theFBT, all within a well defined and coordinated framework regulated by an independent third party.3.2 Subsidiary responsibility and warranty in building industryThe agents, more than just being aware of the impacts of their activities - and therefore of theirresponsibilities - should align their interests, resources and capabilities to configure solutions tobetter performance. In subsidiary systems, this requires coordination, cooperation and communication(MELÉ, 2005), to ensure its success (Karlsson 2007) through the participation of those involved inthe governance of a system that aims at obtaining the results required. This must be done by assuringthe involvement of the IP, and the proper transfer of skills, seeking to ensure the 'know-how', thusensuring the 'can-do' in the industry. Melé (2005) argued that governance should set targets, withsome participation from the smaller (according to their capacity to take responsibility to perform theirrole (Karlsson, 2007)), on key issues (e.g. rules), supporting the development of the smaller‟sactivities through their training, transfer of information and technology, guidance, feedback, etc.However, the transfer of responsibilities will only be feasible when each agent is aware of the greatprinciples that establish the consistency among their activities, considering the environment and theirinterests and needs (ENTERPRISE.., 2007). Thus, Melé (2005) describes that the term Subsidiarityderives from the Latin subsidium expression that meant providing help from the reserve to those whoare in the vanguard of the battle. This implies that some agents, or IP, are vanguard agents and othersrearguard, being the latter called to give subsidiary support to another agent who needs it.Oyegoke (2001) argued that general contracting systems in BI have similar configurations to that inFigure 1. There, it is observed that the business supply chain starts with the entrepreneur, and thematerialization of the project ultimately depends on FBT. In the Brazilian BI, the FBT are mostlySME with few resources (Cardoso, 2003), a feature that added to his place in the supply chain shownin Figure 1, determines its position as vanguard agents, natural candidates to receive subsidiarysupport. Thus, considering the FBT as agents of the vanguard, the challenge now is to understandhow IP could intervene in the FBT, in a subsidiary way. For ENTERPRISE ... (2007), studying therelationship between those involved allows getting aware of the multiple exchanges, facilitating theperception of its ties of dependence and therefore of the overall impacts of the initiatives that they put113

into practice. The initiative refers mainly to the greater responsibility of agents, a more questioningattitude and a sense of risk. This, not only in the sense of standardizing, but also to allow and to valueall the contributions made provided they are responsibly made (ENTERPRISE.., 2007). For OviedoHaito (2009), in relationships with its contractors, the FBT provides different commercialized servicescopes (CSE), representing links between flows of resources and competences (R&C) and theactivities that will be performed in the execution of their services.Owner /ClientArchitectEngineersQuality surveyor /ConstructionMainContractorNominatedSubcontractorsSubcontractorsMaterial suppliersSub-subcontractorsCAPTION:Contractual relationshipsAgentsFigure 1: A general contracting system (adapted from Oyegoke, 2001)Therefore, the CSE is used as an object of study, from which subsidiaries relations (the functions,processes, expertise or resources required for the production of the trade, and that are necessary forthe activities of both subsidized and the subsidiary) between FBT and the other IP is established.3.2.1 Commercialized scopes in FBT service and subsidiary relations among theinterested partiesENTERPRISE ... (2007) notes that the owners [or firms] cannot claim, nowadays, to have all theskills required at all levels under their responsibility. In Brazil, Serra (2001), Lordsleem (2002),Pereira (2003), Filippi (2003), Cardoso (2003) emphasized that BI faces a stage of outsourcing of itsactivities, resulting in a large family of FBT, accounting for the execution of trades. FBT sell theirservices in different scopes. Based on the „service logic‟ (Vargo and Lusch, 2008), Oviedo Haito(2009) found that the value proposition (Bititci et al., 2003), which is commercialized in therelationship between FBT and their contractors, can be expressed as a function of the R&C owned bythem. These R&C are related to the factors that compose their management and production systems.Thus, factors are inputs (e.g. energy), processes (e.g. organizational structure), and outputs (e.g.quality of the results, as productivity) that may render services to their customers (Vargo and Lusch,2008) and / or produce economic rents (Amit and Schoemaker, 1993) for the FBT. However, thediscussion of the universe and qualities of such factors is beyond the scope of this paper.Notwithstanding, to describe the subsidiary relations described later, Pereira proposed (2003) theclassification of CSE, grouping the elements of the CSE into four factors provided with highfrequency in Brazil: 1) labor force, 2) material, 3) design, and 4) technical responsibility + warranty +maintenance. To illustrate the relationship among these scopes and the PI, six CSE profiles weretabulated in a matrix. FBT that provide all the elements deliver a full CSE, which accepts fullresponsibility for their results (e.g. Elevator FBT), the profile of which is denoted with the letter A in114

Subcontractor and SpecialtycontractorsMain ContractorBuilding Materials andEquipments manufacturersBuilding Material andEquipments SuppliersTraining and P&D InstitutionsConstruction professionalsConstruction LaborServices (Engineering andDesign)Real Estate DeveloperInsurance companiesGovernmentFacilities Users'SocietyInvestors, Financers,entrepreneursFigure 2. Similarly, B, C, D, E and F designate other smaller CSE profiles, corresponding to F thesmallest delivery: supplying a single element, labor (e.g. rebar FBT).Subsidiary Leader (Interested Parties)Subsidiary Leader(Interested Parties)Pereira's (2003)Proposed CSEelementsF E D C B ALabor X X X X X X H H L L H HMaterial X X X X X H H H HEquipments X X X X H H H H L L LProcess design X X X H H H H H H L HProduct design X X H H H H H H L H HTechnical responsability X H H H H H H L H HWarranty X H H H H H L L H H H H HMaintenaince X H H H H H L L H H H H H HLEGEND: H Potentially High subsidiary link Note: Subsidiary Leaders can be either atL Potentially Low subsidiary linkindividual or at association levelFigure 2: Interested Parties subsidiary relations matrixAt the left side of the matrix in Figure 2, it is note that its lower diagonal is empty, which means thatin all the CSE profiles different from profile A, there are some elements that are not performed by theFBT. This suggests that the smaller the scope provided by the FBT, the greater the effort that itssubsidiary responsible (usually the main contractor) will have to make in order to guarantee the resultof the trade. That agent should take the service portion not provided by FBT, or should pass it on toothers BI agent or IP. Hence, FBT providing smaller CSE means a greater effort to manage them onthe part of the other agents responsible for production; and the transfer of responsibility of the FBT toothers involved in a particular setting, according to the results and interests of a particular array.Oviedo Haito (2010) discussed the relationship between FBT‟s R&C and its CSE, finding that itsvalue proposition and therefore its strategic choice expressed in the CSE, determine FBTrequirements for R&C. This choice will vary from trade to trade and from project to project (Jungand Woo, 2004). Thus, a rough idea of the R&C that a FBT has to meet the needs of its clients can beconfigured as a function of its CSE. Therefore, in order to clarify the bond between R&C andsubsidiary support around the FBT, the classification of Pereira (2003) has been detailed by:equipment, process and product design, and also dividing the fourth element of CSE into technicalresponsibility, warranty and maintenance, as shown on the left side of Figure 2, which shows somerelationships that bond the IP with the FBT through the elements of its CSE.On the right side of Figure 2 are: 1) a subset of subsidiary leaders, who belong to set of IP, 2) thesubsidiary relations (with a [H] or a [L] indicating the potential contribution) between elements of theCSE and the subsidiary leaders. Such relationships have been established according to three criteria:i) support capacity of the leader ii) common interests (commercial relationship, common products or115

services, positive and negative risks or impacts), and iii) Capacity or Culpability of subsidiary leader(related to problem that causes the FBT not to deliver one or more elements of the CSE). Byanalyzing Figure 2, it can be concluded that: the center of the action begins with the subsidiarysupport to the labor, extending to the other CSE elements. Hence, different agents could assume orsubsidize one or more of these elements and functions (e.g. technical responsibility can be distributedamong the trade designer, the responsibility of the main contractor and the FBT for the execution,etc.). In warranty and maintenance, the amount involved or the PI is greater. These subsidiary actionsrequire an organization which regulates, coordinates and promotes them among the PI, as well as theleadership of the subsidiary agents to develop the FBT, related to capabilities of a particular elementof the CSE (e.g., the technical responsibility, where manufacturers related to specific material,component or system could promote a set of trained professionals and make them available for theFBT). The agent capable of assuming the full subsidy or initiative for leadership in the articulation ofa subset of BI or IP agents for subsidizing one or more elements of the CSE of the FBT is calledsubsidiary leader.Consequently, the main benefit of PS is the integration of IP through the development of a subsidiarywarranty. This warranty means the governance, division and allocation of responsibilities and R&C,backed by an articulated subset of IP, to ensure, in solidarity, the outcome of the FBT service,providing each one with a part of the solution according to their capabilities and agreementsestablished in its governance.4. ConclusionsA discussion of the PS was developed, exploring its concept and its application to the FBT focusingon the development of potential subsidiary actions by other industry agents or IP to improve theresults delivered by the BI as a whole. The PS is applicable at the industry agents‟ level, the level ofthe supply chain of a company and even within the same organization. For FBT, the systemicapproach of PS evidences its role as a major agent in the sector, in contrast with the traditional viewof they being treated as part of the supply chain of contractors. Thus, based on a proposed set of CSEelements, potential subsidiaries relationships were discussed and analyzed. This compositionillustrates the importance of FBT in the industry: all the specialties involved in a construction projectconverging and depending on them to achieve the materialization of buildings. Such relationshipsshows ways to develop some initiatives (such as public-private partnerships) inspired on this andother principles, among which allocating responsibilities and R&C. Through this allocation, PShighlights leaderships exploring ways to optimize by articulating what already exists; stressing theneed to support (the subsidiary) the efforts made by the producer (subsidized) to deliver the result weall need, collaborating with the development of their R&C. Therefore, it is necessary to establishwhat requirements the IP as a whole should meet and then distribute them among their agents, byprinciples, in proportion to the capacity of those involved, jointly developing a subsidiary warrantyon BI results. The PS should be used not only to promote the convergence of sector activities towardcommon goals, but also to ensure in a solidary way that there exist adequate conditions ofcompetition and the supply of the R&C needed to attain these goals, thus contributing to improve thevalue of the result delivered to society and, as a result, to his SD.116

ReferencesAbiko A K, Marques F S, Cardoso F F e Tigre P B (2005) Tendências organizacionais e de difusãotecnológica para o setor de construção civil: Segmento de edificações. Estudos Setoriais n. 5 BrasíliaABRAMAT (2008) A cadeia produtiva da construção e o mercado de materiais, (available onlinehttp://www.abramat.org.br/ [Accessed on 10/09/2008])ABRAMAT (2009) Perfil da Cadeia Produtiva da Construção e da Indústria de Materiais,(available online http://www.abramat.org.br/ [Accessed on 30/09/2009])Amit R and Schoemaker P (1993) “Strategic assets and organizational rents” Strategic ManagementJournal 14: 33-46.Arditi D and Chotibhongs R (2005) “Issues in Subcontracting Practice” Journal of Constr. Eng. andManagement 138: 866-876.Associação Brasileira de Normas Técnicas – ABNT (2000) NBR ISO 9000 Sistemas de gestão daqualidade – Fundamentos e vocabulário, Rio de JaneiroAurgenbroe G and Pearce A R (1998) Sustainable construction in the United States of America: aperspective to the year 2010 CIB-W82 ReportBititci U, Martinez V, Albores P, Parung J (2004) “Creating and managing value in collaborativenetworks” International Journal of Physical Distribution & Logistics Management 34: 251-268.Cardoso F F (1997) “Estratégias empresariais e novas formas de racionalização da produção no setorde edificações no Brasil e na França. Parte 1” Est. Econ. da Construção, SindusCon-SP, São PauloCardoso F F (2003) Certificações 'setoriais' da qualidade e microempresas. O caso das empresasespecializadas de construção civil. Tese (Livre-docência) - Escola Politécnica, Universidade de SãoPaulo - EPUSP. São PauloCardoso F F and Araújo V M (2007) “Levantamento do estado da arte: Canteiro de obras” ProjetoFinep 2386/04: Tecnologias para construção habitacional mais sustentável, São PauloCardoso F F et al. (2007) Capacitação e certificação profissional na construção civil e mecanismosde mobilização da demanda. In: EPUSP, ABRAMAT e OIT (Org.) São PauloCBIC - Câmara brasileira da indústria da construção (2001) Macrossetor da construção, (availableonline http://www.cbicdados.com.br/files/textos/037.pdf [Accessed on 02/06/2008])Cooper I (2006) The Subsidiarity Early Warning Mechanism: Making It Work, (available onlinehttp://www.intereconomics.eu/archiv/index.php?mode=rubrik&rubrik=2 [Accessed on 14/11/2008])117

Dainty A R J, Briscoe G H and Millett S J (2001) “Subcontractor perspectives on supply chainalliances” Construction Management and Economics 19: 841-848.DiMaggio P and Powell W (1983) “The iron cage revisited: institutional isomorphism and collectiverationality in organizational fields” American Sociological Review 48: 147-60.ENTREPRISE ET PROGRES Subsidiariedad en la empresa, (available online http://es.catholic.net/empresarioscatolicos/436/1310/articulo.php?id=15335 [Accessed on 09/06/2008])Filippi G A de (2003) Capacitação e qualificação de subempreiteiros na construção civil.Dissertação (Mestrado) - EPUSP, São PauloHaltenhoff C E (1995) “Discussion: The contractor-subcontractor relationship: the subcontractor'sview” Journal of Construction Engineering and Management 121: 332-333.Henke K D (2006) Soft Coordination and Hard Rules in European Economic Policy – ManagingSubsidiarity from an Economic Point of View, (available onlinehttp://www.intereconomics.eu/archiv/index .php?mode=rubrik&rubrik=2 [Accessed on 14/11/2008])Hinze J and Gambatese J (2003) “Factors That Influence Safety Performance of SpecialtyContractors” Journal of Constr. Eng. and Management 129: 159-164.Jung Y and WOO S (2004) “Flexible Work Breakdown Structure for Integrated Cost and ScheduleControl” Journal of Constr. Eng. and Management 130: 616-625.Kale S and Arditi D (1998) “Business failures: liabilities of newness, adolescence, and smallness”Journal of Constr. Eng. and Management 124: 458 - 464.Kale S and Arditi D (2002) “Competitive Positioning in United States Construction Industry” Journalof Constr. Eng. and Management 128: 238-247.Karlsson S (2007) “Allocating responsibilities in multi-level governance for sustainabledevelopment” International journal of Social Economics 34: 103-126.Lordsleem Jr A C (2002) Metodologia para capacitação gerencial de empresas subempreiteiras.Tese (Doutorado), EPUSP, São PauloLove S (1997) “Subcontractor partnering: I'll believe it when I see it” Man. in Eng. 13: 29-31.Melé D (2005) “Exploring the Principle of Subsidiarity in organisational forms” Journal of BusinessEthics 60: 293–305.Oviedo Haito R J J (2010) Caracterização das empresas executoras de serviços de obras baseadanos seus ativos estratégicos. Dissertação (Mestrado) – EPUSP, São Paulo.118

Oviedo Haito R J J, Cardoso F F e Silva M T (2008) “O valor do serviço de construção de edifícios:construindo um diferencial” Anais do XII ENTAC, outubro 2008, Fortaleza, BrasilOyegoke A S (2001) “UK and US construction management contracting procedures and practices: acomparative study” Engineering, Construction and Architectural Management 8: 403-417.Pelkmans J (2006) An EU Subsidiarity Test is Indispensable, (available onlinehttp://www.intereconomics.eu/archiv/index .php?mode=rubrik&rubrik=2 [Accessed on 14/11/2008])Pereira S R (2003) Os subempreiteiros, a tecnologia construtiva e a gestão dos recursos humanosnos canteiros de obras de edifícios. Dissertação (mestrado) – EPUSP, São PauloPope John Paul II (1991) Encyclical ‘Centesiumus Annus’, (available onlinehttp://www.vatican.va/holy_father/john_paul_ii/encyclicals/documents/hf_jp-ii_enc_01051991_centesimus-annus_en.html [Accessed on 27/10/2008])Porter M (1980) Competitive Strategy, Free Press, New York.Porter M (1985) Competitive Advantage, Free Press, New York.Prahalad C K and Hamel G (1990) “The Core Competence of the Corporation” Harvard BusinessReview, May-June 1990, 79-91.Russel J (1991) “Contractor failure: analysis” Journal of Perf. of Constructed Facilities 5: 163 - 180.Schäfer W (2006) Harmonisation and Centralisation versus Subsidiarity: Which Should ApplyWhere?, (available online http://www.intereconomics.eu/archiv/index.php?mode=rubrik&rubrik=2[Accessed on 14/11/2008])SEBRAE-SP (2008) Onde estão as micro e pequenas empresas em São Paulo? (available onlinehttp://www.biblioteca.sebrae.com.br/ [Accessed on 10/09/2008])SENAI (2005) Tendências organizacionais e de difusão tecnológica para o setor de construção civil:Segmento de edificações: Setor de Construção Civil. SENAI, BrasíliaSerra S M B (2001) Diretrizes para gestão dos subempreiteiros. Tese - EPUSP. São PauloVargo S and Lusch R (2008) “Why “service”?” Journal of the Acad. Marketing Science 36: 25–38.Vatican Council II (1965) Pastoral Constitution ‘Gaudium et spes’ (available onlinehttp://www.vatican.va/archive/hist_councils/ii_vatican_council/documents/vatii_const_19651207_gaudium-et-spes_en.html[Accessed on 27/10/2008])119

Development of Business Management Skills for SmallContractors in South Africa – Can We Really MeasureIt?Hauptfleisch, D.The University of Free State, Bloemfontein, SOUTH AFRICA(email: ach@ecospan.co.za)Dlungwana, S.Council for Scientific and Industrial Research (CSIR), Pretoria, SOUTH AFRICA.(email address: sdlungwana@csir.co.za)AbstractPurpose of this paper – This paper demonstrates that programmes aimed at developing businessmanagement skills among small construction contractors, as promoted by some governmentdepartments and agencies, can be scientifically evaluated to determine the level of acquisition ofsuch skills by business owners. Methodology/Scope – The research is based on data compiledduring a pilot contractor development programme that was conducted and concluded in SouthAfrica’s Eastern Cape province in 2007. Another survey was later conducted in 2009. Theprogramme, managed by the Council for Scientific and Industrial Research (CSIR), provided astructured training and mentoring programme to 54 small contractors. Contractor performanceevaluation was conducted using questionnaire-based assessment methods. The pilot programmehas been followed by a refined new programme of similar scope, running from 2008 to 2010.Findings – The research findings demonstrated gradual improvement of performance bycontractors under the programme, giving credence to the effectiveness of the programme in termsof developing skills and delivering business results. These findings are finding application in afollow-up programme conducted by the CSIR. Value – This paper publishes research that can beuseful to South African government departments and agencies in supporting activities aimed atminimising performance risks when awarding construction projects to small (emerging)construction contractors, and in promoting the government’s socio-economic policies. Findingsmade in the pilot programme have been utilized in some public sector programmes and ongoingconsultation between the CSIR and government agencies is taking place with aim of increasingadoption of the programme by government.Keywords: small contractors (synonym: emerging contractors), skills, development, evaluation120

1. IntroductionNumerous attempts by a variety of agencies were undertaken in South Africa to develop small(emerging) construction contractors (SCs) that were disadvantaged in the pre-democratic era in SouthAfrica before 1994. Accelerated development of SCs generally had little success, mainly due to thefragmented nature of such attempts. An Integrated Emerging Contractor Development Model(IECDM) was created, in conjunction with the authors, to address the problems experienced indeveloping self-sustainable construction contractors for the construction industry. This model wasdeveloped by the Council for Scientific and Industrial Research (CSIR), as probably the first holisticapproach. The Eastern Cape Development Corporation (ECDC) adopted the model and introduced itthroughout the Eastern Cape Province, South Africa, as a skills development programme.The problem to create an IECDM consisted of three sub-problems, being firstly to identify supportivelegislation, secondly to identify all the possible role players that could be sourced in support of theholistic IECDM and thirdly to structure the programme, in such a way that the outcomes could bequantified/measured continuously and the results acted upon.The Total Quality Management tool devised for the programme was based on the identification ofknowledge areas and application thereof to be mastered by the SCs. These knowledge areas (45) wereplaced on an assessment schedule, with provision for non-quantified information to be provided.Each of the 45 knowledge areas was assessed monthly, according to a 10-point scale measurement bythe relevant mentor for each contractor. Areas of weakness were identified for each contractor andacted upon. The data collected for all contractors was statistically processed and presenteddiagrammatically for each SC, each region and for the province as a whole.The contributions of each role player/stakeholder in the IECDM are described, following Figure 1,which presents the complete model.Figure 3 is a diagrammatic (overall) example of the quantified/measured data that was continuallyobtained as managerial input to control the programme during implementation.Follow-up assessments regarding role player perspectives on the post-IECDM period have been doneand are reported in the following sections.The conclusions drawn and recommendations made are thus based on the programme as a whole,including the follow-up investigations done, particularly also discounting the qualitative dataprovided by mentors and SCs. It is therefore broader based than the confined information containedin this paper. The follow-up 2008 to 2010 programme, in which the outcomes of the pilot IECDMproject are utilized, is briefly described.Note: The terminology “small contactor” and “emerging contractor” is used synonymously.121

2. Structural InterventionsGovernment, and other organs of state have made the following structural interventions, in order tocreate an “enabling environment” for the rapid development of, inter alia, construction contractors(summarised by Hauptfleisch, 2006:2-3). These interventions were assimilated where possible in thedevelopment of the IECDM:2.1 Creating an enabling environment: construction industrydevelopment board (CIDB)The South African Government has adopted legislation to create an enabling environment, fromwhich inter alia flowed the Construction Industry Development Board Act (Act 38 of 2000). TheCIDB mandate that followed from the above legislation is encapsulated in the following abstract inthe Construction Industry Development Board: Annual Report (2004/2005:12):Provide strategic direction and develop effective partnerships for growth, reform andimprovement of the construction sector;Promote sustainable growth of the construction industry and the sustainable participation of theemerging sector (small contractors).2.2 Broad based black economic empowermentGovernment initiatives are further supported by the Broad Based Black Economic Empowerment Act(No 53 of 2003) (BBBEE, 2003:2) that is in the implementation phase, and reads as follows: “Toestablish a legislative framework for the promotion of black economic empowerment; to empower theMinister to issue codes of good practice and to publish transformation charters; to establish the BlackEconomic Empowerment Advisory Council; and to provide for matters connected therewith.”2.3 Construction education and training authorityThe Skills Development Act (Act 97 of 1998) provides for the creation of a Sectoral Education andTraining Authority (SETA) for each of the various economic sectors. The Construction Educationand Training Authority (CETA) is responsible for training in the construction industry. A levy,expressed as a % of salaries and wages paid by employers, is placed in a fund that is applied in termsof stated guidelines, to ensure that education and training take place in the industry.122

3. Structuring of an integrated emerging contractordevelopment modelThe enabling environment that has been created, as overviewed above, leaves the constructionfraternity with the challenge to create a working model to achieve the stated objectives within theunique demographics of South Africa. The IECDM is a serious attempt to put such a working modelto the test (Hauptfleisch, 2006:4-8).Figure 1 is a diagrammatic presentation of the IECDM, depicting all the identified role playersrequired in order to maximise the development of emerging contractors.1PROJECT MANAGER4TRAININGPROVIDER3CLIENT11MENTOR5CETA6BANKS12EMERGINGCONTRACTOR10MENTOR BASED/EC TRAINING7KHULA/ ECDC9SUNDRYPROFESSIONALSERVICES8CIDB2QUALITY CONTROLLERFigure 1: Integrated Emerging Contractor Development Model (Source: Hauptfleisch, 2006:5)4. Selection of emerging/small contractors, mentors andtraining service providers4.1 Emerging contractors (ECs)Emerging Contractors for the programme were selected from applicants who responded to acomprehensive advertising campaign in the Eastern Cape. A good response was obtained and a finalgroup of 54 was taken on board. The programme was then structured and launched from five centres.123

4.2 MentorsMentors for the programme were selected by inviting applications via a province wide advertisingcampaign. All those who aspired to become mentors on the programme were subjected to theestablished Mentorship Accreditation Programme of the University of the Free State.4.3 Training service providersThree training service providers were selected from the CETA database in conjunction with CETA.Two of these were a source of continuous concern and turned out to be the weakest link in theprogramme, requiring constant management interventions to rectify.5. Total quality management (TQM): quantificationmethodology and application of outcomes5.1 Indabas (meetings) and TQM visitsIn order to ensure that the required results were achieved a system of constant communication/contactwas put in place. TQM being an important element of the IECDM, dictated that the entiredevelopment process of the contractors had to be managed constantly. Two activities were introducedto achieve this. Firstly, Indabas (meetings) were held in every centre, every three months, where allstakeholders were required to be present. Secondly, during the period between Indabas the TQMteam visited every mentor, with the contractors assigned to each mentor present, in the offices of thementor or on a construction project of the contractor, in order to monitor the progress of eachcontractor.5.2 Manual for small construction contractorsThe management team obtained permission from the Building Industries Federation South Africa(1990’s), now Master Builders South Africa (MBSA), to adapt their Manual for Smaller Builders intoa fit for purpose (for the IECDM) Manual for Small Construction Contractors (MSCC).5.3 Quantified data: mentors’ evaluation of emerging contractors andothersThe MSCC was positioned to be a reference standard for the level of competency achieved by thecontractors. The indexing of the manual was further used as reference for the monthly assessmentmade by mentors of each contractor’s development level. Each knowledge area contained in the indexas well as some others was taken up into a ten-point assessment measurement scale. This provided124

the management team with a wealth of sensors (45 knowledge areas) relating to every aspect of eachcontractor’s individual development. Figure 2 is an example of the typical documentation (only firstpage shown) completed monthly by the mentors.The statistical data was processed further through a computer programme, specifically designed bythe CSIR for the IECDM, and presented in easily understandable diagrammatic format (see example,Figure 3).5.4 Quantified data: small contractors’ evaluation of mentors and othersThe small contractors were also afforded the opportunity to evaluate the mentors and other roleplayers on the programme. Their feedback, reflecting the actual experience of the beneficiaries of theprogramme, was very valuable as quantified/measured input and provided very specific insights thatwere also used to assist with the management of the programme.5.5 Management development programmeAfter approximately twelve months it became evident from the data obtained from the mentors thatthe formal training component presented by the training service providers was not going to besufficient to create self-sustainable contractors.Having established shortcomings, the management team introduced a further development tool thatwas named the Management Development Programme (MDP). The MDP was structured in theformat of a simple bar chart for the remainder of the IECDM programme. The methodology followedwas to place each item contained in the MSCC on the bar chart, where after each contractor’sproficiency was evaluated by the mentor and the project team regarding each specific knowledge areain the MSCC.125

NAME OF EC: ____________________________________________________________________NAME OF MENTOR: ______________________________________________________________REGION: ____________________________________________________________________DESCRIPTION OF PROJECTS: ______________________________________________________DATE OF EVALUATION: __________________________________________________________PROGRESS EVALUATION: NQF LEVEL 2The progress evaluation is based on a 10-point scale for which minimum standards to be achieved aredetermined by the Mentor and Emerging Construction Contractor Programme: Setting of MinimumStandards for Quality Assurance of Integrated ECDP. Progress evaluation is also required regarding anumber of items not contained in the above programme, i.e. technical advancement (See item 4).The10-point tick box scale to be utilized as follows (benchmarks only provided, use entire scale forevaluation).1 = The EC is not capable at all to execute this activity independently5 = EC is capable to execute this function with assistance10 = EC is capable to execute this function independently on a sustainable basisASPECTS TO BE EVALUATED: DEVELOPMENT OF BUSINESS PROCESSES1 2 3 4 5 6 7 8 9 10SECTION 1: RUNNING A SMALL BUSINESSA. ADMINISTRATION:1. The Business plan: Development achievedComments: _______________________________________________________________________Figure 2: Mentor’s Monthly Evaluation of Emerging Contractor (Source: Hauptfleisch, 2006)The mentors were then required to intervene and specifically oversee capacity creation in areas ofweakness. This intervention is visually very evident from Figure 3, showing the specific impact of theMDP from June 2006 onwards.6. Construction education and training authority (CETA)6.1 The role of CETAAs the statutory body responsible for training in the construction industry, it was obvious that CETAparticipation should be sought in the IECDM. It was agreed with CETA that the contractors on theIECDM would be accepted for training in order to earn a qualification.6.2 Training methodologyThe training methodology followed consisted of a duel system, having a classroom trainingcomponent and structured workplace experience, the latter supported by mentors.126

7. Quantitative measured data: CSIR diagrammaticpresentation and commentsAll the data generated during the programme was continuously processed and reported on by theCSIR. This element of the programme is unique and the first known of its kind, applied in order tocontinuously track, assess and manage programme outcomes.The most important outcome of the CSIR Report is that it conclusively shows that it is possible to setstandards for all aspects of a development programme, measure the outcomes, assess deviations andtake corrective steps based on the measured outcomes (TQM), during the life of the programme. Oneexample of a diagrammatic presentation is shown in Figure 3, providing a perspective of the overallability developed by the contractors during the programme (CSIR Close-Out Report, 2007:1-22).Table 1 provides the scoring and ranking scales, as was determined in order to reflect the contractors'ability to manage a small construction business.7.1 Running a small business-global averagesWhen viewed across the overall performance for the time under review (see Figure 3), October 2006represents the highest rating at 59.7% (average, approaching very good performance). Whencompared to the 24.9% recorded in August 2005, through to June 2006 (being “fair”), theperformance regarding this indicator has increased by almost 35 percentage points since the inceptionof the programme, mainly during the period June 2006 to October 2006. This represents a substantialincrease in the ability of contractors to run a small construction business. This strong improvementspecifically coincided with the introduction of the Management Development Programme (MDP),requesting mentors to identify knowledge weaknesses and to take steps to rectify it (TQM),underscoring the mentors’ contribution in capacity generation.Figure 3: Running a Small Business – Global Averages (Source: CSIR, 2007)127

Table 1: Scoring and RankingScorePerformance0-20% Poor performance (contractor is not capable to execute an activity independently)21-40% Fair performance41-60% Average/good performance (contractor is capable to execute and activity with assistance)61%-80% Very good performance81-100% Excellent performance (contractor is capable to execute activities independently and in asustainable manner)Source: CSIR 20078. Follow-up surveysFurther fairly comprehensive studies were undertaken, following the official completion of theprogramme in November 2006, in order to obtain a final perspective from the participants, dealingwith aspects not contained in the CSIR Report. This survey (Close-out Stakeholder Questionnaires)leads to two further reports, firstly reflecting views of mentors and training providers and secondlythe views of the SCs. These reports generally comment favourably on the IECDM. Some of theresultant data, based on inputs obtained from the main beneficiaries of the IECDM, the SCs, isreflected in Sections 1 and 2 below (ECDC, IECDM Close-Out Report, 2007: 19-20).Section 1 requested the respondents to rate the overall performance of the model. The scoringsystem utilised was based on a 1-10 rating with: 1-2 = poor, 3-4 = fair, 5-6 = average/good, 7-8 =very good, 9-10 = excellent Question 1.1: Rate the overall IECDM programme in terms of delivering on the key objectivebeing enterprise development of emerging contractors. The average score was 8, thus falling intothe range of “very good”. Question 1.2: Rate the mentoring programme introduced by the project team in terms of valueadding beneficiation of the emerging contractor. The average score was 9.3, thus falling into therange of “excellent”. Question 1.3: Rate the management of the IECDM by the ECDC appointed project team. Theaverage score was 8.33, thus falling into the range of “excellent”. Question 1.4: Have you as the emerging contractor noticed significant growth of your enterpriseregarding sustainability and viability as a construction enterprise. The average score was 8, thusfalling into the range of “very good”. Question 1.5: Rate the CETA learnership in terms of the value adding beneficiation it hasprovided for the emerging contractor. The average score was 8.33, thus falling into the range of“excellent”. The emerging contractors have indicated a high level of satisfaction with thelearnership qualification. This in contradiction of the 6.33 scored for the same element by thementors. Based on the scores received and the comments, it may be said that although the128

emerging contractors felt they gained from the learnership the mentors questioned the lack ofpractical application on site of the modules taught on the learnership. Question 1.6: Rate the overall TQM process in terms of the value adding, providing correctivemeasures and to guide the mentor/emerging contractor /training provider relationship. The averagescore was 8.67, thus falling into the range of “excellent”. Question 1.7: Has the introduction of the Manual guideline document (MSCC) created a soundknowledge base for the mentor/contractor relationship. The average score was 9, thus falling intothe range of “excellent”.Section 2 took into account the business development of the emerging contractors; the responsewas requested as a yes or no to the question put forward: Question 2.1: Asked whether the IECDM had improved the business skills of the emergingcontractor to manage their enterprises effectively. 100% responded with “yes”. 0% respondedwith “no”. Question 2.2: Asked whether the emerging contractor was now in a position to execute projects oflarger capacity as a result of the knowledge gained through the IECDM. 100% responded with“yes”. 0% responded with “no”. Question 2.3: Asked whether the emerging contractor was able to tender and compete moreefficiently for construction projects post IECDM than prior to the IECDM. 100% responded with“yes”. 0% responded with “no”. Question 2.4: Asked whether the emerging contractor felt the knowledge base regarding theconstruction industry has been enhanced as a result of their participation in the IECDM. 100%responded with “yes”. 0% responded with “no”A small survey was undertaken 12 month after completion of the programme. Some of theresponses obtained from 16 contractors within a limited time frame (30,8% response) areprovided in Tables 2 and 3.Table 2: Emerging Contractors’ Personal DevelopmentQUESTION1 How much value would theextension of the mentoringprocess have added to thesuccess of your business if itwas continued for anotheryear?2 Have you developed theability to tender on yourown?3 Have you developed theability to do your ownaccounts?PERCENTAGENone Slightly Moderately Considerably- 12.50 12.50 75- 12.50 37.50 50- - 62.50 37.50129

Table 3: Rating of Overall Programme (10-point Scale)QUESTION1 Rate the overall IECDM programme interms of delivering on the key objectivesbeing enterprise development ofemerging contractors2 Rate the mentoring programmeintroduced by the project team in termsof the value adding beneficiation of theemerging contractors3 Rate the management of the IECDM bythe ECDC appointed Project TeamPERCENTAGE ON 10 POINT SCALE1-2 3-4 5-6 7-8 9-10- - 37.50 50 12.50- 12.50 25 37.50 25- - 37.50 37.50 25A further limited survey was conducted in December 2009 amongst small contractors that took part inthe pilot programme 3 years after completion of the programme. Responses where obtained from 20contractors (out of the 54 participants) that could be reached (37% response). Table 4 thus providesthe perspectives of contractors, almost four years after the commencement of the pilot project.Table 4: Contractors’ progress 36 months after completion of the programme (subject to availabilityof work (recession))QuestionnrQuestion YES NO1 Has your ability to manage yourbusiness improved over the last 12months?2 Are you now capable to execute/takeon contracts larger than those 12months ago?3 Has your ability to prepare tendersfurther improved over the last 12months?4 Are you now capable to employ morepeople, including sub-contractors andtheir staff, than 12 months ago?19 110 1017 312 8Table 4 illustrates the results of the questionnaires for 20 contractors who were interviewedtelephonically. It was not possible to interview all the contractors mainly because some telephonenumbers have since changed; the sample therefore represents those contractors that could be tracked.Almost all contractors interviewed (95%) felt that the IECDM programme contributed immensely tothe general development of their business skills and construction knowledge, which has improved130

their ability to manage their businesses. 50% of interviewed contractors indicated that they havegrown their companies by one or two CIDB grades between the time of interview and the beginningof the programme. A similar number of contractors felt that although there has been a lot of learning,the CIDB grading level has remained unchanged. Much of this was attributed to lack of work as aresult of highly competitive market environment and lack of transparency in awarding tenders whichthey blamed on corrupt practices by procurement authorities.Some 85% of contractors stated that their pricing and tendering skills have improved greatly andwere now able to price their own tender documents instead of hiring consultants. A smaller portion ofthis group, however, admitted that in some bigger projects they still needed outside help but wereable to check if the rates and the prices were realistic. Some 60% of the contractors stated that theyhave managed to employed more labour than before, and this figure corresponds closely to the 50%of contractor that have managed to increase their CIDB grades.Overall, it appears that even three years after the completion of the IECDM programme there hasbeen remarkable improvement on the skills development of contractors and contractors have survivedunder a very difficult market environment. It seems that skills would develop at a much faster rate ifcontractors can have easier access to construction projects during the programme.9. General comments regarding statistical dataFrom a purely methodology perspective, it is important to note that the data contained in all thereports represents the perspectives of mentors and SCs. The data contained was not tri-angulated.However, the feedback from mentors and contractors, over a large geographical area, withoutpersonal contact with each other, consistently confirmed the same trends, supporting the reliability ofthe data.10. Follow-up programme 2008 to 2010The follow-up programme of 2008 to 2010, based on the experience and outcomes of the pilotprogramme, inter alia introduced the following practice: The small contractors enlisted were selected to ensure that the majority has constructioncontracting experience. The training providers were rigorously selected and their contribution and training progress tightlymonitored. The accredited mentors active on the programme are monitored continuously for diligent supportto the contractors. The TQM reporting and other reports reflecting programme progress is more widely distributed toshareholders.131

The project management services provided by the CSIR management team had to be extended tocounter the weaker client (ECDC) management contribution to the overall management of theprogramme. The measurement instruments for the programme have been refined, making possible a reductionin sensors without sacrificing quality. The measurement scales were reduced from 10-point scalesto 5-point Likert-scales. Concurrent with this change a more sophisticated computer programmehas been introduced. The latter provides rapid visual diagrammatic presentations of the measureddevelopment progress made by the contractors. The measurement scales and computerizedprocessing and presentation of date are now in a format that is also available for application inother programmes.11. Conclusions The research conducted during the creation and practical implementation of the IECDM (as aholistic integrated programme in practice) and the ensuing results, conclusively showed that theelements contained in the model are vital to achieve successful outcomes resulting from thecreation of an enabling environment for small/emerging contractor development in South Africa. The programme has to be rigorously managed. This requires that a competent project manager andmanagement team be appointed to manage the programme on a day-to-day basis. An important principle underlying the IECDM is recognised, namely that it is a training anddevelopment programme with the objective of creating sustainable construction businesses.Training and development has a price tag and satisfactory results are achieved more effectivelyand efficiently when programmes have the necessary financial resources and the full commitmentof all stakeholders. The principles applied in this programme are generic and could be applied to other industries suchas agriculture, trade, light engineering, etc. All elements of the programme have to be supported by quantified Total QualityManagement processes and managed each step of the way so that corrective action may betaken in time. Regular progress reports and management action plans, based primarily onquantitative/measured data, supported by qualitative data were key elements of theprogramme. By having established measurement tools, utilized through-out the programme,it became possible to manage the development of the small contractors scientifically.132

ReferencesBuilding Industries Federation South Africa. Undated, during 1990’s. Manual for Smaller Builders.Midrand.Construction Industry Development Board. 2004/2005. Annual Report 2004/2005. Pretoria.Eastern Cape Development Corporation (ECDC). 2007. Integrated Emerging ContractorDevelopment Model (IECDM): Close-Out Report. East London.Hauptfleisch, A.C. 2006. Integrated Emerging Contractor Development Model. University of theFree State. Johannesburg.Hauptfleisch, A.C. 2008. The Role of Total Quality Management as a Key Intervention in SmallConstruction Contractor Development in South Africa. 5 th Post Graduate Conference, ConstructionIndustry Development Board. Bloemfontein.Hauptfleisch, A.C, Verster, J.J.P and Lazarus S. 2008. The Quantification of Outcomes in EmergingConstruction Contractor Development. ASOCSA Conference, Cape Town.Republic of South Africa. 2003. Broad Based Black Economic Empowerment Act (No 53 of 2003).Pretoria. Government Printer.Republic of South Africa. 2000. Construction Industry Development Board Act (No 38 of 2000).Pretoria. Government Printer.Republic of South Africa. 2003. Skills Development Act (No 97 of 1998). Pretoria. GovernmentPrinter.Council for Scientific and Industrial Research (CSIR). 2007. Close-Out Report: EmergingContractor Development Model for the Eastern Cape Development Corporation. Pretoria.133

Corporate Decision Making in the Implementation ofEnvironmental Management Systems: Small andMedium-Sized EnterprisesNjuangang, S.School of Built and Natural Environment, University of Central Lancashire(email: snjuangang@uclan.ac.uk)Douglas, C. H.School of Environment and Life Sciences, University of Salford, UK(email: c.h.douglas@salford.ac.uk)Liyanage, C. L.School of Built and Natural Environment, University of Central Lancashire(email: CLLiyanage@uclan.ac.uk)AbstractSMEs (Small and Medium-Sized Enterprises) make up about 99% of all businesses in the UK.Despite this economic significance, SMEs in the UK contribute cumulatively to the largestenvironmental impact and risk. The role of SMEs in achieving the UK green agenda thusmakes the implementation of Environmental Management Systems (EMSs) necessary. Themain purpose of this paper is to discuss the drivers and barriers that influence the adoption ofEMSs by SMEs. The findings presented are primarily based on an in-depth literaturereview. Studies in the UK have shown that, existing legislation, social responsibility andcustomers are the key drivers in EMS implementation. SMEs generally lack environmentalawareness, expertise and understanding of adopting EMSs. Their lack of awareness of thebenefits of EMSs has also contributed towards the poor level of adoption of EMSs. Apart fromall aforementioned factors, the most significant factor that influences EMS implementation bySMEs appears to be ‘cost’. The total cost of implementing an EMS seems to be greater than theturnover of most SMEs. This evidently, has discouraged many SMEs in EMS implementationas; many see it as a cost burden that cannot be passed on to their customers or to any otherstakeholder. Therefore, there is a need to introduce cost-effective solutions for implementingEMSs in SMEs that can, in turn, help in sustainable development.Keywords: Environmental Management System (EMS), implementation; influence factors,Small and Medium-Sized Enterprise (SMEs), sustainable development.134

1. IntroductionSmall and medium-sized enterprises (SMEs) are vital to the UK economy as they account forthe majority of firms. According to estimates by NetRegs (2003a), SMEs account for up to 99%of the estimated 3.7 million businesses in the UK. This fact is supported by Roberts et al (2006)who noted that, of the estimated 4.3 million businesses in the UK only 26,000 (0.6%) weremedium, (50-259 employees) and 6,000 (0.1%) were large (over 250 employees). It can bededuced from these figures that the vast majority (99.3%) of firms in the UK employ fewer than50 workers.Despite the significance of SMEs to the UK economy, there appear to be little interest in thelikely cumulative environmental impact of the sector. As a result, many SMEs have generallyfailed to respond positively to a number of environmental initiatives that have aimed to improveenvironmental performance. Recent environmental pressures and concerns have not beensufficient to persuade SMEs to embrace Environmental Management Systems like ISO1400(International Organisation for Standardisation 14001), EMAS (Eco-Management andAudit Scheme), BS 8555 (British Standard 8555). This against the fact that SMEs in the UKcontribute up to about 70% of all industrial pollution (Hillary, 1995 cited in Hillary, 2003),80% of all pollution accidents and 60% of commercial waste in the UK (NetRegs, 2003a).The gap between the likely environmental impact of SMEs and the implementation ofEnvironmental Management Systems reveal that, part of the solution lies with understandingthe drivers and barriers that influence SMEs to embark on EMSs. The purpose of this study istherefore to conduct an in-depth literature review of the drivers and barriers faced by SMEs inthe implementation of EMSs.2. The benefits associated with EMS implementationFor businesses to stimulate growth and reduce their impacts on the environment, they havesought to implement tools that will aid reduce cost while at the time minimise resource andenergy consumption. One of such tools is an EMS used to aid firms manage their environmentalimpacts through a structural approach of planning and implementing environmental protectionmeasures (European Economic Area, 1998). An EMS operates under the principle of ‘plan whatyou are going to do, do what you are going to do, do what you planned to do, check to ensurethat you did what you planned to do and act to make improvements’. The three EMSs that willbe mentioned in this study are; ISO 14001, EMAS and BS 8555.The decision of an SME to implement an EMS depends on its weighting the benefits and nonbenefits of it doing so. As Struder et al (2005) noted, a number of SMEs might be motivated toimplement an EMS if they are convinced it would add value to their business. Data gatheredthrough the implementation of EMSs has shown that EMSs lead to savings in the cost of energyand raw material (Whitelaw, 1997; Puri, 1996).135

Through EMS processes of Environmental Performance Evaluation and Quality Auditing,SMEs are able to implement cost reduction strategies of their existing operations. They canachieve cost savings from cheap alternative energy and raw material sources and wherepossible redesign products and packaging to reduce waste. According to Starkey (2000), EMSin a Vaux haul plant at Ellesmere Port UK has given benefits such as cost savings, reducedenvironmental burden and environmental awareness of workers.Also associated with the implementation of EMSs are organisational improvements andefficiencies (Hillary, 2003; Scoffman and Tordoni, 2000). For example, SMEs with an EMScould witness improvements in quality systems, quality of management and training ofemployees as well as, develop new business/market opportunities and improve relationshipwith relevant stakeholders (customers, shareholders, regulators, local community, partners andemployees). Many firms including SMEs use EMS certification as a logo of excellence todistinguish themselves and provide customers and investors a reason for choosing their productand services over rivals. The implementation of an EMS therefore serves as a gateway to localand foreign markets.Being certified to an EMS could also result to a number of financial gains. Having an EMS canactually bring down the cost of insurance and reduce the risk of imprisonment by demonstratingdue care and diligence (Whitelaw, 1997). A survey conducted by NetReg (2007b) foundreduced risk of prosecution; good customer relations and reduced operating cost were the mainbenefits respondents associated with environmental management.The value of having an EMS has lead Johnson (1997) to observe that firms with an EMS arebetter managed and more successful than those without an EMS. They put emphasis onpollution prevention rather than on end of pipe solutions, which are reactive, expensive andoften increase overall cost (Welford, 1998). The benefits associated with EMSs make the studyinto the drivers and barriers into EMS implementation an important one.2.1 Key drivers in the implementation of EMSsDrivers are a number of push factors that can actually push a firm into implementing an EMS.Drivers can be classified into internal and external drivers depending on whether they areinternally or externally influenced. An understanding of the drivers in EMS implementation isimportant in the formulation of policies aimed to push the uptake of EMSs by SMEs. It alsogives an insight into how drivers impact on firms in the different sectors.The benefits associated with EMS implementation also act as drivers. As the primary aim ofmost businesses is to maximise profits, it is no doubt that the benefits associated with EMSimplementation will act as a pull to most SMEs. A number of studies in Hong Kong haveshown the main drivers of EMS implementation to be competitive advantage, brandenhancement, reputation and increased revenue (Struder et al, 2005; Lo et al, 2003).136

Unlike in Hong Kong, NetRegs (2003a); Pimenova and Van der Vorst (2003) found socialresponsibility, compliance with existing legislation and general concern for the environment tobe the main drivers in the implementation of EMSs in the UK. The difference between thesestudies seems to point the fact that the UK has an environmental conscious public and astronger regulatory regime than Hong Kong. It also reveals that, unlike in the UK where manyfirms see EMS as a tool to manage their environmental aspects, SMEs in Hong Kong perceiveEMSs as a marketing tool to generate profit.Though SMEs in the UK appear to be environmentally proactive, they nonetheless see EMSs asbeing peripheral to their business concern. Legislation is therefore a tool through which SMEsin the UK can be encouraged to embrace EMSs (Mir and Feitelson, 2007, Revel and Blackburn,2004). Despite this, a survey conducted by NetRegs (2003a) found that micro businesses wereleast likely to be affected by legislation or seek to achieve operational benefits from goinggreen. Instead of embarking on green initiatives like EMSs, most SMEs concentrate their efforton emission reduction tactics; as this is a basic strategy to avoid any penalties from regulators(Hillary, 2007 cited in Schaper, 2007).Relevant stakeholders could also put pressure on SMEs to embark on EMSs. Some of thesestakeholders include: customers, the general public, shareholders, business partners, largercompanies, insurers, employees and regulators. A study of 33 different SMEs both in the UKand EU (1994-1999) lead Hillary (2003) to conclude that, customers were the most importantstakeholders in the implementation of EMS. However, the interest of customers on theactivities of SMEs depends on its nature of business. Stakeholders only exert pressure on SMEsif they perceive their operation as posing a high risk to the environment. In a study of SMEs inthe construction and restaurant industries, Revell and Blackburn (2004) showed that SMEs withlittle environmental impacts faced little stakeholder pressures to embark on an environmentalinitiative like EMS. This study, which focussed on SMEs in the construction and restaurantindustries, found that respondents in the restaurant sector felt being environmentally friendly(EMS) was not something customers were interested in. Conversely, SMEs, which are aware oftheir environmental impacts, are more likely to implement EMSs to demonstrate to itscustomers and other relevant stakeholders that it is taking the environment seriously. Palmer(2000) in a study of seven organisations was able to show that Hampshire Chemical with themost potential for hazardous effect and financial resources had an EMS.SMEs in the micro sector are least likely to face any pressure from customers to engage in anenvironmental initiative like EMSs. In a study of SMEs in Jerusalem, Mir and Feitelson (2007)noted that, market pressure, opportunities through suppliers and contractors were moreimportant than customers in changing environmental behaviour. Increasingly, many largecorporations are using EMSs as a prerequisite to award contracts or partner with SMEs downtheir supply chain (Mir and Feitelson, 2007).This has therefore exerted pressure on SMEs vyingfor the same market opportunities to demonstrate some form of environmental action like theimplementation of EMSs. However, this is often only restricted to upper tier SMEs who oftenare ‘nearly’ large companies themselves. The key drivers in EMS implementation are listedbelow as:137

Social responsibilityConcern for the environmentNature of businessStakeholders pressure: customers, regulators, large firms, local community,banks/insurersLegislationMarket pressureBenefits of EMS implementation: competitive advantage, brand enhancement,reputation and increased revenue, low cost of energy and raw material, insurance,compliance with existing legislation.2.2 Barriers in the implementation of EMSsBarriers are obstacles that arise within an SME and prevent or impede it from implementing oradopting an EMS. Barriers that operate within an SME are called internal barriers while thosethat are outside the remit of an SME are called external barriers. The study of barriers isimportant in understanding the reasons why SMEs fail to embrace environmental initiatives likeEMSs. As drivers, barriers are important in the understanding and formulation of policiesaimed to drive the uptake of EMSs by SMEs.There are a number of barriers that prevent an SME from implementing an EMS. Financialresources are very fundamental to the implementation of an EMS hence; it is often seen as oneof the major barriers. Unlike large multinationals where the cost of implementing an EMS maysimple be to pay for registration, SMEs generally lack the necessary manpower and logisticsthat is needed for EMS implementation. According to Miles et al (1999) approximate cost ofadopting ISO 14001 in a company is usually $100,000/year excluding work done by companystaff. Realistically, this amount far exceeds the turnover of most SMEs who, in the face of theglobal economic recession, struggle to survive. Some studies have even indicated that theaverage cost per employee of environmental compliance decreases as the size of the firmincreases (Hopkins, 1996 cited in Mir and Feitelson, 2007). Even where SMEs have theadequate resources, most are still sceptical or unsure whether implementing an EMS will bringabout any financial gain. The result is that, most SMEs see green initiatives (like EMS) as acost burden, which in the mind of many owners and managers cannot be passed onto customers(Tilley, 1999).The multi-functional task of SME staff means there is not always enough time for EMSimplementation. They lack the expertise needed to make accurate assessment of the time and138

esources needed for the implementation of an EMS. As a result, environmental responsibilityis often left solely for top management, who often see it secondary to other business affairs(Pimenova and Van der Vorst, 2003; Hillary, 2003; Palmers, 2000; Whally, 2000). Even whereSMEs do have an individual responsible for the environment, it is often in conjunction withproduction, health and safety. As a result, there is often not enough management and staff timededicate to environmental issues.The impact of legislation as a driver in the implementation of EMSs in SMEs is one of theclearest and least contestable (Tilley, 1999; Revel et al, 2008). Despite the influence oflegislation, Petts (2000) argue that SMEs in the UK face less regulatory pressure than largefirms. One of the major differences between SMEs and large firms is in the type and nature ofenvironmental regulation they are both exposed. Unlike SMEs, larger firms are subjected tostringent environmental regulation. Large firms whose operations pose a significant threat toland, air and water are subjected under the Integrated Pollution Control (IPC). They arerequired to demonstrate an understanding of the impact of their operation and to minimise itthrough Best Practicable Environmental Option (BPEO). They must also apply Best AvailableTechnique not Entailing Excessive Cost (BATNEEC) in the process to meet the objectives oflegislation.Although the implementation of Integrated Pollution Prevention and Control (IPPC; Directive96/61/EC) saw an increase in the number of industries subjected to stringent control, Petts(2000) noted that, only 5% or less of SMEs are subjected to part A of IPPC and 15% to part Bprocesses under the control of the Local Authority. Though part B processes (under LocalAuthority Control) are subjected to the preventative and proactive regulatory style inherent inconsideration of BATNEEC (Best Available Techniques Not Entailing Excessive Cost), it onlyapplies to air pollution control (Petts, 2000). With few SMEs under stringent regulation, manyhave turned to reactive ad hoc environmental initiatives that meet the basic requirement of theirpermit conditions. Also a large number of SMEs are affected by incidence based regulation,coming in contact with an environmental regulator only when a particular law has beencontravened or traced back to them (Petts, 2000).There are two major issues associated with the educational awareness of the SME sector. Thefirst being the lack of awareness of the environmental benefits of improved environmentalmanagement performance and the lack of the expertise and understanding about actuallyimplementing an EMS (Gerstenfeld and Roberts, 2000; Hillary, 2003).Because many SMEs view EMS with little interest, they rank it relatively low on their businesspriorities (Bichard, 2000; Tilley, 1999) or simply perceive their impact as being too small ornon existence. One of the reasons for this ignorance is because many SMEs suffer frominformation overload and tend to discount much that comes across their desk without furtherconsideration (Hunt, 2000). As a result many SMEs lack the relevant information about EMSsdue to their poor perception of environmental issue (Smith et al, 2000). To even make mattersworse, most of the tools and techniques for improving environmental performance have beentailored in favour of large firms as they fail to take the unique characteristics of SMEs into139

account (Gerstenfeld and Roberts, 2000). The lack of sector specific guidance and materialsthat take into account the different sizes of firms means that SMEs are still unsure about whereto seek advice.The lack of communication between SMEs and key environmental organisations has resulted inmany SMEs not being able to access necessary financial and technical support needed for EMSimplementation. Even efforts meant to push environmental awareness through energy-savinginitiatives have failed to persuade SMEs to embrace EMSs (Roberts et al, 2006). The majorityof SMEs seem to concentrate their attention on everyday operational issues rather thaninvesting on long-term holistic strategies (EMSs) that will benefit their businesses and theenvironment. Even when SMEs have tried to go green, they have often done so in a piecemealfashion concentrating on measures that bring short-term financial gains. In addition to meetingbasic permit requirements, the majority of SMEs without an EMS do practice some form ofrecycling, waste and energy management.Most SMEs especially in the micro sector are solely owned and depend on the decision of themanager/owner on such issues as EMS. A number of studies have been done to find out theassociation between the environmental attitude of owners/managers and the implementation ofEMS or performance. Though most managers/owners have a positive environmental attitude,there appear to be a gap between what they say and practice (Schaper, 2001; Mckeiver andGedanne, 2005; Tilley 1999; Merritt, 1998). Despite a large majority of owners/managersshowing an environmentally friendly attitude, Mckeiver and Gedanne (2005) in their study ofSMEs in Australia found that 61.4% of the SMEs neither had a formal or informal EMS. AsMerritt (1998) noted, managers who expressed a rather more positive environmental attitudewere less likely than those who did not in introducing environmental management practice.This has lead Mckeiver and Gedanne (2005) to blame the low uptake of EMS by SME on thedisassociation of the environmental attitude of owners/managers and the implementation ofEMS. Below is a list of barriers in the implementation of an EMS by SMEs:Cost of implementation/verificationManagement and staff time delegated to EMSLack of legislative pressureNot a legal requirementLack of awareness of the benefits and expertise/understanding of implementing EMSs.Lack of information/ignorance about EMSLack of communication between SMEs and key environmental organisationsEnvironmental attitude of SME owners/ managers140

3. Conclusions and recommendationsThe findings of this research are also useful in the understanding of the drivers and barriersfaced by SMEs in the implementation of other management systems like the InternationalStandard for Quality Management ISO 9001, Occupational Health and Safety ManagementSystems (BS OHSAS 18001, ILO-OSH 2001 Guidelines, and HS (G) (65). The implementationof these management systems are driven as well as hindered by similar factors that SMEs facein the implementation of EMSs. The similarities in the requirements used in the implementationof these management systems strengthen the argument for an integrated management systemwhich uses the simple principle of ‘plan-do-check-act’. For such an integrated managementsystem to have an impact on the SME sector, it must be tailored to take into account the diversecharacteristics of the SME sector.Though SMEs in the UK are motivated by social responsibility and concern for theenvironment, the main driving force behind EMS implementation appears to be profit. SMEsimplement an EMS because of numerous benefits associated with it: competitive advantage,reputation, brand enhancement, customer satisfaction, compliance with existing legislation,organisational improvement, better training of employees and communication.Figure 1(A) illustrates how key drivers could act as a push factor in the implementation of anEMS and in turn leads to a number of benefits. It is worthwhile noting that, these benefits helpservice the running (e.g. verification cost) of the EMS through the realisation of financial gains.On the other hand, figure 1(B) shows how barriers could push an SME into inactive, therebyputting it in a disadvantage position. Because SMEs without an EMS are less competitive thanthose with an EMS, their goal should be to break the cycle of inaction and move from positionB to A (see fig. 1).Action lineREACTIVESMESMEKEYDRIVERSKEYDRIVERSSMEEMSsBANon benefitsHigh energy bills, unsustainable wastemanagement practices, low staff eco-literacy,failure to meet legislative compliance, fines,high insurance premium, and lack of businessopportunities.BenefitsCost savings from sustainable energyand raw material utilization, access tonew and existing markets, competitiveadvantage, brand enhancement,insurance premium, better customerrelationship, eco-literacy, and legislativecompliance.141

Figure 1: A conceptual framework of the drivers and barriers in EMS implementationAmongst the different stakeholders in EMS implementation, customers, larger firms andbusiness partners are the most important because of their economic significance to SMEs.SMEs whose operations pose an environmental risk are more likely to use EMS to wade offpressure from stakeholders and demonstrate environmental seriousness. However, this is likelyto affect only a small number of SMEs up the supply chain.The high cost of implementing an EMS has made EMSs affordable only to those SMEs whichare financially viable. The cost of EMS implementation and verification (internal and externalverifiers) put the total cost far above the reach of most SMEs. Even when SMEs are financialviable, market conditions make EMS implementation unprofitable.Also, associated with cost is the lack of management and staff time required in EMSimplementation. The multi-functionality of staff task means that SMEs will prefer to allocatestaff to those business operations they believe will generate immediate profits. The lack of timemeans that, many SMEs do not even bother to seek technical and financial help. The lack ofcommunication between SMEs and those organisations rendering assistance in EMSimplementation appears to be a major barrier. The lack of communication has left manyconcentrating on makeshift environmental initiatives that only bring short-term benefits.The lack of legislative pressure is an important barrier in the implementation of EMSs bySMEs. For the reason that most environmental legislations target but large firms, many SMEshave resort to focus their time on meeting the basic requirement of their permit condition.Legislation remains one of the most important tools to drive up EMSs amongst SMEs.The study of drivers and barriers in EMS implementation are important in understanding thevarying reasons why some SMEs embark on EMSs and others do not. The findings couldtherefore assist in the formulation of target specific policies and laws that aim to change theenvironmental practice and behaviour of the SMEs sector.The heterogeneity of the SME sector means that, the ‘one shoe fits all’ principle of the driversand barriers in EMS implementation is unlikely to reflect a true picture of the sector. For thereto be a full understanding of the drivers and barriers in EMS implementation, EMSs need to betailored in a way that take into account the size and nature of business of the SME sector.Those promoting EMSs amongst SMEs could also use financial and technical incentives toplacate SMEs into adopting EMSs. Given the cost associated EMS implementation, SMEsshould where possible, be encouraged to adopt an uncertified in-house EMS based on one ofthe aforementioned EMSs. This will go a long way to cut the likely cumulative environmentalimpact associated with the SME sector.142

ReferencesAnglada, L M. 2000. Small and Medium –Sizes enterprises: Perceptions of the Environment, INHillary, R. (ed.) 2000. Small and Medium-Sized Enterprises and the Environment, Sheffield,Greenleaf Publishing Ltd.Bichard E. 2000. Time to reassess the Small Business Environmental help Organisation, INHillary, R (ed.) 2000. Small and Medium-Sized Enterprises and the Environment, Sheffield,Greenleaf Publishing Ltd.Defra. 2008, Defra Position Statement on Environmental Management Systems, Department ofEnvironment, Food and Rural Affairs.European Environment Agency. 1998. Environmental Management tools for SMEs: Ahandbook, Copenhagen, EEA.Gerstenfeld, A and Roberts, H. 2005. Size Matters: Barriers and Prospects for EnvironmentalManagement in Small and Medium-Sized Enterprises, Journal of Cleaner Production, 23 (5):513-537.Hillary, R. 2004. Environmental Management Systems and the Smaller Enterprise, Journal ofCleaner Production, 12 (6): 561-569Johnson, P. 1997. ISO14000: The Business Manager’s Complete Guide to EnvironmentalManagement, New York, John Wiley & Sons, Inc.Roberts, S, Lawson, R and Nicholls, J. 2006. Generating Regional-Scale Improvements in SMEcorporate Responsibility Performance: Lessons from Responsibility Northwest, Journal ofBusiness Ethics, 67(3): 275-286Lo, M, Tsoi, J, Welford, R, Hills, P and Hills, J. 2003. Corporate Environmental GovernanceProgramme: In-house Environmental Knowledge Capital and Corporate EnvironmentalGovernance in Hong Kong Businesses, Hong Kong, University of Hong Kong.McKeiver, C and Gadenne, D. 2005. Environmental Management Systems in Small andMedium Businesses, International Small Business Journal, 23, 513.143

Merritt, Q J. 1998. EM into SME won’t go? Attitudes, Awareness and Practices in the LondonBorough of Croydon, Business Strategy and the Environment, 7: 90-100.Miles, P M, Munilla, S L and McClurg, T. 1999. The Impact of IS0 14001 EnvironmentalManagement Standards on Small and Medium Sized Enterprises, Journal of QualityManagement, 4 (1): 111-122.Mir, F D and Feitelson, E. 2007. Factors Affecting Environmental Behaviour in Microenterprises:Laundry and Motor Vehicle Repair Firms in Jerusalem, International SmallBusiness Journal, 25 (4): 383-415NetRegs. 2003a. SME-Environment 2003: A Survey to Assess Environmental Behavioursamong smaller UK Businesses, NetRegs.NetRegs. 2007b. SME-Environment 2007: England, NetRegs.Palmers, J. 2000. Helping Small and Medium-Sized Enterprises improve EnvironmentalManagement, IN Hillary, R (ed.) 2000. Small and Medium-Sized Enterprises and theEnvironment, Sheffield, Greenleaf Publishing Ltd.Petts, J. 2000. SMEs and Environmental Compliance: Attitudes among Management and Non-Management, IN Hillary, R (ed.) 2000. Small and Medium-Sized Enterprises and theEnvironment, Sheffield, Greenleaf Publishing Ltd.Pimenova, P and Van der Vorst, R. 2004. The role of Support Programmes and Policies inImproving SMEs Environmental Performance in Developed and Transition Economies, Journalof Cleaner Production, 12: 549-559.Puri, S C. 1996. Stepping up to ISO 14000: Integrating Environmental Quality with ISO 9000and TQM, Portland, Productivity Press.Royal Society of Chemistry, 1998. Eco Labelling, RSC.Revel, A and Blackburn, R. 2004a. SMEs and their Response to Environmental Issues in theUK, Surrey, Small Business Research Centre University of Kingston, (SBRC 03-04).144

Revel, A., David, S. and Chen, H. 2008b. Small Business and the Environment: Turning over aNew Leaf, CRRC, Queen’s University Belfast.Roberts S, Lawson R and Nicholls, J. 2006. Generating Regional-Scale Improvements in SMEcorporate Responsibility Performance: Lessons from Responsibility Northwest, Journal ofBusiness Ethics, 67(3): 275-286Schaper, M. 2001. Environmental Attitudes and Practices amongst Small BusinessOwner/Managers in the Western Australian Community Pharmacy Sector, Perth, CurtinUniversity of Technology.Schoffman, A. and Tordini, A. 2000. ISO14001: A Practical Approach, Oxford, OxfordUniversity Press.Smith, A, Kemp, R. and Duff, C. 2000. Small Firms and the Environment: Factors thatinfluence SMEs’ Environmental Behaviour, IN Hillary, R (ed.) 2000. Small and Medium-SizedEnterprises and the Environment, Sheffield, Greenleaf Publishing Ltd.Starkey, R. 2000. Environmental Management tools: Some options for small and medium-sizedenterprises, IN Hillary, R (ed.) 2000. Small and Medium-Sized Enterprises and theEnvironment, Sheffield, Greenleaf Publishing Ltd.Studer, S, Welford, R and Hills, P. 2005. Drivers and Barriers to Engaging Small and MediumSized Companies in Voluntary Environmental Initiatives, the Hon Kong Centre of UrbanPlanning & Environmental Management.Tilley, F. 1999. The Gap between the Environmental Attitudes and the EnvironmentalBehaviour of Small Firms, Business Strategy and the Environment, 8 (4): 238-248.Welford, R. 1998. Corporate Environmental Management, London, Earthscan.Whitelaw, K. 1997. ISO 14001 Environmental System Handbook, Oxford, Butterworth-Heinemann Ltd.Williamson et al. 2006. A Blueprint to Support Environmental Compliance among EuropeanSMEs, Staffordshire University.145

Prioritising Variables of SMEs/Private Sector throughInterpretive Structural Model (ISM)Dawood, I. and Underwood, J.Research Institute of the Built and Human Environment, University of Salford, UK(email: i.a.dawood@pgr.salford.ac.uk)(email: j.underwood@salford.ac.uk)AbstractSmall and Medium Enterprises (SMEs) make substantial contributions to national economies and areestimated to account for 80% of global economic growth. There is a universal recognition that SMEsare crucial facilitators of economic growth. Therefore, SMEs are considered to play a major in theentire economy. Moreover, thriving economies in countries such as the US, Britain, Europe, Japan,etc., are vastly dependent on their well regulated, established, organised and monitored SMEs. In theUK, the Department of Trade and Industry (DTI) in 2004 estimated that of the 4.3 million businessenterprises, 99.9% were small to medium sized (SMEs). At the start of 2004, SMEs accounted formore than half (58%) of all UK employment (small enterprises accounting for 46.8%; medium-sizedenterprises accounting for 11.7%); and more than half (51.3%) of the UK‟s estimated businessturnover of £2,400 billion (small enterprises accounting for 37%; medium-sized enterprisesaccounting for 14.3%). This paper focuses on prioritising the variables of SMEs as part of strategysetting. A previous study conducted by the Authors (Dawood and Alshawi, 2009) identifies 10 majorvariables of SMEs which include Government Role (Regulation and Legislation), Governing Bodyand Task Force, Financing SMEs, Outreach SMEs / Skills and Recruitments Shortage, Training,Politics, Free Market and Fair Competition, Entrepreneurs/Owners, e-Information Sources (IT) andStandardisation/ISO 2000. Interpretive Structural Model (ISM) has been adopted and used as a tool toprioritise these variables to assist decision makers in setting successful and sufficient strategies andpolicies and as a guide to emphasise the starting point. The research methodology consists of twoparts; literature review which provides an understanding of ISM in terms of definition, stages,purposes, mechanism, how it functions, etc. The second will identify, classify and characterise SMEsvariables. Finally, the ISM will be examined and tested using the identified SMEs variables. Thefindings will be stated in the concluding section.Keywords: SMEs, SMEs variables, Interpretive Structural Model (ISM)146

1. IntroductionSmall and Medium Enterprises (SMEs) make substantial contributions to national economies and areestimated to account for 80% of global economic growth. There is a universal recognition that SMEsare crucial facilitators of economic growth. Therefore, SMEs are considered to play a major in theentire economy. Moreover, thriving economies in countries such as the US, Britain, Europe, Japan,etc., are vastly dependent on their well regulated, established, organised and monitored SMEs. In theUK, the Department of Trade and Industry (DTI) in 2004 estimated that of the 4.3 million businessenterprises, 99.9% were small to medium sized (SMEs).At the start of 2004, SMEs accounted for more than half (58%) of all UK employment (smallenterprises accounting for 46.8%; medium-sized enterprises accounting for 11.7%); and more thanhalf (51.3%) of the UK‟s estimated business turnover of £2,400billion (small enterprises accountingfor 37%; medium-sized enterprises accounting for 14.3%).The main objectives of this study are as follows:1. to investigates methods available to identify and rank variables and criteria and then selectingone method (ISM) among others which is closer to the researchers expertise2. to find out the interaction among identified variables and criteria using ISM, and3. to discuss the managerial implications and decision-making process within using ISM.This paper focuses on identifying, classifying and prioritising the major variables affecting theperformance of the SMEs as part of strategy setting and implementing. The variables that have beenidentified are Government Role (Regulation and Legislations), Governing Body and Task Force,Financing SMEs, Outreach SMEs / Skills and Recruitments Shortage, Training, Politics, Free Marketand Fair Competition, Entrepreneurs/Owners, e-Information Sources (IT) and Standardisation/ISO2000. Interpretive Structural Model (ISM) has been adopted and used as a tool to prioritise thesevariables to assist decision makers in setting successful and sufficient strategies and policies and as aguide to emphasise the starting point. According to literature, ISM has been successfully implementedso far in a variety of industries/sectors including Energy Conservation in Indian, Cement Industry,Vendor Selection, Waste Management in India, Knowledge Management in Manufacturing,Productivity Improvement in Reverse Logistics, IT-enabled Supply Chain, Modelling the Agility ofSupply Chain, Modelling the Logistics Outsourcing Relationship Variables and Housing Industry(Dawood and Alshawi, 2009). However, ISM has never been adopted for SMEs.The paper discusses the adopted research methodology which consists of two parts; literature reviewwhich provides an understanding of ISM in terms of definition, stages, purposes, mechanism, how itfunctions, etc. The second will identify, classify and characterise SMEs variables. Finally, the ISM147

will be examined and tested using the identified SMEs variables. Finally, the findings are presented inthe concluding section.It is important to bear in mind that there are models available that can be used to prioritisefactors/variables for an industry. The reason behind selecting the ISM to prioritise the factors thataffect the performance of SMEs is because it uses matrices closest to the Authors background andwhich have previously been implemented by the Authors in different industries. Moreover, the ISMdeals with/prioritises the factors of an industry regardless of its nature, value or size; therefore there isno restriction/difference in implementing the ISM to prioritise the factors that affect the performanceof Large Enterprises (LE) or SMEs.2. DefinitionWarfield (1973) defines Interpretive Structural Modelling (ISM) as a computer‐ assisted learningprocess that enables individuals or groups to develop a map of complex relationships among manyelements involved in a complex situation. Duperrin and Godet (1973) suggest that ISM is primarilyintended as a group learning process. The method is interpretive as the judgment of the group decideswhether and how the variables are related. Ravi and Shankar (2004) believe that the methodology ofISM is an interactive learning process. It is a set of different and directly related variables affectingthe system under consideration and is structured into a comprehensive systemic model. The benefit ofISM model is that it reveals the structure of a complex issue of a problem under study, in a carefullydesigned pattern employing contextual and logical interpretations, matrices, graphics tables, etc. Themethodology of ISM can act as a tool for imposing order and direction on the complexity ofrelationships among elements of a system. Qureshi et al, (2007) argue that ISM is a method whichenables handling the complexity of the system and resolves it into easily comprehendible form byworking out the hierarchical arrangement of system variables. Thus, ISM is structured on the basis ofrelationships, and the overall structure is extracted from the complex set of variables. In other words,ISM is a modelling technique where the specific relationships and overall structure is represented inmatrices, digraphs MICMAC model, etc.3. ISM’s scopeA variety of industries/sectors have applied the ISM model in order to identify variables and prioritisethem to solve problems (Qureshi et al, 2007and Dawood and Alshawi, 2009) (Table 1):Table 1: ISM Application (Qureshi et al, 2007; Dawood and Alshawi, 2009)No: Contributors Area in which ISM Has Been Applied1. Saxena and Vrat (1990) Energy Conservation in Indian Cement Industry2. Mandal and Deshmukh (1994) Vendor Selection148

3. Sharma et al. (1995) Waste Management in India4. Singh et al. (2003) Knowledge Management in Manufacturing5. Ravi et al. (2005) Productivity Improvement in Reverse Logistics6. Jharkaria and Shankar (2005) IT-enabled Supply Chain7. Agrawal et al. (2006) Modelling the Agility of Supply Chain8. Qureshi et al. (2007) Modelling the Logistics Outsourcing Relationship Variables9. Dawood and Alshawi (2009) Prioritisation of Factors That Affect the Housing Industry:Interpretive Structural Model (ISM)According to the Table 1, Saxena et al (1990) applied the ISM methodology to the case of EnergyConservation in the Indian Cement Industry and identified the key variables using direct as well asindirect interrelationships amongst the variables. Mandal and Deshmukh (1994) used the ISMmethodology to analyse some of the important vendor selection criteria and have shown the interrelationshipsof criteria and their levels. These criteria have also been categorized depending on theirdriver power and dependence. Sharma et al (1995) have implied ISM methodology to develop ahierarchy of actions required to achieve the future objective of waste management in India and so on.Therefore, based on the variety of industries that have already applied the ISM to solve theirproblems; it is safe to say that the ISM can be applied in SMEs/Private Sector in order to prioritisevariables and assist in strategy setting and therefore solve the problems related to their performance.4. ISM’s structuring stagesThe mechanism of the ISM is explained by different scholars and researchers. For the purpose of thispaper one mechanism is presented. Mandal and Deshmukh (1994) propose a technical analysis systemwhich can be followed to achieve the stages of an ISM. This technical analysis system is illustrated inthe following five steps:Step i: Self-structural Interaction Matrix (SSIM)Step ii: Reachability MatrixStep iii: Level Partition and Canonical MatrixStep iv: Classification of VariablesStep v: Development of DigraphThe procedure of setting the ISM can simply be described as first; the process starts with theidentification of variables, which are relevant to the problem or issue and then extends with a group149

problem-solving technique. Later on a contextually relevant subordinate relation is identified. Afterresolving the variable set and the contextual relation, a structural self-interaction matrix (SSIM) isprepared based on pair-wise comparison of variables. The SSIM is transformed in to a reachabilitymatrix which includes variable transitivity. Finally, the partitioning of the variables and an extractionof the structural model, called ISM, is derived.5. ISM adoption in SMEsThere is no indication or limitation found in literature on why the ISM should not be adopted and usedin the SMEs/Private Sector; therefore, an attempt for this purpose will be made to apply the ISM inSMEs/Private Sector in the following section. The five steps identified in the previous section will befollowed to adopt and implement ISM in the SMEs/Private Sector. This process at the end will helpdecision makers in the SMEs/Private Sector identify, classify and prioritise the industry variables andtherefore setting sound strategies and policies.Before starting the ISM process, it is important to first identify the major variables that significantlyaffect the performance of SMEs. A previous study, like never before, was conducted by Dawood andAlshawi (2009) and identified 10 variables which affect SMEs performance along with alsointroducing a (SME) Model to display the relations among SMEs variables. The final variables usingSMEs the Model were then prioritized by the ISM. These variables are illustrated in Figure 1.SMEs Successful RelationsGovernment1. Legislations2. RegulationsGoverning Body,Taskforce forMonitoring, DataCollection andFeedbackFinanceFinancial andBankingFacilitiesMGEMega and GigaEnterprisesParticipationEntrepreneurship1. Creativity2. Innovation3. Invention4. New Ideas &Adventurese-Information1. E-transaction portal2. Supply databases3. Advisory andInfomediary Services4. Market intelligence5. Technology providers6. Information providers7. Linkages with relevantinstitutionsSmall andMediumEnterprises(SMEs)Training CenresProviding Trainingand Education forManagement,Employers,Owners andemployeesPolitics1. Code of Practice2. Governing Body3. Taxation andCustom DutiesOutreachOutreach DeprivedCommunities inSlums and ShantyTowns by SettingCommunityCentres andJobcentresQMSStandardisation, Certification,RegistrationFigure 1: Variables Affecting SMEs (Dawood and Alshawi, 2009)According to Figure 1, and for the purpose of this research; the most important variables wereidentified as 10 variables.The (10) variables are listed as follows:150

1. Government Role (Regulation & Legislations); to better regulate and control SMEs2. Financing SMEs; to provide continuous financial source3. Governing Body and Task Force; to audit, control and make sure everything is in order4. Outreach SMEs / Skills and Recruitments Shortage; to provide skilled labour to remote areas5. Training; to provide skills to employees of SMEs6. Politics; intervene to restrict the dominance of giant outlets7. Free Market and Fair Competition; provide better and fair chances for survival8. Entrepreneurs/Owners; improve management and leadership9. e-Information Sources (IT); to encourage using IT within the SMEs sector10. Standardisation/ISO 2000; to elevate the standards of SMEs and then deliver better servicesand products to customersEach variable was allocated a number (as in the list above) which represents the variable in thefollowing stages namely, matrices, tables, digraphs and prioritising and analysing processes. Mandaland Deshmukh (1994) illustration of the ISM process and the five steps will be followed to performthe ISM in the SMEs/Private Sector:Step One: Self-structural Interaction Matrix (SSIM)Mandal and Deshmukh (1994) argue that the SSIM establishes a contextual relationship of “leads to”between criteria or variables in an industry. Four symbols are used for the type of the relation thatexists between two sub-variables under consideration: V for the relation from i to j but not in bothdirections; A for the relation from j to i but not in both directions; X for both direction relations from ito j and j to i; and O if the relation between the variables does not appear valid.These types of relationships are given English Characters such as V, A, X, and O. Each characterindicates a type of relationship between two variables (in this case i&j). The four types of contextualand logical relationships between variables i&j are illustrated as follows:V: Variable i will help achieve Variable jA: Variable i will be achieved by Variable jX: Variables i and j will help achieve each other151

O: Variables i and j are unrelated.According to the above types of contextual and logical relations, the SSIM Matrix for the 10 SMEsvariables is illustrated in Table 2.Table 2: SSIM MatrixAttribute 10.Standardisation9 8 7 6 5 4 3 21. Regulation andLegislationsV V V V V V V V V2. Finance & Banking A A A A A A A A3. Task Force V V V O V V V4. Outreach SMEs O O O O O V5. Training X X O O O6. Politics O O V V7. Free Market O X X8. Entrepreneurship A A9. e-Information Sources XStep Two: Reachability MatrixNext, according to Mandal and Deshmukh (1994) the SSIM is converted into a binary matrix, calledthe Initial Reachability Matrix (IRM) by substituting X, A, V, and O by 1 and 0. For example, ifcriteria i leads to criteria j and criteria j leads to criteria k then criteria i must lead to criteria k. Theprocess of bridging these gaps is known as transitivity check. The various possibilities aresummarized in Table 3.Table 3: Contextual Relations (Mandal and Deshmukh, 1994)Entry in SSIM (i, j) V A X OEntry in Reachability Matrix (i, j) 1 0 1 0Entry in Reachability Matrix (j, i) 0 1 1 0The binary replacement orders for the bi-relationships (V, A, X, O) are explained as follows:1. If (i, j) entry in the SSIM is V, then (i, j) entry in the reachability matrix becomes 1 and the (j,i) entry becomes 0.2. If (i, j) entry in the SSIM is A, then (i, j) entry in the reachability matrix becomes 0 and (j, i)entry becomes 1.152

3. If (i, j) entry in the SSIM is X, then both (i, j) and (j, i) entries in the reachability matrixbecome 1.4. If (i, j) entry in the SSIM is O, then both (i, j) and (j, i) entries in the reachability matrixbecome 0.Thus, the SSIM is used to produce the Reachability Matrix for the SMEs/Private Sector variableswhich can be implemented by replacing the letters (V, A, X and O) by the respective values they aregiven in Table 3. The Reachability Matrix then becomes the matrix as shown in Table 4.Table 4: Reachability Matrix of SMEs VariablesAttribute 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.1. 1 1 1 1 1 1 1 1 1 12. 0 1 0 0 0 0 0 0 0 03. 0 1 1 0 1 1 0 1 1 14. 0 1 0 1 1 0 0 0 0 05. 0 1 0 0 1 0 0 0 1 16. 0 1 0 0 0 1 1 1 0 07. 0 1 0 0 0 0 1 1 1 08. 0 1 0 0 0 0 1 1 0 09. 0 1 0 0 1 0 1 1 1 110. 0 1 0 0 1 0 0 1 1 1The Matrix in Table 4 shows the „Initial Reachability Matrix‟ and the Matrix in Table 5 shows the„Final Reachability Matrix‟. In the Final Reachability Matrix, the driving power and dependency ofeach variable are also stated. The driving power of a variable is the total number of variables which itmay help achieve (including itself) e.g.; Variable 1 (Regulation and Legislations) is the driving powerfor all variables; this means that without Regulation and Legislation there is nothing can be achievedon the ground in terms of setting strategies and policies for SMEs. The dependency of a variable is thetotal number of variables that may help facilitate achieving, e.g.; Variable 2 (Finance) is the variablewhich facilitate achieving other variables such as allocate funds for training, financial loans,subsidies, etc.Table 5: Final Reachability Matrix of SMEs VariablesAttribute 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Driving Power1. 1 1 1 1 1 1 1 1 1 1 102. 0 1 0 0 0 0 0 0 0 0 13. 0 1 1 0 1 1 0 1 1 1 74. 0 1 0 1 1 0 0 0 0 0 35. 0 1 0 0 1 0 0 0 1 1 46. 0 1 0 0 0 1 1 1 0 0 47. 0 1 0 0 0 0 1 1 1 0 48. 0 1 0 0 0 0 0 1 0 0 39. 0 1 0 0 1 0 1 1 1 1 610. 0 1 0 0 1 0 0 1 1 1 5153

Dependency 1 10 2 2 7 3 5 7 6 5Step Three: Level Partition and Canonical MatrixMandal and Deshmukh (1994) state that different criteria have to be classified into four sectors,namely autonomous, dependent, linkage, and driver/independent, based on their driver power anddependence. Quadrant-wise characteristics of these sectors are given in Table 6 (Iteration Table,Conical Matrix). Tables 6 and 7 in Mandal and Deshmukh (1994) can be used as an example to guidesetting the MICMAC Matrix in Step 4 and The Digraph in Step 5 for the SMEs/Private Sector.Table 6: Quadrant-wise characteristics (Mandal and Deshmukh, 1994)Quadrant First Second Third FourthNature of Variables Autonomous Dependant LinkageDriver VariablesVariablesCharacteristics Weak Dependant Weak Driver Power Strong Driver Strong Power andPower and Weak and Strong Power and Strong Weak DependenceDriver Powers Dependence Dependence PowerUnstable VariablesPowerTable 7: Interaction Table for the VariablesAttribute/Variables Reachability Set Antecedent Set Intersection Set1. Regulation and Legislations 1,2,3,4,5,6,7,8,9,10 1 02. Finance & Banking 2 1,2,3,4,5,6,7,8,9,10 03. Task Force 2,3,5,6,8,9,10 1,3 04. Outreach SMEs 2,4,5 1,4 05. Training 2,5,9,10 1, 3,4,5,9,10 26. Politics 2,6,7,8 1,3,6 07. Free Market 2,7,8,9 1,6,7,8,9 28. Entrepreneurship 2,7,8 1,3,6,7,8,9,10 19. e-Information Sources 2,5,7,8,9,10 1,3,5,9,10 210. Standardisation 2,5,8,9,10 1,3,5,9,10 2Step Four: Classification of Variables/MICMAC MatrixMandal and Deshmukh (1994) believe that the objective of the MICMAC analysis is to analyze thedriving power and the dependence of the variables.154

Figure 2: MICMAC MatrixThe MICMAC Matrix (Figure 2) reveals the classification and status of a variable. It also indicateseach role of a variable and how it reacts as a deriving power and dependency. It is important toredisplay the variables below in order to identify them properly (not only by their numbers) and therole they play in setting strategies and policies of the SMEs/Private Sector.As it is illustrated in the MICMAC Matrix, the analysing process will be in four stages as follows:1. Cluster I: Autonomous Variables2. Cluster II: Dependant Variables3. Cluster III: Linkage Variables4. Cluster IV: Independent/Driving VariablesIn the following; the Analysing process of the MICMAC Matrix will start in a reverse order (ClusterIV, Cluster III. Cluster II and Cluster I) as the process will give a chance to first explain what drivingpower and dependency mean.1. Cluster IV: Independent/Driving VariablesIn Cluster IV, variables 1. Regulation and Legislations and 3. Task Force fall in this category and areindependent from the rest of variables. These variables are the driving power of the SMEs/PrivateSector, especially variable 1). Regulation and Legislations which is the most driving force. Moreover,Regulation and Legislations must be given first priority among the variables. This means that decisionmakers in the SMEs/Private Sector must consider Regulation and Legislations as their first priorityand as a driving force towards achieving the target set by strategies and policies. Thus, a governmentmust be prepared to introduce new Regulation and Legislations (along with the existing ones) in orderto move forward in improving SMEs‟ performance. In other words, without the introduction of newRegulation and Legislations, all planning, strategies and policies are dead and a waste of time, costand effort and thereby it will be impossible to put the SMEs (as a major participant within the155

economy) plans into a place and to move forward a single step in implementing strategies and policieswithout the required regulation and legislations. Finally, solving the SMEs/Private Sector crisis in acountry requires a fully committed and prepared government and decision makers to provide the rightregulation and legislations in order to be able to implement strategies and policies and therefore solvethe SMEs/Private Sector crisis.2. Cluster III: Linkage VariablesThere are two variables fall into Cluster III, namely 9. e-Information Sources and 10. Standardisation.The variables that fall into this cluster are classified as deriving power while other variables dependupon them, however, this might not quite apply to variable 10. Standardisation, because it is locatedright in the centre of the MICMAC Matrix, therefore standardisation could fall in any other cluster.Since the introduction of IT first and then ICT, businesses and therefore SMEs have significantlymoved forward, improved their performance and communication and contribute more into theeconomy. It is apparent in the last 50 years how much computers and therefore ICT have improvedhuman lives in every single aspect.3. Cluster II: Dependant VariablesThe variables that fall into this area are known for other variables being dependent on them. Thesevariables are 2. Finance, 5. Training, 7. Free Market, and 8. Entrepreneurship. 7. Free Market fallsright on the dividing line between Clusters I & II and therefore the variable in this case might not beconsidered as strongly dependent, whereas2. Finance, 5. Training, and 8. Entrepreneurship are thestronger ones. It has to be mentioned that 2. Finance is the strongest dependent variable which meansthat all other variables are totally dependent on Finance. Logically, without finance embarking onanything is almost impossible. Decision-makers have to realise the importance of this and have to findmeans for generating enough funds for the SMEs/Private Sector in order to implement the strategiesand policies smoothly and without any delay. Therefore, the SMEs/Private Sector problems will besolved in time, efficiently and effectively.4. Cluster I: Autonomous VariablesThe final cluster is Cluster I and those variables that fall into this cluster are weak and dependant onother variables which have significant driving power and dependency. The variables in this area areidentified as 4. Outreach SMEs 6. Politics, and possibly 7. Free Market, and 10. Standardisation. Asthese variables have no power and are dependent on others, they are therefore not consideredimportant; however, they should not be ignored when setting strategies and policies. Finally,according to the MICMAC Matrix, the SMEs/Private Sector variables are classified under threeprioritising groups depending on their score and location in the MICMAC Matrix. The followingsection will clarify the prioritising process.Step Five: Development of Digraph156

Mandal and Deshmukh (1994) claim that from the Reachability Matrix the structural model can bestructured by means of vertices or nodes and lines of edges known as a directed graph or digraph. Thedigraph displays the priority and level of importance of a variable. The digraph has three prioritylevels (high, medium and low).Then, the element descriptions are written in the digraph which is thencalled the ISM. According to the MICMAC Matrix (Figure 2), the following Digraph illustrates thepriority groups and their urgency and degree.Figure 3: Reachability Matrix Digraph for SMEsThe (10) variables are classified and grouped according to their score/priority as follows:1. First/High Priority GroupThe variables in this group include Regulation and Legislations and Finance. These variables have toppriority and considered very urgent among others. Decision makers must negotiate them first beforethey start planning and setting strategies and policies.2. Second/Medium Priority GroupThe variables in this group include Task Force, Training, Entrepreneurship and e-InformationSources. These variables are important but less so than those in the First Priority Group although moreimportant the Third Priority Group3. Third/Low Priority GroupThe variables included in this group are Outreach SMEs, Politics, Free Market, StandardisationThese are the lowest ranking group in terms of priority, ranking, driving power and dependency. Thismeans that decision makers should consider them with lesser attention when planning strategies andpolicies the SMEs/Private Sector.157

In summary, while planning strategies and policies for SMEs/Private Sector, governments anddecision makers must be prepared first to issue the required Regulations and Legislations in order tobe able to move forward. These Regulation and Legislations facilitates all other variables in terms ofavailability, acquiring them, improving performance, and developing a sector within theSMEs/Private Sector. Moreover, it is important for governments and decision makers to provide agood estimated finance in order to set up a realistic strategies and policies for SMEs. All othervariables depend on finance and the lack of finance could undermine implementing the SMEs/PrivateSector strategies and policies. Thus, Regulation and Legislations and Finance are the starting pointand are the top priorities for planning strategies and policies.The second ranking group of variables is Task Force, Training, Entrepreneurship and e-InformationSources. These variables are also important and affect other variables; however, they are not asimportant as the first priority variables. They could be both as a driving power along with beingdependent upon.Finally, the last group of variables is Outreach SMEs, Politics, Free Market and Standardisation.These variables are weak and are completely reliant on other variables in terms of driving power anddependency. They can only achieved by the availability of others. Government and decision makersshould pay lesser attention to these variables because they are not the major players in strategy andpolicy planning and setting.6. ConclusionThe findings of this research reveal that ISM is an effective tool that can be used to prioritise variablesand assists decision makers setting successful and sound strategies and policies. The attempt ofadopting the ISM in SMEs/Private Sector, like other industries mentioned in literature, has alsoproven successful and the ISM could be significantly affective in building and improving theperformance of the SMEs/Private Sector. It is recommended that ISM could be adopted in allindustries to help and assist in setting their strategies and policies. Moreover, it is also important toacknowledge the SMEs Model produced in a previous study conducted by Dawood and Alshawi(2009). The SMEs Model assists significantly in identifying and classifying important variable inSMEs/Private Sector. Therefore, ISM and SMEs Model are both important in assisting decisionmakers setting successful strategies and policies. The final outcome/result will be significant andwould clarify all the ambiguity surrounding the planning process by ranking, prioritising, defining,determining, etc, all variables.Finally, ISM and the SMEs Model use statistical, mathematical, and simple methods in identifying,ranking and prioritising variables and their relations. This might scare inexperienced users off;however, ISM and SMEs Models are not highly sophisticated mathematical computerisedprogrammes. The mechanisms of ISM and SMEs Models are based on logical and contextualinterpretation of the relations among the SMEs/Private Sector variables, therefore users of ISM andSMEs Models need to have some kind of experience in order to be more sufficient using the twomodels (ISM and SMEs Models) and to get the right result which will be used in setting strategies and158

policies. Thus, ISM and SMEs Models users need a little of practice and patience before they becomefamiliar on how to use them.ReferencesAgarwal, A. et al (2006), Modelling Agility of Supply Chain, Industrial Marketing Management, pp.1-15, available at: www.sciencedirect.com.Beynon-Davies P. (2004), e-Business, European Journal of Information System Palgrave Macmillan,Basingstoke, UK, 2004, 480 pp,Bolaños, R. and Nenclares, A. (2005), “Using Interpretive Structural Modelling in strategic decisionmakinggroups”, Management Decision, Vol. 43 No. 6, pp. 877-895.Dawood, I. and Alshawi, M. (2009), Factors Effecting SMEs Performance: Literature Review, 9thInternational Postgraduate Research Conference (IPGRC Conference), University of Salford, January2009: 26-39.Duperrin, J.C., Godet, M. (1973), Methode de Hierarchisation des Elements d'un Systeme, RapportEconomique du CEA, Paris, pp.45-51.Get Ahead-Website (2008), ULR: http://www.getahead-direct.com/gwentrel.htm , Accessed(18/09/2008).Jharkharia, S. and Shankar, R. (2005), Selection Of Logistics Service Provider: An Analytic NetworkProcess (ANP) Approach, Omega, 35 (3):274-89.Mandal, A. and Deshmukh, S.G. (1994), Vendor Selection Using Interpretive Structural Modelling(ISM), International Journal of Operations and Production Management, 14(6): 52–59.Qureshi, M.N et al (2007), Modelling The Logistics Outsourcing Relationship Variables To EnhanceShippers, Productivity And Competitiveness In Logistical Supply Chain, International Journal ofProductivity and Performance Management, 56(8): 689-714.Qureshi M.N et al (2008) An Integrated Model To Identify And Classify The Key Criteria And TheirRole In The Assessment of 3PL Services Providers, Asia Pacific Journal of Marketing and Logistics,Vol. 20 No. 2, 2008, pp. 227-249, Emerald Group Publishing Limited ULR:www.emeraldinsight.com/1355-5855.htmRavi, V. and Shankar, R. (2005), Analysis of Interactions Among The Barriers Of Reverse Logistics,Technology Forecasting And Social Change, 72: 1011-1029.Ravi, V. et al (2005), Productivity Improvement Of A Computer Hardware Supply Chain,International Journal of Productivity and Performance Management, 54(4):239-55.159

Saxena, J. P. et al (1992), Scenario Building: A Critical Study Of Energy Conservation In The IndianCement Industry, Technology Forecasting and Social Change, 41:121-146.Sharma, H.D. et al (1995), The Objectives Of Waste Management In India: A Futures Inquiry,Technological Forecasting and Social Change, 48: 285-309.Singh, M.D. et al (2003), An Interpretive Structural Modelling Of Knowledge Management InEngineering Industries, Journal of Advances in Management Research, 1(1):28-40.Warfield, J.W. (1974), Developing Interconnected Matrices In Structural Modelling. IEEE TranscriptOn Systems, Men and Cybernetics, 4(1): 51−81.Watson, R.H. (1978), Interpretive Structural Modelling-A Useful Tool For Technology Assessment?,Technology Forecasting and Social Change, 11: 165-185.160

Competitive Stakes in the “Credit Crunch”:An Analysis of Strategic Polarisation amongstEuropean ContractorsSmyth, H.School of Construction and Project ManagementBartlett Faculty of the Built EnvironmentUCL1-19 Torrington PlaceLondon WC1E 7HB(email: h.smyth@ucl.ac.uk)AbstractThe aim is to establish how main contractors are strategically responding to the recessive conditions.The objectives are to compare approaches to investment and divestment between major mainlandEuropean contractors and UK contractors in response to recession. Comparison is made between theprocesses from the early and mid 1990s and the current recession in order to assess whether lessonshave been learnt from the previous industry recession. Adopting a resource-based view of contractorcorporate strategy, an analysis of divestment is contrasted with investment strategies to build marketshare in recession. The paper starts with a review of the consequences of the polarised strategiesemployed by mainland European and UK contractors during the recession in the early and mid1990s. This is compared with emergent strategies during the “credit crunch”. The competitive stakesare analysed derived from comparative analysis. Historically published data is used from the earlyand mid 1990s. Current data is derived through action research methods and published data. Thereview shows that UK contractors typically applied divestment strategies to keep overheads to aminimum in the 1990s, whilst many mainland European contractors invested to build market share.Investment took the form of both organic expansion and takeovers to expand market share throughincreased geographical coverage. The emergent strategies during the “credit crunch” suggestrepetition of trends of the recession of the early 1990s. Mainland European contractors took a morestrategic view and allocated resources accordingly. UK contractors tend to be more reactive,employing short-term tactical measures. It would appear that few lessons are being learnt from theprevious recession amongst UK main contractors. The consequences are the continued loss of marketposition of major UK contractors in the European context. Whilst this may not necessarily be ofconsequence in terms of open market (non-protectionist) practices, the change in ownership structurein the UK has and continues to take place without apparent notice. Such change may haveconsequences for particular clients, especially government and for long-term government policy,which is explored in the conclusions.Keywords: competitive advantage, contractors, divestment, investment, market share161

1. IntroductionInvestment in capacity development by setting up branch offices and using large plant imported fromthe US were two decisive factors in the Second World War to position leading UK contractors forgrowth in post-War reconstruction and boom. On the other hand, investment in capacity forprefabrication and industrialised building systems in the late 1960s proved a costly liability for majorcontractors in the subsequent recession and ability to enter overseas markets (Smyth, 1985).Contractors have historically been reluctant to commit to investment as a survival strategy (e.g. El-Higzi, 2002; Skitmore and Smyth, 2007), yet investment is necessary to grow. This raises thequestion as to what type of investment is suited to contractors, especially under recessionaryconditions.The aim is to establish how major European main contractors are strategically responding to therecessive conditions. The objectives are to compare approaches to investment and divestmentbetween major mainland European contractors and UK contractors in response to recession.Comparison is made between the processes from the early and mid 1990s and the current recession inorder to assess whether lessons have been learnt from the previous industry recession.2. Theoretical backgroundContracting markets have been internationalising as part of the trend of the globalisation of markets.Levitt (1983) stated that companies must learn to operate as if the world was a single market, localand regional markets simply being expressions of a whole system. Porter (1986) called for a globalstrategic approach overall with detail being the focus of the local response. Bartlett and Ghoshal(1989) suggested that the competence of a firm to manage a cross-border network of activities wouldprove decisive in the competitiveness of firms. Globalisation led by the financial institutions has beena major trend since these research proclamations, which has culminated in the “credit crunch”recession in the financial markets. Companies are repositioning themselves as markets are redefinedby emergent economic and regulatory conditions. Where is construction placed in this picture?Strassman and Wells (1988) claimed a global construction industry simply did not exist. Yet therewere emergent pointers towards increasing internationalisation, if not globalisation (Seymour, 1987).Abdul-Aziz (1994) claimed an international outlook was a necessity for large contractor survival.International contracting firms formed a small but significantly growing part of the market by thetime of the recession in the early 1990s (Bon, 1994).What has happened in the market since the last major recession in the mid 1990s and the start of thecurrent recession will be examined for major European contractors with particular attention to theimplications for British contractors within the European market. Adopting a resource-based view ofcontractor (Wernerfelt, 1984; Barney, 2001), that is, competitiveness being derived from whether andwhere resources are allocated in the firm, an analysis of divestment is contrasted with investmentstrategies for growth and to build market share in recession.162

3. MethodsThe period between 1993 and 2008 is considered. The period between 1993 and 1996 were the threeyears when construction experienced the worst effects of the last recession that commenced in theearly 1990s. UK contractors were seeing improved workloads by the end of this period, slightlyahead of many European counterparts as the recession was unevenly experienced across Europe. Thecompany data for the financial year 2007/8 closes the period and therefore reports on the accountingperiod prior that is at the beginning of the downturn, yet prior to the “credit crunch” in September2008 and recession commencing. Some of the data is qualitative on company action, hence allocationof resources. This data is primarily secondary. The published data on financial accounts poses anumber of issues. The data sets are readily available and for the period Building Magazine (1994;1997; 2009) was used. This provides the ability to make comparisons over the short and longer term.The data is therefore subject to the prevailing points of methodology used by Building and exchangerates current at the time, although this less of an issue in 2009 that the mid 1990s. In addition, severaldisadvantages are evident:The accounting practices for each firm and in each company are different, and therefore,strict comparison is difficult;The data includes reporting from overseas operations outside Europe, which on the one handinhibits looking at activity within Europe, but on the other hand reflects the success andmarket leverage of the firms to which this applies;Company data includes contractors that are conglomerates with wider interests thancontracting in construction and includes specialist firms such as volume house builders actingas developers too.Therefore the figures should be taken as indicative in general and helping to illuminate trends. Forexample figures on market share for conglomerates will be inflated for contracting, yet thesecompanies also have more resources available which can be allocated to construction (or divestedfrom construction) as part of firm strategy in the European market. French contractors are particularlyprevalent as conglomerates, whilst British construction has a high proportion of large house builderdevelopers.4. The findingsOne way to examine the competitive stakes is to measure market share. This is a particularlyimportant measure, because in recessive times, maintaining or expanding market share is significantas it provides the baseline for growth as the market improves. In other words, increasing market shareis a source of medium and long-term competitive advantage entering into and during recession. Table1 considers the market share of the top ten European market share by turnover.163

During the late 1960s and 1970s UK contractors were significant players in the growing internationalmarket with some of the largest contractors in the field, although US contractors were dominant(Smyth, 1985). Ground had already been lost by 1993. Table 1 shows that between 1993 and 1996,the market share of British contractors at the top end declined from 23% to 5.2% within the Europeancontext. That represents a loss of 18.7% market share over a 3-year period. This has to be seen in thecontext of business development managers vigorously contacting clients and potential clients with theproverbial plea, “give us a job”. In the growth period of 1996-2008 British contractors slipped out ofthe top 10 European contractors by turnover. Balfour Beatty appears in 11 th place, rising from 13 thplace the previous year. It will rise further once the acquisition late 2009 of US professional servicesfirm, Parsons Brinckerhoff, is assimilated. The next placed British contractor was Taylor Wimpey(18 th ), yet this parent sold Taylor Woodrow Construction to VINCI, the largest European contractorfrom France at the end of 2008.Table 1: Market share of British contractors in EuropeSources: derived from Building, 1994; 1997; 2009.British contractors had lost market share in Europe between 1993 and 1996 amongst the top 50contractors (-19.8%), the top 100 (-5.2%) and top 300 (-3.1%), so the 18.7% loss of market shareamongst the top 10 was part of a wider pattern (Smyth, 1998). Current market share of Britishcontractors amongst the top 50 is just under 13.5%. It is 17.9% within the top 100 Europeancontractors, which is lower than the share British contractors had amongst the top 10 in 1993(23.9%).If British contractors specifically and indeed UK contractors generally, which includes Irishcontractors are performing poorly in terms of market share, which nations are the winners and losersin terms of market share? Table 2 sets out “at a glance” the turnover rank order by nationalownership. French contractors are increasing their dominance, having had 3 in the top 10 in 1993 and5 by 2008. German contractors have held reasonably steady, whilst Spanish contractors have emergedas dominant players – none in 1993, yet 3 by 2008. Italian contractors have been losing ground, notjust in the top 10, but overall, a trend which mimics the British contractors, although their loss ofmarket share was 6.3% between 1993 and 1996, compared to 18.7% for British contractors. TheNorwegian‟s figured prominently in 1996, largely due to the Kvaerner takeover of Trafalgar House,164

ut the Swedes retain a sizeable presence through Skanska in the top 10 and the Scandinaviancountries generally remain strong presence in the top 100.The following Tables provide a more detailed look at current market shares by nationality measuredby company turnover. Table 2 presents the top 10 contractors by nationality in rank order, Table 3presents market share by percentage of turnover for both the top 10 and top 50 contractors for 2008,and Table 4 shows the profit margins for the top 10 and top 50 European contractor groupings.Table 2: Top ten European contractors by nationalitySources: Smyth, 1998; derived from Building Magazine, 2008.Whilst British contractors were the largest companies in the third quarter of the twentieth century(Smyth, 1984), French contractors emerged as dominant players in the last quarter and havemaintained their position in the twenty first century. France had 3 contractors in the top 10 in 1993and 4 by 2008 (Table 2), representing over 50% market share amongst the top 10, and having over37% market share amongst the top 50 contractors (Table 3). German contractors, having madestrategic plans to expand in the mid 1990s (Siehler, 1998), lost their ranking between 1993-2008(Table 2), market share currently being just over 10% in the top 10 and just under 20% in the top50% (Table 3) with low profit margins as a group (Table 4). The Spanish contractors are those of165

growing significance, having 3 amongst the top 10 by 2008 (Table 2) with a market share of over28%, although less than 10% in the top 50 (behind the French, German and British contractors – seeTable 3), yet significantly the highest profit margins within both the top 10 and top 50 (Table 4).Table 3: Market share of the top ten and fifty European contractors by percentage of group turnover,2008Source: derived from Building Magazine, 2008.There were 3 British contractors in the top 10 in 1993, 1 by 1997 in tenth position and none by 2008(Table 2). The largest British contractor, Balfour Beatty, occupied 11 th position in 2008. Britishcontractors had around 13% market share of the top 50 European contractors (Table 3) and averageprofitability as a grouping of 2.95% margins in 2008 (Table 4).166

Table 4: Profit margin by national grouping for 2008 amongst the top ten and fifty EuropeancontractorsWhileit isimpossible at this aggregated level to draw too many conclusions from profit levels and margins, it istheoretically to be expected and practically probable that those contractors with the highest marginsare either making some profits from non-construction activities per se and/or have decided to declarethe maximum profits, and therefore have strategically decided not to reinvest profits into developingthe business capabilities and improve service levels. These are probably the most transactionalcompanies. Similarly, it is also probable that those with the lowest profitability are in survival moderather than investing in the long-term (cf. Skitmore and Smyth, 2007). Those contractors occupyingthe intermediate range are likely to have some companies that are strategically allocating resources toproduct and service quality, particularly those who are seeking to build market share during therecession and thus positioning themselves for growth in the upturn.This brings the analysis towards the theoretical position of the resource-based view of the firm as ameans to secure competitive advantage, and hence, where national groupings are positioningthemselves in staking out their market position. Stockerl (1997) found that British contractors wereplacing less effort and resources into strategic planning than their European counterparts. Britishcontractors had not used the preceding recession to assess what type of firm and service they wishedto offer in the market post-recession and therefore restructure accordingly at the start of recession.167

Instead they employed a core-periphery model to their workforce. They initially chose to makeredundant the peripheral staff members. After which they uncritically delayered, guided by costtargets to be met, making redundant core staff on a numbers basis from each layer (cf. Smyth, 2000).All the major British contractors decided to divest from mainland Europe apart from Amec. Incontrast, many mainland European contractors decided to invest in building market share and marketentry.During the early 1990s investment came in two waves. Initially there was takeover activity. For somecompanies this started through takeovers within the domestic market to create larger groups. Britishcompanies tended to ignore this trend, as Siehler comments:The failure of British contractors to consolidate into bigger companies leaves themdisadvantaged in comparison with some of their European rivals, which continue to regroupto create larger powerful giants. (1998, pp24)Takeovers also occurred to penetrate other national markets. The most notable being the Kvaernertakeover of Trafalgar House, which placed the Norway in a significant position in the European top10 by 1997 (Table 2). Dutch companies had also been active in UK contractor acquisitions. Frenchand German contractors had protected themselves from takeover through cross-shareholding amongstdomestic competitors and links to the financial institutions (Smyth, 1998). French contractors wereparticularly active in acquiring cross-border shareholdings with 284 cases out of a total of 796 crossbordershareholdings amongst European contractors in 1995. British contractors had only 43 crossbordershareholdings and were continuing to divest (Siehler, 1998).The takeover wave was followed by market entry into the UK largely through organic growth (Ive etal, 2004), for example the Bouygues and Skanksa market entries. The UK was a prime target as theBritish government were following European Union open market policies for tendering (Smyth,1998), which other nations were not implementing either implicitly through cultural factors orexplicitly by informally favouring domestic companies (which is not the same as corruption, althoughcorrupt practices can occur in certain European markets under particular conditions). Strategicinvestment in increasing market share was therefore in evidence during the early-to-mid 1990srecession and in the subsequent upturn amongst many European contractors (cf. Estache and Strong,2000; Meredith and Mantel, 2005). British contractors were not following this lead (cf. Hillebrandt etal, 1995; Morton, 2002).What are the signs in the current recession, rendered so severe by the “credit crunch”? It is too earlyto make definitive statements but there are some indicative events and processes that may point to arepeat of the pattern for 1993-1996. VINCI, the largest French contractor took over Taylor WoodrowConstruction from parent Taylor Wimpey to create the fifth largest contracting group in the UK asVINCI Construction UK by merging this company with its other UK businesses, of which formerNorwest Holst was the largest part (Chambers et al, 2009). Whilst VINCI, and Norwest Holst inparticular had a reputation for being transactional, Taylor Woodrow Construction had beendeveloping relationship marketing as a dynamic capability (Teece and Pisano, 1994; Hobday et al,2003 for projects; Smyth and Fitch, 2008 in construction; cf. Langford and Male, 2001). Investment168

in this initiative has been stepped up, particularly focused upon the civil engineering andinfrastructure markets to not only include contractor-client relationships, but also to start researchinto developing relationship marketing for business development activities in influencer and referrermarkets, of which the consultants are a prime part (Christopher et al, 2006; see Chambers et al, 2009for this construction company). This investment has the potential to build market share at the expenseof competitors failing to match investment in this or equivalent areas of competitive advantage.A further sign is provided by Balfour Beatty as the largest British contractor, which was acquiringParsons Brinckerhoff during late 2009. Parsons Brinckerhoff is one of the leading professional designfirms with work concentrated in the international infrastructure and power generation markets(Balfour Beatty, 2009). UK contractors have generally faired better in penetrating US markets thanmainland European markets. For reasons explored further below. The acquisition will provide a newrange of capabilities in breath and depth.The investment in developing capabilities has a poor track record amongst British owned contractors(cf. Leiringer et al, 2009), which have tended to “throw over the wall” the demands for continuousimprovement to the supply chain, thus circumventing developing and harnessing continuousimprovement as a means to gain competitiveness (Smyth, 2006), largely confining responses toclients and learning to individual projects, even where Demonstration Projects have offered wideropportunities (Smyth and Olayinka, 2009). The only major British contractor to buck the UK trend inthe 1993-1996 recession was Amec, which interestingly divested of construction activity in the recentboom to focus upon oil and gas and other process industries.In addition, anecdotal evidence strongly suggests that contractors are taking the same approach toredundancies in 2008-2009 as they did in the 1993-1996 period, that is, being guided by cost targetsby making staff redundant on a numbers basis from each layer of the organisation rather than askingwhich staff do we need to shape the company for the economic recovery and the strategic position ofcompany within the new marketplace. The review shows that UK contractors typically applieddivestment strategies to keep overheads to a minimum in the 1990s, whilst many mainland Europeancontractors invested to build market share. Investment took the form of both organic expansion andtakeovers to expand market share through increased geographical coverage.The emergent strategies during the “credit crunch” suggest repetition of trends of the recession of theearly 1990s. Mainland European contractors seem to take a more strategic view and allocatedresources accordingly. UK contractors tend to be more reactive, employing short-term tacticalmeasures. It would appear that few lessons are being learnt from the previous recession amongst UKmain contractors.Pursuing the resource-based view at the strategic level, the work of Madsen (1989) is instructive.Madsen found across a number of sectors that companies are most successful in more distant marketswhen local management is given a high degree of autonomy, yet are most successful in adjacentmarkets when there is a high level of strategic support for local management. Support includesinvestment in management capability, especially for contractors, which do not necessarily have along-term local base or branch office. Stockerl (1997) had found that UK contractors took strategic169

planning less seriously than their European counterparts. Smyth and Stockerl (1998) found thatBritish contractors had traditionally been more successful in operations conducted at a distance, suchas the Middle and Far East. Indeed, Seymour (1987) had advocated an emergent and developingmarket focus as a strategic focus, even though continuity of work is not always present in thesemarkets. Not surprisingly, therefore, British contractors were proving less successful in adjacentEuropean markets during the 1990s (Smyth and Stockerl, 1998). Thus British contractors intheoretical terms are always operating in an exploratory fashion with the exception of the NorthAmerican market (Perlmutter, 1969; Smyth, 1998 for construction) rather than being long-termplayers in most non-domestic markets. The following prediction of the late 1990s has been proven bythis paper and would still seem to resonate in the “credit crunch”:This analysis would infer that further market decline of British contractors can be expectedin Europe. In the long term, the majority of that decline will be experienced in the domesticmarket because other European contractors will be larger than those in Britain and thus willsecure the large scale contracts. (Smyth, 1998, pp21)5. Conclusions and recommendationsThe consequences of the continuing trend are the continued loss of market position of major UKcontractors in the European context. Is any of this a matter of concern? From a pure marketperspective national ownership is of irrelevance and invoking national ownership issues could beinterpreted as a call to protectionism within the sector and nationalism politically. Such calls are to beavoided, yet, that does not mean ownership issues are without management and economicconsequences in an asset specific market, especially where the trend is seemingly proceedingunnoticed. Generally, UK clients should welcome the shift in ownership patterns where it leads to animproved service through investment. That assumes that the overseas influence is stronger than UKmanagement influence and that resources flow accordingly.However, that assumption may not always prevail. Yet, the main issue for British contractors is theapparent lack of awareness of the consequences of divestment in recession and low levels ofinvestment upon the competitiveness of major companies compared to European counterparts.Therefore, the lessons from these consequences of a lack of strategic planning are not being learnt.This paper may contribute to greater awareness. Other issues of pertinence that may challenge theassumption that overseas ownership leads to improved service relate largely to client and their needsat particular times, especially the public sector:Where clients wish to drive construction agendas and policies, global clients may not be at adisadvantage, but UK based companies may be at a disadvantage as strategic decision makingon investment is ultimately controlled at greater distance where influence from Britishcompanies may be less powerful – this is possible but not an automatic outcome;Where public policy is to encourage certain initiatives (such as the “continuousimprovement” agenda of the recent past and sustainability practices currently), again theremay be less responsiveness for the same reason;170

In times of national crisis and states of emergency (e.g. war) government has less directcontrol or has to take control (temporarily or permanently) over leading contractors withattendant political consequences.None of the above issues is reason to intervene in the market, but the fact that these significantchanges proceed unacknowledged is of some concern (cf. Ive et al, 2004). Perhaps the findings alsohave wider implications for UK management, that is, management needs to be more strategic andlong-term in planning, investing in activities and capabilities that build market share during thedownturn and reposition companies for renewed growth in the upturn.ReferencesAbdul-Aziz A (1994) “Global strategies: a comparison between American and Japanese constructionfirms.” Construction Management and Economics 12: 473-484.Balfour Beatty (2009) Proposed Acquisition of Parsons Brinckerhoff Inc., Notice of GeneralMeeting, Prospectus, Croydon.Barney J B (2001) Gaining and Sustaining Competitive Advantage, Prentice-Hall, Upper SaddleRiver.Bartlett C A and Ghoshal S (1989) Managing across Borders, Harvard Business Press, Boston.Bon R (1994) “Whiter global construction.” Building Research & Information 22: 109-126.Building (1994) 2 December.Building (1997) December.Building Magazine (2009) 23 January.Chambers M, Fitch T, Smyth H J and Keki I (2009) “Differences between customer experience andbusiness development propositions: the case of a major contractor in the infrastructure market”,Proceedings of ARCOM 2009, 7-9 September, Nottingham.Christopher M, Payne A and Ballantyne D (2006) Relationship Marketing: creating stakeholdervalue, Butterworth-Heinemann, Oxford.171

El-Higzi F (2002) “International market entry for construction services.” International Journal ofConstruction Marketing 3: www.brookes.ac.uk/other/conmark/IJCM/vol_03/vol3-paper2-authorinfo.htm.Estache A and Strong J (2000) The Rise, the Fall…the Emergency Recovery of Project Finance inTransport, Policy Working Paper, World Bank, wwwwds.worldbank.org/externasl/default/WDSContentServer/IW3P/IB/2000/08/14/000094946_00072705354795/Rendered/PDF/multi_page.pdf, retrieved 02.03.09.Hillebrandt P M, Cannon J and Lansley P (1995) The Construction Company in and out of Recession,Macmillan Press, Basingstoke.Hobday M, Prencipe A and Davies A (2003) The Business of Systems Integration, Oxford UniversityPress, Oxford.Ive G. Gruneberg S, Meikle J and Crosthwaite D (2004) “Measuring the competitiveness of the UKconstruction industry.” Construction Economics and Statistics 1: 1-139, Construction Industry,Department of Trade and Industry.Langford D and Male S (2001) Strategic Management in Construction, Blackwell, Oxford.Leiringer R, Green S D and Raja J Z (2009) “Living up to the value agenda.” ConstructionManagement and Economics 27: 271-285.Levitt T (1983) “The globalization of markets.” Harvard Business Review, May-June: 92-102.Madsen T K (1989) “Successful export marketing management: some empirical evidence.”International Marketing Review 6: 41-57.Meredith J R and Mantel S J (2005) Project Management, John Wiley and Sons, Chichester.Morton R (2002) Construction UK: introduction to the industry, Blackwell Science, Oxford.Perlmutter H (1969) “The tortuous evolution of the multinational corporation.” Columbia Journal ofWorld Business, Summer, 98-112.Porter M (1986) Competition in Global Industries, Harvard Business School Press, Boston.Seymour H (1987) The Multinational Construction Industry, Croom Helm, London.172

Siehler B A (1998) “Different approaches of European contractors to be a global player”,Proceedings of the 3rd National Construction Marketing Conference, 9 July, The Centre forConstruction Marketing and CIMCIG, Oxford Brookes University, Oxford: 22-29.Skitmore M and Smyth H J (2007) “Pricing construction work: a marketing viewpoint.” ConstructionManagement and Economics 25: 619-630.Smyth H J (1985) Property Companies and the Construction Industry in Britain, CambridgeUniversity Press, Cambridge.Smyth H J (1998) “Competitive stakes and mistakes: the position of British contractors in Europe”,Proceedings of the 3rd National Construction Marketing Conference, 9 July, The Centre forConstruction Marketing and CIMCIG, Oxford Brookes University, Oxford: 19-21.Smyth H J (2000) Marketing and Selling Construction Services, Blackwell Science, Oxford.Smyth H J (2006) “Competition”, Commercial Management of Projects: defining the discipline,Lowe D and Leiringer R (eds.), Blackwell, Oxford: 22-39.Smyth H J and Fitch T (2009) “Application of relationship marketing and management: a largecontractor case study.” Construction Management and Economics 27: 399-410.Smyth H J and Olayinka R (2009) “Construction Industry Performance Improvement Programmes:the UK case of Demonstration Projects in the „Continuous Improvement‟ Programme.” a draft paperfor journal submission at the time of writing.Stockerl K C (1997) “The importance of strategic marketing planning for UK construction industry ina changing European business environment”, Proceedings of the 2nd National ConstructionMarketing Conference, 3 July, The Centre for Construction Marketing and CIMCIG, Oxford BrookesUniversity, Oxford: 24-31.Stockerl K C and Smyth H J (1998) “Strategic marketing planning by UK contractors in aninternational business environment”, Proceedings of the International Construction MarketingConference, 26-27 August, University of Leeds, Leeds.Strassmann W P and Wells J (1988) The Global Construction, Unwin Hyman, London.173

Teece D J and Pisano G (1994) “The dynamic capabilities of firms: an introduction.” Industrial andCorporate Change 3: 537-556.Wernerfelt B (1984) “A resource-based view of the firm.” Strategic Management Journal 5: 171-180.174

The Move to Nighttime Construction –How are U.S. Highway Agencies Coping?Minchin Jr., R.E.University of Florida, USA(email: minch@ufl.edu)Thurn, S.B.,Verochemical Distributors Inc(email: bthurn21@gmail.com)Ellis, R.D.,University of Florida, USA(email: relli@ce.ufl.edu)AbstractThe traffic volume in major cities such as Chicago reached the point years ago where closinga lane of a major traffic artery during daylight hours so affected the city’s traffic patterns andcommerce that a move toward nighttime construction was initiated. In recent years, trafficvolumes have increased so much faster than infrastructure upgrades that the need fornighttime construction has affected smaller cities such as Pensacola, Florida. As a result,many public highway agencies have overseen a steady increase in roadway constructionperformed during the night instead of during the day. The effectiveness and wisdom of usingthis alternative has been called into question and there have been studies performed on thedangers associated with night time shifts, as well as the quality of the finished product, theeffect on the health of the workers, illumination standards, signage, etc. Since use of nightwork has been a somewhat controversial subject, many of the state Departments ofTransportation (DOT) have decided to avoid using night work altogether while many othershave only used it in extreme situations. Until now, it has been unclear to what extent eachstate’s DOT performs night work construction and to what extent their regulation of theconstruction differs from that performed during the day. By way of interviews performed bythe authors with every state DOT, this paper documents the level of usage, as well as thespecific plans, programs, and specifications currently in place for each state DOT’s nighttimeconstruction effort.Keywords: nighttime construction, illumination, glare, reflectivity, signage175

1. IntroductionTraditionally, there have been many questions that an owner or, more lately, perhaps a contractor ordesign-build entity, had to answer during the programming and design phases of a highway or bridgeproject. These questions deal with issues at the very core of every project. How these issues aresettled determines how a construction project will be executed. Examples of these issues are projectlocation, with questions like “what is the route of the road?’ and “will this be built in a residential orcommercial area?”, or maintenance of traffic (MOT), with questions like “can the road be shut downat all?” and “how many lanes can be closed at a time, and when?”Once these issues have been settled, a plan must be developed by the owner, in the case of major UShighway work, probably a state Department of Transportation (DOT), as to what time of the day theconstruction of the project will be performed. In the last 30 years, night time construction hasbecome a viable option in the delivery of highway construction projects, giving the owner morechoices as to when to build a project.Night construction results in less traffic congestion during the day when the traffic on the road is atits highest, but can negatively affect construction workers. Studies show that projects that areconstructed during the night affect the worker both mentally and physically. (Ullman et al 2005) Inaddition to this, performing road work at night puts the workers in a more dangerous situation byworking in areas that are not as well lit on average as during the day.Currently scientists and researchers are studying, analyzing, and debating the many factors that typifynight time construction to determine whether this should be considered a viable option. Theobjective of this paper is to report on the current use, and plans for use of the option by state highwayagencies in the U.S. Knowledge of this should help decision makers for construction programs atpublic highway agencies throughout the world in deciding whether to use the nighttime construction,and, if so, when to do so, and how to do it the most effectively and safely. It should also giveresearchers a synthesis of the industry with which to begin data gathering for research on the subject.The practice of night time highway construction began in the early 1960’s. (Ullman et al 2004) TheDOTs saw it as an effective measure to ease traffic in high volume areas during the day. Theyreasoned that performing work at night would improve the traffic flow during the day as well asimprove access to construction sites so contractors could export waste and import necessary materialsmore easily. In addition to this, workers would perform their crafts in cooler temperatures whichwould lessen the fatigue that workers usually face when working in the sun during the middle of theday. Because of these factors many experts argued that the construction itself would be completedmore efficiently with a higher level of quality.Others now argue that because of the odd hours that the construction workers are forced to work, thequality of the work suffers. Studies have confirmed that workers who tend to work the long hoursthat night work demands have been negatively affected by reductions in their individual sleep times,increases in stress on the body, and altered appetites. (Ullman et al 2004) Other perceptions are that176

working at night will affect the workers’ alertness, reaction times, and motor skills, though this hasnot been proven conclusively.Even though night time construction has become far more popular recently within many states, it isstill a relatively new and unexplored option for many DOTs. In fact, a majority of states today do notview night time construction as a viable option for most projects, and some others will use it only inextreme situations.The objective of this paper is to document the level of usage, as well as the specific plans,programs, and specifications currently in place for each state DOT’s nighttime constructioneffort. The research that spawned this paper led to the most comprehensive report of DOTnightwork activity ever published, when one considers that not only did the paper report onwhich states use nighttime highway construction, but also the level of usage, the stated plansfor future use, whether or not the DOT has a specific program for nighttime construction, andwhat, if any, specifications for nighttime work each state has in their standard orsupplemental specifications, or special provisions. Additionally, this paper provides a limitedsynthesis on the related topics of safety and accident prevention in nighttime highwayconstruction zones.2. Safety impactThere have been many studies yielding differing results but the general perception is that night workis far more dangerous than traditional day time construction. A study during the 1980’s in Californiaconcluded that for active night time work zones, accidents on the road increased by 87 percent.Furthermore it was concluded that accidents were increased by 75 percent when at least one lane ofthe road was closed compared to none. (Ullman et al 2004) A similar study that took place inVirginia during this time period replicated the findings of the California study, giving furthercredence to the argument of those not in favor of night time construction. (Cottrell 1999) Despitethe overwhelming evidence of the dangers of night time construction, it can be argued that night timeconstruction can still be a viable option for contractors due to the fact that the overall number oftraffic accidents if night work is performed might actually decrease. Those that make this argumentpoint to the fact that there is a much higher concentration of traffic during the day. Even though thereis a much higher probability that any one vehicle travelling through a work zone at night will beinvolved in an accident, the total number of accidents in a work zone will probably be higher duringthe day due to the higher number of vehicles passing through the work zone. Therefore, a case can bemade that night time construction increases driver safety over a 24-hour period. (Ullman et al 2004)Further studies were performed in active night work zones in Texas between June, 2002 and May,2003 to determine what activities would be improved through being performed at night as well ashow dangerous these work sites would be to traffic.This study broke down the overall road construction process into four different types of work. Thefirst type of work was demolition and structure repair. Demolition and structure repair are usually177

performed on overpasses and over traffic so this process is best performed at night. The second workprocess included concrete pours. Concrete pours are often performed during the night due to the hightemperatures that are present during the day. The third work process is paving. Paving, in this case,included milling, sealcoat, and overlay and is often performed during the night time. The last workprocess is striping. Striping is a good candidate for night work because it is a slow process thatnegatively affects traffic flowOnce they had broken down the activities that go into night time construction the researchers decidedto determine if night work affected the number of night time crashes. In the state of Texas during thistime period there were 280 ongoing road construction projects. Of these 280 projects, 39 of themincluded night work in some form (70% of the work completed during the night as well as the day,30% of the work being completed solely during the night hours).When data from construction sites that used night time construction were compared to data fromconstruction sites that used day time construction, the researchers determined that in areas wherethere is a work zone with no one working at the moment, there is a slightly higher accident rate thanif there were no work zone at all. Secondly it was determined that when work was ongoing duringthe day, accidents increased by 36.5% in areas where there was construction work being performedboth during the day and during the night. In areas where there was no one working in a workplace atnight, accidents increased by over 45%. Conversely, when work was being performed at these worksites during the night time, accidents increased by over 102%. Clearly the construction equipmentand barricades without the presence of construction workers generate a higher number of accidentsthan roadway without any such MOT devices and the presence of night time construction crews morethan double the number of traffic accidents within a work zone, when compared to the absence of awork zone. Lastly it was proven that the most dangerous of the work activities was the task ofasphalt resurfacing. During this operation, accidents increased by 55.4%. (Ullman et al 2004)It has already been argued that night time construction increases chances of automobile accidents, butworkers safety must also be considered when measuring the dangers of night time construction.Annually, about 100 workers die and more than 20,000 are injured while working on highwayconstruction projects. Of these deaths, vehicle and equipment operating in, or in close proximity to,the work zone account for nearly half of the overall fatalities. Because of this, it has becomeincreasingly important to barricade the work zone, in order to protect workers. (Ullman and Anderson2000)3. Planning and preventionAs stated earlier, a driver is nearly 85% more likely to get into an accident in a night time work area,than a driver that is not near any construction. To mitigate this, researchers propose traffic controlsystems that would encourage drivers to use alternate pathways. By doing this the roadways underconstruction would become less congested, which should result in fewer accidents. Studies haveproven that a motorist will take alternate routes when faced with road delays, so if a trafficmanagement program becomes successful at alerting motorists of oncoming delays, the roadway178

under construction will be less congested as long as there are alternate routes. (Ullman and Anderson2000)In order to implement such a policy, officials would be required to develop a traffic management planthat included determining the economic impacts involved, safety considerations, public image, andtraffic handling strategies. Once all of these issues have seriously been considered a DOT cansuccessfully develop a Traffic Management Policy (TMP) for when and how it will perform roadconstruction under traffic.The first item that traffic officials take into account is the economic impact of any TMP that isproposed during the planning stage as part of considering the economic impacts of the constructionitself. One simple thing that DOTs are doing is shortening project duration, which lowers road usercost and helps in many other areas.The next items taken into account for the traffic management plan are safety considerations. Thenumber one reason for so many accidents happening during the night in active work zones isvisibility. Currently, DOTs are adding illumination specifications to their Standard Specifications forRoad and Bridge Construction. These all require that flaggers be placed at strategic areas throughoutthe work zone to attract the attention of motorists and help prevent accidents. Reflective barriers arealso becoming more prevalent around the job site and many state specifications include a minimumlevel of lighting required in the work zone for specific work activities. This lighting must be wellspaced out to sufficiently light the surrounding area without providing a glare to the oncoming traffic.The third item that goes into the TMP is public perception. When performing a highway constructionproject it is very important to take the surrounding public’s opinions into consideration. Forexample, should night time construction be considered as a viable option in a residentialneighborhood? Also, in commercial areas, it might be important to perform more work during thenight because for the most part, businesses do not appreciate roadwork being performed in front oftheir businesses, citing reduced business as a problem. (Ullman 2000)The last issues that should be taken into account for the TMP are different MOT strategies. Theseprocesses have proven to be very difficult because DOTs try to optimize how much constructionwork can be done without affecting traffic congestion. By attempting to accomplish this DOTs havedeveloped a number of different methods that include portable concrete barriers and paddle screens(Bryden 2002).4. IlluminationOne of the most important factors for the safety and well being of a night time construction project isthe need for sufficient lighting. On a job site a contractor would like to maximize the averageluminance, while maximizing the lighting uniformity in the work zone, while minimizing the glarethat can be seen by the oncoming traffic; all of this while spending the least possible amount of179

money on the lighting system. El Rayes and Hyari (2008) delved into this subject to develop anautomated decision support system (DSS) that would accomplish all four objectives.Once it has been decided to perform any highway construction at night, a good lighting plan must bedeveloped. When deciding the methods that the contractor will use to accomplish the four objectiveslisted in the preceding paragraph, the contractor will make decisions on seven different variables:lighting equipment selection, type of lamps, lamp lumen output, mounting height, lighting towerpositions, luminaries lighting angles and lighting tower positioning.Once the contractor has determined the design variables and constraints of the work zone areas he/shemust identify the purpose of the lighting and then develop a plan to fully optimize the lighting. Oncethe plan has been fully developed and implemented, the night work may begin.4.1 Luminance detectionWhile working at night contractors need adequate lighting. But what constitutes adequate lighting?What are the different factors that go into determining this? In a study by Ellis et al (2003), it wasshown that there are four main factors that are present when determining how much and what kind oflighting to use.The first factor to consider when determining the proper level of lighting is the visual display and thedetails to be seen. Where a work process is being performed that requires a larger work zone area,especially if it is a riskier item of work, the researchers suggest that the safest way to perform thework is to light the whole area as brightly as possible. In this case it will be safer to not only theworkers that are performing this work in a dark environment but it will also benefit the people thatare driving on the roadway at night (makes drivers more aware of the situation).The second factor that should be considered when determining the amount that a specific work zoneshould be lit is the overall age of the drivers on the road. Studies have shown that the older a driveris, the less reactive he is to change in his environment. So, if there is any prior knowledge of theoverall age of drivers on the road, the illumination specifications for the work zone should beadjusted accordingly.Another factor that greatly impacts lighting decisions is the overall speed of drivers through the workzone area. In an area of higher speeds, studies have shown that drivers are far less aware of theirsurroundings than drivers that are travelling slower. This makes sense when broken down into itselemental stages; a driver is far less aware of his surroundings in an area he is speeding throughbecause he is not in the area as long and he is probably concentrating on driving as much as possible.This further encourages DOTs to lower work zone speed limits during the night while the traffic islow because it will cause drivers to travel through the most dangerous expanses of the road in a morecontrolled manner.The last factor that should be considered when developing the lighting plan is the reflectance of thetask and the background. While working on the road at night, it is very important to not only be aware180

of the dangers in the work zone, but it is equally important to understand exactly what dangers thework zone creates for drivers outside of it. One of the more serious factors that should be consideredwhen dealing with illumination plans is the presence of glare. It has to be determined first how muchlighting is needed for a specific work process, and then how much glare or reflectivity that particularwork area and background are likely to produce. In an area where illumination is maximized yet theglare or reflectivity is minimized, the driver is at an added advantage because they can see their roadand their surroundings clearly and unabated.Ellis et al (2003) went on to prove that there is a linear relationship between illumination andperformance on a highway construction project. As a rule, the more well-lit the project is the moreproductive and efficient the contractor. This is true up to a saturation point, where more light onlyincreases the light, and hence the cost, without improving productivity at all.5. Research methodologyIn order to know where the different state DOTs stand on night time construction and what theirexperiences are with it, it was necessary to communicate with the DOTs and inquire as to theirexperience, future plans, currently used specifications, policies, and procedures dealing with nighttime construction. To accomplish this, the research team telephoned the DOT of all 50 states, as wellas Washington D.C., and Puerto Rico, and spoke with either the State Construction Engineer or oneof his assistants and asked a series of five questions. These five questions were asked:What does your DOT do special regarding night time work? This can include lane closurestandards, illumination requirements, etc.Do you have anything in your specification book specifically regarding night time work?If you do have something regarding night time construction, do you have any specificationsregarding illumination?Other than illumination, are there any other issues regarding night time construction that arecovered in your specification book?Can your specification book be located on the internet?6. Research resultsOnce the results had been analyzed there were a number of items and trends that could be seen. Thefirst notable item is the fact that all of the 52 agencies interviewed have performed night work insome manner. Certain states tend to perform night work more often than others. These states areusually higher population states that night work would greatly benefit like California, New York,181

Florida, etc. Other states like North Dakota, South Dakota, Montana, and other less-populated statesdo not use night time construction as frequently as more populous states.The second item that was noticed during the analysis period of the study was that nearly half of theDOTs (25 of 52) have specifications dealing with night time construction work. Results of theinterviews can be seen in Table 1.Of the 25 states that claimed to have something in their specification book dealing with night timeconstruction, 24 said that they had an illumination specification. This number can be compared withthe fact that only 64% (16/25) of these state’s specification books deal with any issue related to nighttime construction other than illumination standards. The only state that had night workspecifications and did not have a specific lighting specification was the state of Kansas. Kansasinstead allows the contractor the leeway to choose the amount of lighting that they see fit.Table :. Individual state nighttime specification listStatesSpecialnighttimeworkproceduresNighttimework specsIlluminationspecsOther requirementsin specsCommentsAlabama No No No No Contractor has toperform the work thatwill be inspected by theDOT.Alaska Yes Yes Yes No Specific lighting neededfor work processes andmachinery. Use ofballoon lighting.Arizona No No No No Only puts disincentive incontract for contractorswho do not open byspecific times in themorning. Uses police forlane closures.Arkansas No No No No Follows the MUTCDstrictly. Nothing else ismandatory for nighttimeconstruction.California Yes Yes Yes (High VisibilityPermits, ReflectiveANSI 2 Vests)Items on the jobsite suchas cones and barriersmust be reflective.Lighting must be toOSHA standards.Colorado Yes No No No There will be specialwork configurations fornight work. There are nospecifications; it is moreof a state policy.182

Connecticut Yes Yes Yes (Crash Trucks,Signage, and StateTrooperRequirements)The specifications fornight work mostlyinvolve lighting and theother items mentioned.Delaware Yes No No No When night work isnecessary they use aspecific manual. Thismanual deals with laneclosures, lightingnecessities, andreflective clothing.Florida Yes Yes Yes (Materials, LaneClosures, Guardrails,Signage, etc.)Specs for Night timeMOT and standards tobe the same for quality.DOT does lane closureanalysis to determine thebest time.Georgia No No No No The state has madeprovisions to improve thereflectivity of vests andsafety gear.Hawaii Yes No No No Specific areasthroughout the statemust achieve permits inorder to perform work ofcertain noise levels andlighting levels.Idaho No No No No When night work is done,provisions are put in thecontract.Illinois Yes Yes Yes (Traffic ControlStandards, LaneClosure Ramps, etc.)Details on how laneclosures will be set aswell as other processeson how to determine laneclosure ramps.Indiana Yes No No No DOT follows theMUTCD. Requires thatworksites be illuminatedfor workers. Alsorequires reflective vestsand gear.Iowa Yes Yes Yes No The only items in Iowa’sspecification book relateto lighting standards.Kansas Yes Yes No (Materials,Equipment, ReflectiveGear)Illumination standardsare up to the contractor.Kentucky No No No No Requires that the OSHAminimums be met. Thisincludes reflective gear,183

etc.Louisiana Yes Yes Yes (Equipment, LightMeters, GlareControl, LightingPlan)All specs deal solely withillumination standards.Maine No No No No Lighting requirementsdecided on a per-projectbasis. There arerequirements forreflective gear.Maryland Yes Yes Yes No Lane closure standards,additional signage;lighting is specific tolight operations.Massachusetts Yes Yes Yes (Lane ClosureStandards and Usageof Drums forBarriers)Troopers may beemployed by thecontractor. Lighting onpaving operationsrequired.Michigan Yes Yes Yes No Only spec for nighttimework are lightingstandards andspecifications.Minnesota Yes No No No They adhere to theMUTCD. Allrequirements for lightingare on project-by-projectbasis.Mississippi Yes Yes Yes No Has a different set oflane closure standardsfor daytime andnighttime construction.Missouri No No No No Lighting on each projectis completely up to thecontractor. Has somelane closure procedures.Montana No No No No Montana follows theMUTCD guidelines verystrictly. Require lightingon a project-specificbasis, in which therequirements will be inthe special provisions ofthe contract documents.Nebraska Yes Yes Yes (Lighting Signs,Traffic Controls,Reflectivity)Has one of the most welldefinedspecs for nighttime construction.184

Nevada Yes No No No All the traffic controlmeets MUTCDstandards. Towers arelit. Boards and pressreleases warn of laneclosures.NewHampshireNo No No No Only follows MUTCDguidelines whenperforming night work.New Jersey No No No No Illumination standardsare completely up to thecontractor.New Mexico No No No No This is the contractor’sresponsibility.New York Yes Yes Yes (VisibilityRequirements andSign Sheet Signage)Requires different areasfor night work, differentillumination for workprocesses, and highvisibilityapparel.North Carolina Yes Yes Yes (Reflective Flagging) The contractor shallsupply the itemsnecessary in order tomeet the lighting specs.North Dakota Yes Yes Yes (ANSI 3 FullReflective Gear)Night work is very rarebut there still are anumber of provisions forit. Most important arelighting standards.Ohio Yes Yes Yes No There are lane closuremaps (not in thespecifications) that areused by the DOT to aidin the flow of trafficduring construction.Oklahoma No No No No Night work illuminationis completely up to thecontractor.Oregon Yes Yes Yes (Reflective Flaggersand Lane ClosureStandards)Pennsylvania Yes No Yes (Work Zone TrafficControl, TaperLengths)Lane closure standards,illuminationrequirements, etc. areprovided.Has traffic controlspecifications thatdictate specs forillumination in the workzone.Rhode Island Yes No No No Follow MUTCD strictlyand will inspectontractors’ lighting185

plans. Specifies theusage of flaggers and/orpolice depending onroad size.South Carolina Yes Yes Yes No Requires the specificusage of lighting as wellas the usage of reflectivedrums as barriers.South Dakota Yes Yes Yes (Reflective Flagging) Require the usage oflighting on the projectonly.Tennessee Yes Yes Yes No Only specifiesilluminationrequirements.Texas Yes No No No Specifies that lightingrequirements be on aper-project basis. Eachdistrict might make aspecific plan regardingnight work, but it is notin the spec book.Utah Yes Yes Yes (Flagger Equipmentand Clothing,Reflective Drums)Requires the usage oflighting and the usage ofreflective gear anddrums.Vermont Yes No No No Adheres to a standard oflighting put forth by theFHWA.Virginia Yes Yes Yes (Lane ClosureStandards, Flagging,State Troopers)Specs deal with lightingangles, illumination,lane closure standards,flagging, and statetroopers.Washington Yes No No No Lane closures are givenin a traffic control planthat contractors mayalter. Specs concentrateon usage of flaggers.West Virginia Yes Yes Yes No Specs call for temporarylighting and a newchannelizer cone foreasier and quicker setupfor contractors.Wisconsin No No No No No special specsregarding nighttimework or illuminationrequirements. Changes186

to night work are projectspecific.Wyoming No No No No State requires is that thesite be “well lit.”The engineer makes thedecision.District ofColumbiaNo No No No Follows the standardsput forth by the MUTCD.Puerto Rico Yes Yes Yes No Recently developed anillumination spec dealingwith nighttimeconstruction.6.1 Additional items found in specificationsThough illumination is the most important single factor in night time construction to the DOTs, thereare other factors that are featured in their own specification. Sixteen of the 25 states hadspecifications dealing with items ranging from retro reflective vests to guardrail specifics. Otheritems found in states’ nighttime construction specifications were, in order of those found the mostoften to those found the least often were: reflective gear (such as vests); lane closure standards;signage; protective barriers; state troopers; materials and equipment.7. Summary and conclusionsMethods and best practices for night time highway and bridge construction are still in the beginningstages of development. Many states have begun to adopt plans to help in policing the constructionsite, but still more than half of the country’s DOTs do nothing in the way of requiring anything butthe supervision of the contractor.Night time construction is relatively new, having only been an option for the last 30 years or so. Itprovides construction workers and contractors the ability to work during the night while it is not ashot as during the day. It also allows contractors to work in a time period with a lower level of roadcongestion. Because of this contractors are able to use their maximum allowable space on the jobsite, they are able to more easily accept deliveries than during the day, and theoretically, the workersinside the work area have a safer environment due to the fact that there is less of a chance of motoristinterference.There are many drawbacks to performing the work at night, however. There have been many studiesindicating that crash rates go up significantly throughout the work zone when work is beingperformed at night. To counter this, most DOTs have developed their own specific set of proceduresand specifications to deal with night time construction. The states utilizing night time constructionare usually the more populous states, while less-populous states report have little or no night time187

construction. And in the event of night time construction, these states usually leave all of theconstruction planning, work, and safety up to the contractor and trust that he is the moreknowledgeable one on making the project efficient.A study was developed by the authors to develop a synthesis of the industry regarding the use ofnight time construction for highway and bridge construction. The DOTs of each of the 50 UnitedStates were contacted as well as Puerto Rico and Washington D.C. All 52 DOTs submitted to a shortinterview. During each interview, they were asked a series of five questions that would aid indetermining the seriousness and depth of each of their programs.In all, it was determined that a little under half of the agencies (25 out of 52) said they had developedspecifications dealing with night work. Many other states claimed that they solely adhered topractices put in place by the MUTCD and still others claimed that they would include certain nighttime procedures in the contract documents on a project by project basis.Of the 25 states that do have night time construction specifications, 24 of them stated that they hadtheir own illumination specifications. This was far and away the most prevalent item found in DOTspecification books. These specifications sometimes state only that the contractor has to performadequate lighting to perform the work. Other states have more elaborate requirements such asrequirements that there be temporary lighting structures with certain minimum ratings on site atcertain times.There were many other items dealing with night work throughout the states’ specification books thatdid not deal with illumination. There were specifications mandating lane closure standards, the useof guardrails, the use of state troopers, retro reflectivity specifications, etc.Indications are that night time construction is a process that will be heavily utilized in the future.Yet, despite all of its virtues, night time construction still has created controversy due to reports andresearch suggesting that it has a negative effect on the health of workers and increases the probabilitythat any one vehicle will have an accident in the work zone. Because of this it is imperative that eachstate’s DOT continue to research and develop their programs to put the construction workers and thetravelling public in the safest environment possible.ReferencesAnders, Richard. "On Road Investigation of Flourescent Sign Colors to Improve Conspicuity."Virginia Polytechnic Institute. 9 Aug. 2000. 1 June 2008 http://scholar.lib.vt.edu/theses/available/etd-09222000-12010036/unrestricted/anders_etd.pdf.Bryden, J. E., and D. J. Mace. "A PROCEDURE FOR ASSESSING AND PLANNING NIGHTTIMEHIGHWAY CONSTRUCTION AND MAINTENANCE." National Cooperative Highway ResearchProgram. 2002. 4 June 2008 http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_475.pdf.188

Cottrell Jr., B. H. "Final Report: Improving Night Work Zone Traffic Control." VirginiaTransportation Research Council. Aug. 1999. 1 June 2008http://virginiadot.org/vtrc/main/online_reports/pdf/00-r8.pdf.Ellis, Ralph, Scott Amos, and Ashish Kumar. "Illumination Guidelines for Nighttime HighwayWork." National Cooperative Highway Research Program. 2003. 4 June 2008http://books.google.com/books?hl=en&lr=&id=ayavdsooe68c&oi=fnd&pg=pt6&ots=xxrknpzgsi&sig=62awv8yqtognpecpkzbjvnolqqs#ppt8,m1.El-Rayes, Khaled, and Khalied Hyari. "Automated DSS for Lighting Design of Night TimeOperations in Highway Construction Projects." 4 June 2008http://fire.nist.gov/bfrlpubs/build02/pdf/b02083.pdf.El-Rayes, Khaled and Khalied Hyari. "CONLIGHT Lighting Design Models for Nighttime HighwayConstruction." Journal of Construction Engineering and Management. Apr. 2005. 1 June 2008http://cee.uiuc.edu/people/elrayes/conlight%20paper.pdf.Kaisy, Ahmed A., and Khalad Nasar. "Nighttime Construction Issues Revisited." TransportationResearch Board. July 2002. 4 June 2008 http://www.ltrc.lsu.edu/trb_82/trb2003-001161.pdf.Park, Sang-Bin, and Kimberly D. Douglas. "Decision Model For Determining Day Time versus NightTime Operations in Oregon." 2003. 4 June 2008 http://www.ltrc.lsu.edu/trb_82/trb2003-001367.pdf.Pratt, S. G., D. E. Forsbrook, and S. M. Marsh. "Building Safer Work Zones: Measures to ProtectWorker Injuries From Vehicles and Equipment." CSA Illumina. 1 June 2008http://md1.csa.com/partners/viewrecord.php?requester=gs&collection=trd&recid=20070431097018ce&recid=20070454051358mt&q=related%3atk1ynzfrpzgj%3ascholar.google.com%2f&uid=792849287&setcookie=yes.Ullman, Gerald L., and Stuart Anderson. "REDUCING AND MITIGATING IMPACTS OF LANEOCCUPANCY DURING CONSTRUCTION AND MAINTENANCE." National CooperativeHighway Research Program. 2000. 30 May 2008http://ntl.bts.gov/lib/18000/18700/18789/pb2002102043.pdf.Ullman, Gerald L., Brooke R. Ullman, and Melisa D. Finley. "Evaluating Safety Risk of Active NightWork Zones." Apr. 2005. 4 June 2008 http://tti.tamu.edu/documents/0-4747-2.pdf.Ullman, Gerald L., Melisa D. Finley, and Brooke R. Ullman. "Assessing the Safety Impact of ActiveNight Work Zones in Texas." Transportation Research Recrod 1761 (2004): 10-56.189

Advancement of Global Built Environment as ThreeRecursive SystemsHuovinen, P.Strategic Management in Construction, Aalto University School of Science and Technology(email: pekka.huovinen@tkk.fi)AbstractThe global background involves industrialized, developing, and less-developed countries facingsevere societal, industrial, and environmental challenges. This calls for many novel lines of proactivethinking. In turn, our ongoing basic and applied research program aims at advancing recursive,systemic ways of managing firms, businesses, public organizations and services, processes, contracts,projects, and tasks successfully in various evolving contexts of the global built environment (BE).The purpose of this paper is to enhance the thinking and performance of key stakeholders byredesigning the ideal, global BE and its advancement as a set of three recursive systems. The natureof this theoretical paper is that of a system design task. It is assumed that it is possible to redesign theBE only at three levels of hierarchy, i.e. like a viable system that is capable of sustaining an existenceas part of societies, economies, sectors, industries, businesses, and public services. Thus, the selectedprinciples of Stafford Beer’s (1985) Viable System Model (VSM) are applied to the design of theideal, global BE as a recursive set of foresights, models, and practices. The results of this systemdesign task cover the ideal, 3-system BE as follows. The focal, 2 nd -order system deals with modelsunderlying the BE, model designers, and their modeling processes. Its lower, 1 st -order recursion dealswith individual building and infrastructure objects and stocks of them within the real BE and theirowners, users, designers, constructors, suppliers, and life-cycle services providers with modelenabledpractices within the real BE. Its higher 3 rd -order recursion deals with foresights on the futurestates of the BE that precede both the reinvention of existing models and innovations as well asforeseers. This recursive view encompasses all kinds of stakeholders, objects, processes,competences, contexts, varieties, and prerequisites. Finally, it is proposed that collaborative entities,e.g. CIB, the UNEP-SBCI, and the ECTP as well as key stakeholders across the globe can envisionand set more demanding aims and also attain them to higher degrees when they adopt the view of therecursive advancement of the design, construction, use, and maintenance of the global BE.Keywords: built environment, construction, contexts, modeling, recursive systems190

1. IntroductionThe integrated design, (re-)construction, use, and maintenance of the global built environment(BE) encompasses herein (i) all life-cycle aspects of capital (including construction) investments inthe utilization of natural resources, energy supply, telecommunications, transportation, otherinfrastructure, manufacturing, and general building concerns as well as (ii) all stakeholders with theiraims, roles, systems, processes, and competences. In this evolving context, stakeholders are facingsevere societal, economic, and technological challenges across advanced industrialized countries(e.g. aging societies, personnel shortages, and the transformative effects of digitalization), China,India, Brazil, Russia (CIBR), and other developing countries as well as less developed countries (e.g.multi-cultural issues, environmental protection, energy saving, and localization issues). Global andcontinental challenges, coupled with the (inter)national and local ones, are being addressed by manykey stakeholders. Herein, only three major collaborative entities are exemplified as follows.The visions, purposes, and activities of global organizations such as the United Nations, the WorldBusiness Council of Sustainable Development, the International Initiative for a Sustainable BuiltEnvironment (iiSBE), and International Council for Research and Innovation in Building andConstruction (CIB) deal with the advancement of the BE. The United Nations EnvironmentProgramme and the building sector have entered a partnership, i.e. the Sustainable Buildings &Climate Initiative (UNEP-SBCI) to promote sustainable building practices worldwide (UNEP-SBCI, 2009). In turn, CIB is the world’s foremost platform and network of over 5000 experts fromabout 500 member organizations, who cooperate and exchange information in over 50 commissions(CIB, 2009). Within the European Communities, the European Construction Technology Platform(ECTP) is envisioning to raise the sector to a world-beating level of performance andcompetitiveness. This will be achieved by analyzing the major challenges that the sector faces interms of societal, sustainable, and technological developments. The ECTP has crafted the Vision2030. Its Strategic Research Agenda (SRA) is outlining how this vision will be achieved. Researchand innovation strategies will be developed to meet such challenges by engaging with and mobilizinga wide range of leading skills, expertise, and talent within the industry over the coming decades(ECTP, 2009).In turn, this paper is part of the basic and applied research on advancing the recursive, systemic waysof managing firms and their businesses, public organizations and their services, processes, contracts,projects, and tasks successfully in various evolving contexts of the global BE. The purpose is toenhance the thinking and performance of key stakeholders by redesigning the ideal, global BE and itsadvancement as a set of three recursive systems. The selected principles of Stafford Beer’s (1985)Viable System Model (VSM) are applied to designing the ideal, global BE and its advancement as thethree recursive systems, i.e. foresights, models, and practices (Section 2). The current visions, aims,and priorities of CIB, the UNEP-SBCI, and the ECTP are mapped against the four dimensions ofadvancement. Some initial suggestions for recursive advancement are put forth (Section 3). Finally,the future deepening of this semi-Beerian approach is briefly addressed (Section 4).191

2. Redesign of the global BE and its advancement as threerecursive systemsThe global BE and its advancement is herein redesigned from the recursive systems view as follows.The choice of this systems view is justified. The global BE is designed in terms of its fundamentalproblems and their solutions as three recursive systems. The selected principles of Beer’s (1985)VSM are applied to the design of each of the three systems and their subsystems.2.1 Reliance on the selected principles of Beer’s VSMThe initial review of the diverging development programs of CIB, the UNEP-SBCI, and the ECTPrevealed that this system designer could not rely primarily on any one of their present approaches andprograms. Instead, Beer’s (1985) VSM is concerned with what defines each stakeholder organizationand enables it to maintain its viability. The VSM lays down a minimum set of necessary relations thatmust be obtained if an organization related to the global BE is to conduct its foreseeing, modeling,and practicing successfully. Beer (2002) emphasized as one of his last guidelines that self-sustainingorganizations are autonomous within limits that are defined in terms of own systemic structures andthat organizations should be managed in real-time. Management should deal only with theinformation that changes the status of their organization and act as teams initiating selective andimmediate responses. By the year 2009, the VSM has been used for nearly 50 years to diagnoseorganizational structures and communications so that the necessary and sufficient conditions forviability can be met (adding to Leonard 2000). Indeed, some principles inherent in the VSM seem tosuit best for the system design task in hand as follows.2.2 Global BE as the open system with its three recursive problemsThe global BE is seen as one open, goal-seeking system. Aligning with Rittel and Webber (1974), itis argued that many problems inherent in the life-cycles, i.e. the design, (re-)construction, use, andmaintenance of the stocks and objects of the BE are ”wicked”. In other words, information needed tounderstand a problem depends on one’s idea for solving it. Problem understanding and resolution areconcomitant notions. To find a problem is thus the same thing as finding a solution. A particularproblem (e.g. in new buildings) cannot be defined until a solution (e.g. ICT-enabled processes) hasbeen found. One cannot understand a problem without defining its context. One cannot meaningfullysearch for information without the orientation toward a solution concept. Nevertheless, one cannotrely on known solutions only vis-à-vis when one is facing evolving or novel problems.Beer’s (1975) recursive systems view is preferred for trying to capture much of complexity embeddedwithin the evolving BE in various contexts across the globe. Applying Beer (1985), it is assumed thatit is possible to redesign the global BE at three levels of hierarchy as a viable system, which iscapable of sustaining a separate existence as part of societies, economies, sectors, industries,businesses, and public services. At each level, there is one viable system that consists of many sub-192

systems. The viability of the 1 st -order system is enabled by the 2 nd -order system and the viability ofthe 2 nd -order system is in turn sustained by the 3 rd -order system. This is a way of modeling the ideal,global BE (and its stakeholders) like a series of “Chinese boxes”. Accordingly, current problemsfacing the global BE and its stakeholders are restated as three recursive problems with their initialsolutions along the temporal dimension as follows:How can the high quality of the existing and new BE and the high effectiveness of design,new construction, renovation, use, and maintenance processes be enabled and cross-sectionalaims (e.g. to deliver greenhouse gas emissions cuts at the least cost) be set and also attainedvis-à-vis the 1st-order object stocks, individual objects, and practicing?How can the highly advanced and applicable models (including ICT solutions) and the higheffectiveness of model-specific design processes be ensured and longitudinal aims (e.g. todevelop climate neutral, net-zero energy objects) be set and also attained vis-à-vis the 2 nd -order model portfolios, individual models, and modeling?How can the existence of the global, multi-contextual BE be sustained and existential aims(e.g. to expand enabling technology exploitations in order to stop global warming) be set andalso attained vis-à-vis the 3 rd -order BE-related foresight portfolios, individual foresights, andforeseeing?2.3 Global BE as three recursive systemsIt is proposed that the global BE can be advanced successfully as the three recursive systems. Thesesystems enable to design advanced BE-related models, to manage projects and processes effectively,to realize high-quality objects, to explain ex ante reasons for and ways to manage model designs,projects, objects, and stocks as a whole (un)successfully in their contexts as well as to monitor,probe, and manage causes and path-dependencies for heterogeneity in stock and object quality, modellevels, and process effectiveness between various units of analysis and their stakeholders. To thisend, modeling is chosen as the 2 nd -order, focal system which produces more and more advancedBE-related models. One level of recursion down includes all stakeholders with their real objectstocks, projects, processes, and models-in-use. One level of recursion up includes the foreseen, futureBE embedded within foresight portfolios and produced by foresight crafting processes.Thus, the ideal, global BE is conceptualized as the three recursive systems named as follows(Figure 1):1 st -order system of practices (of stakeholders) in the real BE on the action plane2 nd -order, focal system of models enabling the better BE on the design plane3 rd -order system of foresights on the future BE on the cognition plane.193

PRACTICES OF REAL BE (1st-order)MODELS FOR BETTER BE (2 nd -order)FORESIGHTS ON FUTURE BE (3rd-order)CONTEXTUALINTERACTIONBETWEENSOCIETIES,THEIR BUILTENVIRON-MENTS, ANDSTAKEHOLD-ERSReal objectstocksAims-attainmentStock/objectquality levelsProject/processeffectivenessMonitoring andprobingModelportfoliosAims-attainmentModel advancementlevelsDesign processeffectivenessMonitoring andprobingForesight portfoliosAims-attainmentForesight robustnessCrafting processeffectivenessMonitoring andprobingFigure 1: Redesign of the ideal global built environment (BE) as the three recursive systems along thetemporal dimensionRecursivity is incorporated into each of the three systems in terms of three kinds of subsystems for(i) the integrative management of portfolios (of real object stocks, models, and foresights), (ii) realvalue-producing practices, value-enabling modeling, and value-anticipating foreseeing as well as (ii)the monitoring and probing of the states of such practicing, modeling, and foreseeing (Figure 1).Moreover, the 1 st -order, 2 nd -order, and 3 rd -order systemic management competences andperformance competences are defined to be inherent in the respective systems. Such competencesinclude abilities to orientate towards and connect foresights, models, practices, and realobjects/projects with their contexts. These competences possess three flexibilities of absorption,attenuation, and amplification. They guide and re-specify all technology, knowledge, capabilities, andother resources that enable all stakeholders and individuals embedded within each of three kinds ofrecursive systems to think and (inter)act in pre-defined, emerging, or innovative ways that are neededfor aims-attainment (applying Huovinen 2008: 178).Real-time management takes place through managerial and operational processes which linkinternally the three (sub)systems and externally each stakeholder’s organization with its context(s).Each subsystem and element is coupled with a corresponding (sub-)competence internally or it canaccommodate an external (sub-)competence via sub-contracting, partnerships, or networking.Autonomy is nurtured to cope well with BE dynamism. Each subsystem takes responsibility for coevolvingwith its sub-context. Each subsystem is empowered for aims-attainment. Each competenceenables to self-reflect, to improve its state, or to renew its attributes pro-/reactively according tochanges. Each subsystem or element is competent of solving complex problems as close as possibleto points where they occur by re-exploiting, renewing, and complementing its competences.194

2.4 Recursive, 1st-order BE system of managing stocks and realizinghigh-quality objects and effective processes based on models-in-useThe purpose of the 1 st -order BE system is to advance real-time practicing among stakeholders acrossthe globe, i.e. the viability of their object stocks, the targeted high quality of their existing and newobjects, and the high effectiveness of their management, design, new construction, renovation, use,and maintenance processes. In Figure 2, the three subsystems as well as their key elements andinteraction are illustrated in the left-side boxes and with the two broad arrows. The higher-orderinward feedback loops connecting the 1 st -order system with the 2 nd - and 3 rd -order ones are illustratedwith the three narrow arrows. The advantageous uses of such real-time, higher-order feedback arepresented in the three middle boxes and the three right-side boxes.(1) A subsystem of contextual, object-stock management involves the setting of demanding aimsand also attaining them through the integration of the three 1 st -order subsystems. In turn, viable objectstocks enable stakeholders to carry out their primary purposes and processes better. Ideally, objectstockmanagers and decision makers can make use of portfolio models and real-time higher-orderfeedback, i.e. the 2 nd -order, modeling-based advice for re-choosing stocks and ensuring their viabilityas well as the 3 rd -order, foreseen, contextual shifts for phasing the renewal of these stocks.REAL-TIME, 1 ST -ORDERPRACTICINGINTERACTION WITH 2 nd -ORDER MODELINGINTERACTION WITH 3 rd -ORDER FORESEEING(1) MANAGING OF CONTEXT-UAL, REAL OBJECT STOCKS¤ Goals-attainment degrees¤ Renewal of object stocks¤ Networking of stakeholders¤ 1-order competence nurturing¤ Etc.(2) CONTEXTUAL OBJECT-SPECIFIC PROCESSES¤ Aims-attainment levels¤ Roles, actors, and processesover each object’s life-cycle¤ Real-time use of models¤ Use of 1 st -order competences¤ Etc.(3) CONTEXTUAL OBJECTMONITORING AND PROBING¤ Contextual object/stock metrics¤ 1 st -order feedback loops¤ Gap closing vs. objects’ states¤ Probing of novel things and ways¤ Etc.Use of modeling-basedadvice for re-choosing andensuring the viability ofreal object stocks in theircontextsUse of modeling-basedadvice for updating andrevising real object design,new construction, renovation,use, and maintenanceprocesses in theircontextsUse of modeling-basedadvice for ensuring accurate,reliable, contextualmetrics for real objectspecificmonitoring andprobing in their contextsUse of foreseen contextualshifts for phasing therenewal of real objectstocks in their contextsComparison of foreseencontextual novelties andreal object-specific managementand performanceprocesses in their contextsComparison of foreseencontextual object metricsand the monitoring andprobing of real objects intheir contextsFigure 2: Recursive, 1 st -order system of the real BE, its stakeholders, their practices, and inwardfeedback loops with the 2 nd - and 3 rd -order systems195

(2) A subsystem of contextual, object-specific management and processes involves the setting ofdemanding aims for object quality, management level, and process effectiveness as well as also theaims-attainment based primarily on (a) highly competent managers and teams as well as (b) theeffective use of the 2 nd -order object models and process models with self-learning enabled in part bymodel-specific user instructions. Advanced models accommodate requisite variety, i.e. agile ways todesign, construct, renovate, use, and maintain objects successfully in highly dynamic, even chaoticcontexts. Ideally, practitioners can make use of the 2 nd -order, modeling-based advice and the 3 rd -order, foreseen, contextual novelties for revising and updating their object-specific designs/plans andprocess-specific plans to evolve with their changing contexts.(3) A subsystem of the contextual, 1 st -order monitoring and probing of the states of objects,projects, services, and processes involves the setting of demanding aims for pro-acting versus internaland external factors (e.g. novelties, risks, changes, and complexities) that are causally impacting oneach object and the detection of any gaps occurring between the targeted, present, and expectedstates. Aims-attainment is primarily based on (a) highly competent managers, teams, and employeesas well as (b) the effective use of monitoring and probing process models and self-learning enabled inpart by object-specific and model-specific user instructions. Advanced monitoring accommodatesrequisite variety, i.e. agile ways to monitor each object and process in highly dynamic, even chaoticcontexts. Ideally, managers, teams, and employees can make use of the 2 nd -order, modeling-basedmetrics as advice and the 3 rd -order, foreseen, contextual metrics as pointers for ensuring the re-useand necessary redesign of the accurate, reliable metrics versus real objects.2.5 Recursive, 2 nd -order BE system of managing model portfolios anddesigning more advanced modelsThe purpose of the 2 nd -order BE system is to advance real-time modeling among professionalstakeholders across the globe, the viability of their BE-related model portfolios, the high theoreticallevel and high applicability of their individual models as well as the high effectiveness of theirmodeling-management processes and model-specific design processes. In Figure 3, the threesubsystems as well as their key elements and interaction are illustrated in the middle boxes and withthe two broad arrows. The lower-order inward feedback loops connecting the 1 st -order system and thehigher-order loops connecting the 3 rd -order system with the 2 nd -order system are illustrated with thefour narrow arrows. The advantageous uses of higher-order feedback are presented in the three rightsideboxes and those of lower-order feedback are presented in the three left-side boxes.(4) A subsystem of generic and contextual model portfolio management involves the setting ofdemanding aims and also attaining them through the integration of the three 2 nd -order subsystems. Inturn, self-renewing, highly viable model portfolios enable modelers to become leading enablers intheir respective object class and other contexts. Ideally, model portfolio managers can make use ofportfolio models and the 1 st -order, practice-based feedback for ensuring the viability of their genericand contextual model portfolios as well as of the 3 rd -order, foreseen, generic and contextual shifts forphasing the renewal of these model portfolios.196

INTERACTION WITH 1 ST -ORDER PRACTICINGREAL-TIME 2 nd -ORDERMODELINGINTERACTION WITH 3 rd -ORDER FORESEEINGUse of practice-basedfeedback for ensuring theviability of generic andcontextual model portfoliosUse of practice-basedfeedback for ensuring theviability of generic andcontextual models,modeling-management,processes, and modeldesignprocessesUse of practice-basedfeedback for developingthe more accurate, reliablemetrics for generic andcontextual model-specificmonitoring and probing(4) MANAGEMENT OF GENERICAND CONTEXTUAL BE-RELATEDMODEL PORTFOLIOS¤ Goals-attainment degrees¤ Renewal of model portfolios¤ Networking of stakeholders¤ 2 nd -order competence nurturing¤ Etc.(5) MODEL-DESIGN PROCESSESAND NEW GENERIC AND CON-TEXTUAL BE-RELATED MODELS¤ Aims-attainment levels¤ Roles, actors, and processes¤ Use of design-process models¤ Use of 2 nd -order competences¤ Etc.(6) MODEL-SPECIFIC MONITOR-ING AND PROBING¤ Generic and contextual metrics¤ 2 nd -order feedback loops¤ Gap closing vs. models’ states¤ Probing of novel things and ways¤ Etc.Use of foreseen genericand contextual shifts forphasing the renewal ofgeneric and contextualmodel portfoliosUse of foreseen genericand contextual noveltiesfor the reinvention ofmodels, modeling-managementprocesses, andmodel-design processesUse of foreseen genericand contextual metrics forthe reinvention of themetrics for model-specificmonitoring and probingFigure 3: Recursive, 2 nd -order system of better BE, its stakeholders, their models, and inwardfeedback loops with the 3 rd - and 1 st -order systems(5) A subsystem of model-specific management processes and design processes involves thesetting and attainment of demanding aims for modeling based on (a) highly competent modelingmanagers, teams, and designers, and (b) the effective use of model class-specific design processmodels and innovative self-learning enabled in part by modeling instructions. Advanced designprocessmodels accommodate also requisite variety, i.e. agile ways to design generic models andversions for dynamic, even chaotic contexts. Ideally, modelers can make use of the 1 st -order, practicebased,model user feedback and the 3 rd -order, foreseen, generic, and contextual novelties forreinventing models and their design processes on time.(6) A subsystem of the 2 nd -order, model-specific monitoring and probing of the states of modelsand processes involves the setting of demanding aims for pro-acting versus internal and externalfactors (e.g. novelties, risks, changes, complexities) that are causally impacting on modeling tasks aswell as the detection of gaps occurring between the targeted, present, and expected states. Aimsattainmentis based on (a) highly competent staff and (b) the effective use of the monitoring processmodels and self-learning enabled in part by instructions. Advanced monitoring accommodatesrequisite variety, i.e. agile ways to monitor models and processes in dynamic, even chaotic contexts.Ideally, staff can make use of the 1 st -order, practice-based feedback for ensuring the reliability of themonitoring metrics and of the 3 rd -order, foreseen metrics for the reinvention of the current metrics.197

2.6 Recursive, 3rd-order BE system of managing foresight portfolios andcrafting more robust foresightsThe purpose of the 3 rd -order BE system is to advance real-time foreseeing among stakeholders vis-àvisthe BE across the globe, i.e. the robustness of their foresight portfolios and individual foresightsas well as the high effectiveness of their management processes and foresight-specific craftingprocesses. In Figure 4, the three subsystems as well as their key elements and interaction areillustrated in the right-side boxes and with the two broad arrows. The lower-order inward feedbackloops connecting the 1 st -and 2 nd -order systems with the 3 rd -order one are illustrated with the threenarrow arrows. The advantageous uses of lower-order feedback appear in the three middle boxes andthe three left-side boxes.(7) A subsystem of generic and contextual foresight-portfolio management involves the setting ofdemanding aims and also attaining them through the integration of the three 3 rd -order subsystems. Inturn, highly robust foresight portfolios enable stakeholders even to pre-empt major advances andsustain their existence. Ideally, managers and decision makers can make use of foresight portfoliomodels as well as higher and lower-order feedback, i.e. the 2 nd -order, modeling-based triggers and the1 st -order, practice-based feedback for checking the robustness of their foresight portfolios.INTERACTION W ITH 1 ST -ORDER PRACTICINGINTERACTION W ITH 2 nd- -ORDER MODELINGREAL-TIME, 3 rd -ORDERFORESEEINGUse of practice-basedfeedback for checking therobustness of generic andcontextual BE-relatedforesight portfoliosUse of practice-basedfeedback for checking therobustness of generic andcontextual BE-relatedforesights, managementprocesses, and foresightcraftingprocessesUse of practice-basedfeedback for finding themore robust metrics forgeneric and contextualBE-related foresightspecificmonitoring andprobingUse of modeling-basedtriggers for checking therobustness of generic andcontextual BE-relatedforesight portfoliosUse of modeling-basedtriggers for checking therobustness of generic andcontextual BE-relatedforesights, managementprocesses, and foresightcraftingprocessesUse of modeling-basedtriggers for finding themore robust metrics forgeneric and contextualBE-related foresightspecificmonitoring andprobing(7) MANAGEMENT OF GENERICAND CONTEXTUAL BE-RELATEDFORESIGHT PORTFOLIOS¤ Goals-attainment degrees¤ Renewal of foresight portfolios¤ Networking of stakeholders¤ 3 rd -order competence nurturing¤ Etc.(8) FORESIGHT-CRAFTINGPROCESSES AND NEW GENER-IC AND CONTEXTUAL BE-RELATED FORESIGHTS¤ Aims-attainment levels¤ Roles, actors, and processes¤ Use of crafting-process models¤ Use of 3 rd -order competences¤ Etc.(9) FORESIGHT-SPECIFICMONITORING AND PROBING¤ Generic and contextual metrics¤ 3 rd -order feedback loops¤ Gap closing vs. foresights’ states¤ Probing of novel things and ways¤ Etc.Figure 4: Recursive, 3 rd -order system of future BE, its stakeholders, their foresights, and inwardfeedback loops with the 2 nd - and 1 st -order systems198

(8) A subsystem of foresight-specific management and crafting processes involves the setting ofdemanding aims for the robustness of BE foresights as well as also the aims-attainment basedprimarily on (a) highly competent managers, teams, and foreseers as well as (b) the effective use offoresight type-specific crafting process models and innovative self-learning enabled in part byforeseeing instructions. Advanced crafting accommodates requisite variety, i.e. agile ways to craftgeneric foresights and versions for highly dynamic, even chaotic contexts. Ideally, foreseers can makeuse of the 1 st -order, practice-based feedback and the 2 nd -order, modeling-based triggers for checkingthe robustness of foresights and their crafting process models.(9) A subsystem of the 3 rd -order monitoring and probing involves the setting of demanding aimsfor anticipating major internal and external factors (e.g. emerging driving forces and trends) that arecausally impacting on each foresight and its crafting process as well as the detection of gapsoccurring between the targeted, present, and expected states. Aims-attainment is primarily based on(a) highly competent staff and (b) the effective use of the monitoring process models and selflearningenabled in part by instructions. Advanced monitoring accommodates requisite variety, i.e.agile ways to monitor each foresight and process in dynamic, even chaotic contexts. Ideally, staff canmake use of the 1 st -order, practice-based, contextual feedback and the 2 nd -order, modeling-basedtriggers for finding more robust metrics.3. Suggested recursive roles of CIB, the UNEP-SBCI, and theECTPIt is herein suggested that CIB, the UNEP-SBCI, and the ECTP assume the key collaborative rolesalong the four dimensions of the recursive advancement of the global BE, i.e. the generic, object class–specific, ICT-enabled, and external context class-specific dimensions. The justifications for theseroles are to be found in the aims, priorities, and programs of the three stakeholders as follows.3.1 Generic advancement of BE versus CIB and the UNEP-SBCIThe recursive, generic dimension of advancement involves the global BE on the planes ofmodeling and foreseeing. CIB is engaged in building a better world and centering its activitiesaround the priority themes, i.e. through (i) demand driven, macro/industry oriented sustainable construction,(ii) the supply driven, macro/industry oriented revaluing of construction to create maximumvalue, (iii) demand driven, micro/projects oriented ways to meet client and user requirements, and(iv) supply driven, micro/projects oriented ways to deliver integrated design solutions (CIB, 2009).The UNEP-SBCI is committed to take actions to mitigate and to adapt to climate change e.g. by (a)introducing a carbon trade mechanism, (b) renovating buildings to reduce GHG emissions, (c)making publicly owned buildings climate neutral, (d) supporting standard setting, and (e) fosteringlong term responsible lifestyles (UNEP-SBCI, 2009). Thus, it is suggested that CIB and the UNEP-SBCI enlarge their agendas to encompass the 2 nd -order thinking of designing more advanced genericand contextual enabling models and the 3 rd -order thinking of foreseeing generic development pathsand envisioning the desired cross-sectional states of the more advanced global BE.199

3.2 Object class-specific advancement of BE versus the ECTPThe recursive object-class dimension of advancement involves all categories, typologies,groupings, etc. of individual objects and their stocks in terms of (i) capital, building, infrastructure,and environmental investments, (ii) systems and their parts, and (iii) stakeholders, their organizations,and parts. The ECTP (2009) has the seven focus areas. The four vertical areas address cities andbuilding, underground construction, networks, and cultural heritage. The cross cutting or horizontalthemes help integrate approaches in relation to quality of life, materials, and processes with ICT.Thus, it is suggested that the ECTP develop the 2 nd -order object class-specific recursive thinkingand models as well as the 3 rd -order foresight crafting competencies vis-à-vis anticipating the futurestates of the object classes across the (vertical) focus areas on time.3.3 ICT-enabled advancement of BE versus CIB and the ECTPThe recursive ICT-enabled dimension involves ICT solutions that enable the demanding aimssettingand attainment as well as the achievement of high object quality and high processeffectiveness vis-à-vis the advancement of the global BE. CIB aims at improving the BE throughintegrated design and delivery solutions (IDDS). The ECTP has specified the eight research prioritiesin the domain of processes and ICT, i.e. key processes, digitally modeled and intelligent products,system interoperability and ICT support for collaborative work, the capturing of project experienceand knowledge use in new business models (ECTP, 2009). It is suggested that CIB/IDDS and theECTP integrate their 3 rd -order visions, re-craft the new ones, and advance the 2 nd -order modelportfolios. The goals of CIB/IDDS could be enlarged (i) to foresee business opportunities, (ii) toreplace document-based work methods with the use of integrated building information modeling, (iii)to design better process models and to integrate the aspects of people, processes, and technology inorder to minimize inefficiencies, and (iv) to enhance value delivered through project cycles.3.4 External advancement of BE versus CIB and the ECTPThe recursive, external, context-class dimension of advancement involves all kinds of contexts ofthe global BE with stakeholders, stocks, and objects, i.e. by climate, region, country, society, culture,economy, sector, industry, technology, etc. CIB (2008) recalls that there are many national client anduser focused initiatives in the UK, Denmark, Sweden, Finland, the Netherlands, Australia, the SouthAfrica, the USA, etc. The ECTP (2009) aims at overcoming the 13 key challenges, e.g. by enhancingthe competitiveness of the European construction sector with respect to the USA and the low costeconomies, and by shifting the focus from products to services to the [EU] Society. Many EUmembers have established National Technology Platforms (NTP) addressing the future needs of theBE and the challenges of innovation and industry transformation. Thus, it is suggested that CIB andthe ECTP prepare the guidelines and encourage its national members to enlarge the scopes oftheir external, contextual thinking and 1st-order BEs to encompass: (i) the 2 nd -order thinking ofdesigning more applicable contextual versions of models and (ii) the 3 rd -order thinking of foreseeingcontextual development paths and envisioning the milestones for more effective contextual BEs.200

4. ConclusionsIt is herein repeated that the multi-contextual BE can be advanced across the globe more effectivelybased on recursive foresights, integrated models, systemic competences, and ICT-enabled practices.In turn, this system designer perceives that it is worth trying to draw additional, profound insightsfrom Beer’s (1985) recursive systems theory. Generic and contextual BE-related models can bedynamized by applying e.g. management of complexity (four principles of organization), varietyengineering (”in action, there is a group of variety generators, attenuators, and amplifiers incontinuous production of systemic states, so organized as to absorb each other’s variety”), autonomy,homeostasis, and oscillation. Such additions could be coupled with a novel gap-closing logic.ReferencesBeer S (1975) “On Heaping Our Science Together.” Churchman CW (ed.) Systems and ManagementAnnual. New York, Petrocelli/Charter, New York: 469-84.Beer S (1985) Diagnosing the System for Organizations, Chichester, John Wiley & Sons.Beer S (2002) “What Is Cybernetics.” Kybernetes 31(2): 209-19.CIB International Council for Research and Innovation in Building and Construction (2008) New CIBPriority Theme on Clients and Users. News article. April 2008.CIB International Council for Research and Innovation in Building and Construction (2009) AboutCIB and Priority Themes (available online http://www.cibworld.nl [accessed on 4/4/2009]).ECTP European Construction Technology Platform (2009) A New Approach to the ConstructionSector, (available online http://www.ectp.org [accessed on 5/4/2009]).Huovinen P (2008) “Moderate Systemic Inference in Organizational Learning: A “Semi-Beerian”Perspective.” Heene A, Martens R, and Sanchez R (eds.) Competence Perspectives on Learning andDynamic Capabilities. Advances in Applied Business Strategy. 10: 173-210.Leonard A (2000) “The Viable System Model and Knowledge Management.” Kybernetes 29: 710-15.Rittel H W J and Webber M M (1974) “Dilemmas in a General Theory of Planning.” Ackoff R L(ed.) Systems and Management Annual 1974, New York, Petrocelli: 219-33.UNEP-SBCI Sustainable Buildings & Climate Initiative (2009) Information note, news, workprogram, and membership, (available online http://www.unepsbci.org [accessed on 5/9/2009]).201

Towards a Gender Neutral Work-Life Balance?Raiden, A.Nottingham Trent University, UK(email: ani.raiden@ntu.ac.uk)Caven, V.Nottingham Trent University, UK(email: valerie.caven@ntu.ac.uk)AbstractWork-life balance is traditionally considered a female-oriented concept. In practice, it often refers toattempts to offer women the opportunity to balance their caring commitments with a career.Academically it is defined as “the ability of individuals to pursue successfully their work and nonworklives, without undue pressures from one undermining the satisfactory experience of the other”(Noon and Blyton 2007: 356). In our view legislation, perhaps rather disappointingly, reinforces thetraditional view. The main focus of work-life balance is in the accommodation of caringresponsibilities. This gives rise to our research question: do work-life balance initiatives address theneeds and wishes of both men and women? This paper draws on qualitative data. Within an overallinterpretive paradigm, in-depth interviews were conducted with 38 professional/managerialemployees employed in the UK construction industry. The somewhat controversial data revealssignificant concerns over maintaining a satisfactory work-life balance. Interestingly, manyorganisations try and take into account the work-life balance of their employees informally.However, there is significant variation within and between organisations. Many respondents correlatethis to the approach a specific manager takes to managing people. Some men in the sample voicestrong need to operate locally in order to stay close to home; where one female employee forexample would rather stay away from home than commute longer distance. Relationship difficultiesare confirmed by both male and female respondents. This calls for a more gender-balanced researchin terms of the work-life balance agenda and development of organisational practice to accommodateboth sexes in work and non-work activities. Current initiatives are clearly not offering the samepossibilities for both men and women.Keywords: work-life balance, gender, professional workers, qualitative research202

1. IntroductionWork-life balance is an important theme in the mainstream HRM literature. However, understandingof the concept is varied. Traditionally it has been considered a female-oriented term, used to refer toorganisational initiatives that offer women the opportunity to balance their caring commitments witha career. It has roots somewhere in the 1960s when studies were first initiated to look at the linkagesbetween work and family, and soon surfaced with a multitude of work-family related concepts suchas work-family conflict, work-family enrichment, work-family balance (Gregory and Milner, 2009:1). Academically the explanations of work-life balance then developed in their focus and scope from„family friendly‟ to „flexible working‟ in an attempt to move toward „genderblind‟ terminology(Smithson and Stokoe, 2005: 149). The earlier definitions suggested a division between work and lifewas necessary in terms of time and space, as in Felstead et al (2002: 56):“the relationship betweenthe institutional and cultural times and spaces of work and non-work in societies where income ispredominantly generated and distributed through labour markets”. More recent literature suggeststhat this view is limited in that “for the majority of people, „work‟ is a major part of their „life‟,rather than something distinct which can be separated out and presented as a hypotheticaljuxtaposition (work-life)” (Noon and Blyton, 2007: 355). Thus, work-life balance should be about“the ability of individuals to pursue successfully their work and non-work lives, without unduepressures from one undermining the satisfactory experience of the other” (Noon and Blyton 2007:356).Eikhof et al (2007: 326-327) argue that for many professional employees in particular, the notion ofwork being something negative is outdated and in fact the opposite is true: work can be a source ofsatisfaction and self-fulfilment. Watts (2007) takes this further recognising that paid work shapesidentity (see also Reeves, 2001, cited in Watts, 2007: 38) and that the considerations of „life‟ need toextend beyond caring commitments, to include the value of personal wellbeing.For the purposes of this research boundaries are drawn to deliberately exclude those activities that areconsidered non-work related, i.e. the „life‟, so that no uneven weighting is given to people with caringresponsibilities or housework, etc. („division of labour‟ in the home is another, separate debate in theliterature; see for example Singleton and Maher, 2004; Smithson and Stokoe, 2005). In other words,our focus is on investigating how „work‟ is arranged, or not, so that both men and women do not feeloverburdened. Our respondent sample is restricted to professional employees of large constructionorganisations in the UK.In light of the traditional female-orientation of work-life balance as a concept, and in view of theequality agenda where equality (in terms of work-life balance or otherwise) is achieved when womenhave the same opportunities; and the same pay and so forth as men, the question is: do organisationalwork-life balance initiatives address the needs and wishes of both men and women? Effectively thisprovides a reverse order investigation into „equality:‟ what about work-life balance in terms of menhaving the same opportunities and access to organisational support as women?It is important to view work-life balance from the male perspective for two reasons. Firstly, theworking population in the construction industry is heavily male dominated. Organisational work-life203

alance initiatives that only cater for the minority (women) in the sector are not achieving their fullpotential (Smithson and Stokoe, 2005: 149). Secondly, but related to the need to form efficient andeffective organisational policy and practice, the question about supporting the work-life balance ofmen is pertinent as the notion of the „new man‟ emerges (Hearn, 1999; Watts, 2009:42). The newman is arguably keen to spend time with the family and values the abovementioned personalwellbeing, where traditionally the male role has been that of a breadwinner with long working hours(Watts, 2009: 43). In the last decade, the popularity of the work-life balance agenda has strengthenedacademically (ibid: 2) but it has also gained government support in the UK. While much of thelegislative developments have extended the rights of women, there are changes that seek to addressthe previously limited provisions for men, for example father‟s right to use up maternity leave(Stevens and Phillips, 2009).Theoretically the research question is investigated through integrated discussion of the mainstreamHRM and construction management literatures. Empirically, qualitative interview accounts provideevidence of organisational policy and practice, and employee perceptions of achieving suitable worklifebalance.2. Literature reviewWith focus on how „work‟ is arranged, or not, so that professional employees in the UK constructionindustry can achieve work-life balance (adopting the definition by Noon and Blyton, 2007: 356above) this section discusses organisational work-life balance policy and practices. According toTaylor (2008: 64-65) there are four main types of initiatives which commonly make up a work-lifebalance policy: flexible working, leave and time off, childcare facilities and health and well-being.Flexible working comprises „atypical‟ working time patterns; for example, part-time work,compressed hours, term-time working, job sharing, flexitime and homeworking. These arrangementsmay be set for a temporary period of time or on a permanent basis. In terms of leave and time off, it isnow a requirement in law that an employee is allowed to take few days off at a short notice to makearrangements for a care of dependants (in addition to maternity and paternity leave and other suchprovisions). In practice vast majority of employees rarely take advantage of the opportunitiesavailable to them (Taylor, 2008: 65) so many organisations offer voluntary more generousentitlement to support their employees. Beyond leave to accommodate for caring responsibilities,some employers offer career breaks or sabbaticals to established members of staff. Childcarefacilities usually refer to larger organisations provisions of nursery places for pre-school children orafter-school and holiday clubs for school age children. Finally, „health and well-being‟ embracesbroader provision of support services with the primary aim of assisting employees themselves toreach a better work-life balance. Occupational health services are a well established example of thistype of support.The kind of cover provided by these initiatives closely reflects the themes identified in Gregory andMilner‟s (2009: 3) review of the existing literature in terms of three core issues that impact onemployee work-life balance „management‟: time management, inter-role conflict and carearrangements. Industry knowledge (Dainty et al, 2007) suggests that the first two are of particular204

elevance for the employees in the construction industry. Hence, these are used to focus our review insections 2.1 and 2.2 below. Furthermore, significant tension is indentified in the work-life balanceliterature around the primary beneficiary of these initiatives; thus the last section (2.3) enquireswhether organisational work-life balance policy and initiatives are in place to help achieveorganisational goals or to provide a mechanism of employee support. These three themes are alsoused to structure our research findings (4) and discussion and conclusion (5), which follow afterresearch methods (3).2.1 Time managementIn discussions about work-life balance time management features primarily in terms of „long workinghours‟ and different organisational initiatives focused on working time arrangements, such as theabovementioned flexible working, leave and time off work, and their impact on employees. Longworking hours are widely recognised as counter-productive in terms of organisational performance,employee satisfaction and work-life balance (Gregory and Milner, 2009: 4). However, in somecircumstances staying late is considered a sign of employee commitment to the job or theorganisation (Watts, 2009: 40). While many recognise this being related to presenteeism, Eikhof et al(2007: 330) argue that many workers actually work long hours because they want to, regarding workas affirming, or because they are seeking promotion.In the construction industry long hours are considered the norm (Fowler and Wilson, 2004).Geographically dispersed work often also requires travel over long distances to and from projects ateither end of the working day, further extending the employees daily time commitments to theirprofession (job). This perpetuates the separation of work and non-work activities. A culture ofpresenteeism has developed as a means of showing commitment to the job, and sometimes success inthe industry requires making the profession “your life” (Fowler and Wilson, 2004: 109; Watts, 2009:40). Interestingly, Fowler and Wilson (2004:114) note this may be gendered perception, since “twiceas many men as women viewed working outside official working hours as essential” (emphasis inoriginal). According to Langford et al (1995) this helps cement men‟s position as dominant within theindustry. However, in light of the „new man‟ (and „work devotion schema‟ introduced in section 2.2below) such stereotype may be challenged in the contemporary construction organisation.Legislative changes have been introduced in an attempt to encourage greater participation of fathersin the home. In addition to entitlement for paid paternity leave, most recently, fathers have beenallowed to take up to six months off work by transferring their partner‟s maternity leave over to them.The new rules are welcomed but with fear that company cultures may challenge their up-take(Stevens and Phillips, 2009). Much of the lack of take-up in flexible working and work-life balanceby men has been explained in terms of organisational cultural barriers, including perceptions of thesearrangements as favours for those who in need of special treatment (Smithson and Stokoe, 2005: 150;Taylor, 2008: 65; Gregory and Milner, 2009: 4). In construction, Watts (2009: 47) noted a “stigmaattached to working sensible hours.” It is likely that many organisations in the industry have just thekind of culture that makes it difficult for employees to enjoy the benefits of their entitlement.205

2.2 Inter-role conflictThe traditional role models of the mother at home with the kids and the father taking the primarybreadwinning position are being challenged by many changes in the modern society. As noted in theintroduction the new man is increasingly interested in their role as a father, while women are muchmore active in the workplace. Research suggests that the roles of „manager‟ or „professional‟ and„mother‟ do not sit easily together (Smithson and Stokoe, 2005: 162). Equally, the roles of „manager‟or „professional‟ and „father‟ may not sit easily together (Gregory and Milner, 2009: 8).Without entering detailed discussion about the „life‟ side of the debate, in order to observe theboundaries set for this paper in the introduction, it is worth a note that Fowler and Wilson‟s (2004)and Sturges (2008: 126) research lends support for the above-suggested role conflict in that heavyworkloads are often responsible for marriage breakdowns and poor homelife; with men admittingthey do not contribute equally to household chores. In households where both partners are architects,Fowler and Wilson (2004: 115) report that men use the “biological essentialist argument that lookingafter children was both a woman‟s choice and her natural responsibility.” Similarly, Caven (1999)found that the largest proportion of divorces in her sample came from households where both, theman and the woman, were architects.But to return to the paper here, the role conflict of men in particular has been analysed within aframework of four ideal types developed on the basis of Blair-Loy‟s „work devotion schema‟ (Blair-Loy, 2001; Halrynjo, 2009, both cited in Gregory and Milner, 2009: 9):career men – full-time work is absorbing and fulfilling; family duties outsourcedmen who attempt to combine career and care – full-time work with „time squeeze‟; caring forfamily as much as possible outside workpatchwork career men – stimulating part-time or temporary work, rejecting traditional careernorms; attention to home responsibilities and leisure/ artistic pursuitscaring men – part-time work with poor career opportunities and reduced job security;satisfactory time with family.With present available data it is difficult to generalise the exact percentage of men in each categorybut there is evidence to suggest that the latter two, patchwork career- and caring men, are in thesignificant minority (Gregory and Milner, 2009: 9). The „new men‟ may be at least initiallyincreasing the proportion of men who attempt to combine career and care, and accordingly reduce thenumber of career men. Certainly in so-called dual income families we would expect to find men whoattempt to combine career and care perhaps with „women who attempt to combine career and care‟ or„career women.‟206

2.3 Meeting the needs of the employer and/ or employeesThe third significant theme in the literature argues that many work-life balance and flexible workinginitiatives are introduced primarily to meet operational needs of an organisation or as a response tolabour market conditions; such as extended hours of operation, variations in staffing requirementsand knowledge transfer (retaining older workers or working mothers for example), rather than as amechanism of employee support (Fleetwood, 2007; Taylor, 2008: 63-64).The main difference between employer-friendly and employee-friendly working arrangements relatesto trust: for example, the employer-friendly ways of arranging work is associated with a need formuch lower level of trust where employee-friendly forms of flexible working seem to require highlevel of trust (particularly on part of the organisation). It is well-known that many flexible workingsystems fail because managers do not trust their workers (Felstead et al, 2002). Trust correlates withthe approach, or philosophy, an organisation takes to managing people. The up-take and nature ofwork-life balance initiatives in construction organisations may be poor because of the traditionally„personnel management‟ type (Druker et al, 1996) approach to managing people. Personnelmanagement is based on the values, needs and working patters of “traditional men” (theabovementioned breadwinners whose role in the home is limited). More individualistic and liberal,employee-centred, style may require wider application of the principles of human resourcemanagement (HRM), which are closely associated with not only accommodating difference butvaluing difference and individuals (Doherty, 2004). HRM supports the view that formalisticmeasures, such as development of organisational procedures, are likely to achieve only modestbehavioural change (ibid: 437). „True employee-centeredness‟ requires attitudinal change (Smithsonand Stokoe, 2005: 157). To developed this yet a step further, a combination of a business case, legalregulation and social regulation (Dickens, 1999) and further “humanisation of the workplace”(Doherty, 2004) at present suggest a viable way for taking the work-life balance agenda forward. Inaddition, for Sturges (2008: 132), sending out a consistent message is crucially important. This refersto integration of organisational policy and procedures horizontally; i.e. making sure they support eachother, but also ensuring the value system of the organisation is vertically aligned.Really, building on the somewhat controversial contribution of Eikhof et al (2007) from the point ofview that work is not necessarily „bad‟ and needing to be contained through working time and relatedinterventions, the argument becomes that work-life balance initiatives should (and can be) mutuallybeneficial. To illustrate the point rather aggressively: isn‟t the assumption that work always interfereswith life simplistic? Rather than (simply) trying to increase the time we have available with family,wouldn‟t a truly balanced view be considerate of our needs both at work and outside? Therefore, is ituseful to prioritise one over another (work or life); surely we can enjoy both and for that very reasonfind “balance” difficult to achieve?Then, more broadly, we question whether it should be the worker (traditionally female employee) thatforms the focus of work-life balance initiatives. Within a holistic framework of analysis at least,clearly all stakeholders should „have a voice;‟ that is, all individuals, organisations, professions andsociety at large.207

3. Research methodsThis paper draws on qualitative in-depth interviews within an overall interpretive paradigm relatingto people employed in the construction industry. Thirty-eight semi-structured interviews wereconducted with professional/ managerial employees in seven large UK-based contractingorganisations. The respondents included group level directors as well as junior/ operational site-basedmanagerial staff (such as foremen) together with professionals such as architects, design coordinators,quantity surveyors and engineers. All interviews were tape recorded and later transcribedverbatim. Analysis into themes was carried out with the aid of NVivo software.4. FindingsQuantitatively, a brief content analysis shows that all of the 38 participants in the study mentioned(some) work-life balance related issues: working hours was discussed by 34 respondents, travel by all38 participants, staying away at project location was an issue for 19 participants and flexibilityconcerned 35 people. These three themes are used to structure the research findings below.4.1 Long working hoursQualitative analysis revealed real issues with the long working hours culture; a theme that was said tobe “close to the heart for lot of people” and “part of the industry.” One operational director notedthat “construction is a busy business. You end up spending a lot of hours here when maybe youshould be with the family”. One manager noted their motive to tackling the problem stemming from a20% “staff churnage” rate it had induced. Different mechanisms were employed to deal with theproblem, including allowing staff to come in early and leave early in the afternoon (which also helpedto reduce the time required for travel as rush hour traffic as avoided). Another project manager said:“the trouble is they [members of staff] won‟t take time off!” She had divorced because of the hoursshe put in, but now considered it lucky that her current partner also works in the construction industryand hence understands. One senior contracts manager also personalised the problem with longworking hours: “that is my own problem, I don‟t take any time off.”Many frequently took work home over weekends in addition to long hours put in during the week andthe expected daily working time averaged around 10-11 hours, although the contracted hours were37,5. The working hours were noted to always increase nearing project completion. One site managercommented that “the managers taking on programmes of work do not think of employees who will bedoing the work, and plan unrealistic hours. This affects the employee doing the job, not the oneagreeing/ planning it.” This was especially relevant for employees on a fast-track project, which hadbeen built around 12 hours shifts. Some personnel on the project did not mind this since there wasnothing else to do when they were living away from home during the week.208

One engineer mentioned a “look busy culture” and insistent he would not take part in it. Anotherprofessional employee, a quantity surveyor, actively sought work within a particular division of anorganisation because of the Monday-Friday work ethic that was prevalent in that part of the company.4.2 Travel and staying awayMany organisations tried to reduce the need for travel by regional organisational structures, such asthe North, Midlands and South in one company, but this helped only in reducing the need to stayaway at the project location overnight. In some instances, indeed, it had extended the travellingdistance to and from the project. Many of the directors in the participating organisations travelledlong distance to and from the office themselves and so on the one hand understood the strain it canput on the working day, but on the other hand expected similar commitment to the job/ organisationfrom their employees. Interestingly however, one director noted: “when I started here it wasmentioned that my daily commute would be 90 miles each way but this has never been mentionedsince. It would be nice if someone asked „how is it going‟.” Few respondents mentioned workingfrom home occasionally, which eased the burden of travel. Flexibility to do this was availableespecially if someone‟s child was ill or other circumstances at home needed supporting. Another wayof easing the burden of travel was lift sharing. Many adjusted their working time to avoid rush hourtraffic.One foreman described how he had turned down jobs because they involved staying away fromhome. Another foreman described himself as “a family man at heart” and liked to be close to home:“if they asked me to go to London or somewhere, forget it.” The costs of extensive travel weresummarised well by one contracts manager:“No life outside of workExpensive to operate a jobTired employees with reduced performance (and potential impact on their health too).”Some viewed the travel in positive light: “gives you a break to think.” Similarly, one project managerand a divisional head in particular quite liked staying away overnight at project locations saying that“it gives him a break.” The younger engineers viewed lodging away as an adventure, an opportunityto see new places, meet new people and save money. Also, as alluded to above (in relation to timemanagement), those on the fast track project frequently made reference to it being much easier tocope with the 12 hour shifts when staying away during the week. The team had taken to socialisingtogether at nights, to go swimming and have dinner together: they were “like a little happy family.”One quantity surveyor mentioned that he “would like to get out a bit more!” Interestingly, quantitysurveying was mentioned as one job which requires least travel in the industry. Equally, one foremansaid he was “bit too old for it now.”However, in most cases staying away was not all that frequent on an individual basis. Those whowere actually staying away during the interviews noted that it was their first time away in four-eight209

years with the company, and others said that they had only ever stayed away once. One site managerhad opted for a project further away now having worked locally for four years.Three engineers had a very „realistic‟ view commenting that it was really down to each individual‟sown choice. Managers could ask for their employees to travel or stay away overnight, after all it wasa well-known feature of the work, but everyone had the opportunity to refuse the request and find ajob elsewhere. On a similar „realistic‟ vein, one site manager said: “you just get used to it.” Somenoted that since you get the car and fuel paid for it was reasonable to expect the drive. However,another engineer in the past had used his resignation to make a point, try “try and make managementlisten.” Although the interview sample is very limited in size, it is interesting to note that many of the„lower level employees,‟ such as foremen, had stronger inclination to challenge the decisions of theirmanagers, while those higher up the hierarchy and employees in professional roles, such as design coordinators,more readily adjusted to the working conditions offered to them and/ or perhapsnegotiated preferred ways of adjusting. One female design co-ordinator for example much preferredto stay away during the week than commute longer journey on a daily basis.There were limited formal rules, guidelines or policies in place about travel; and those in placeconcerned mostly the car as a benefit. Therefore, much of the management practice in terms ofarranging travel/ staying away and monitoring or managing the expectations over long-term wereinformal. Divisional differences were also apparent, both in terms of management style andgeographical operating radius. In one extreme example of a person working on a tele-communicationsproject had to drive 200 miles for only an hour‟s work and then carry on elsewhere on a regular basis.The geographical radius of work was particularly relevant factor for some employees choosing towork in particular part(s) of a company. Travel was also noted to impact on companies and theindustry‟s ability to recruit the best personnel.4.3 FlexibilityIn terms of flexibility, variation between respondents between and within different companies wasnotable. Commonly a „two-way‟ arrangement was agreed to be in place where the organisationexpected employees to put in the hours needed to complete their work at a location required. Inreturn, the employees were given the opportunity to work from home, attend doctors or dentalappointments during working hours, get time off work when moving house for example and arrangeholidays as best suited their life and work circumstances. Key to success in such a system wasbalance. In three companies flexibility was also noted in relation to providing support with familyproblems.However, it was also recognised that the flexibility was likely to be particularly applicable only incertain parts of the organisation(s); more linked to specific managers‟ style/ approach to managingtheir people, and therefore informal. The formal systems and structures of the participatingorganisations were rigid and inflexible, for example, employees were not allowed to carry forwardholiday entitlement although they were required to put in long hours to finish a project (and perhapsmiss the opportunity to take leave because of their commitment to the project). In staffing, flexible210

employment strategies were used extensively. In particular, agency and freelance staff were broughtin to complement permanent employees in staffing projects.5. Discussion and conclusionDrawing on the three important themes in work-life balance literature discussed in the literaturereview (section 2), our contribution is organised around (i) time management, (ii) inter-role conflictand (iii) focus of the work-life balance initiatives.Firstly, in relation to time management, the data presented clearly confirms that long working hoursare a key issue affecting work-life balance of professional/ managerial employees in the constructionindustry. Perhaps nothing new there; but, we reveal that more senior managers in particular are wellaware of the costs of long working hours coupled with the necessity to travel long distances toprojects and staying away from home. Interestingly, this is not related to gendered assumptions ofcaring responsibilities in the home; rather the focus is on employee well-being and organisationalperformance. This supports our argument that work-life balance must include much broader range ofconsiderations than is traditionally thought.At the same time, one of the organisational challenges to supporting work-life balance wasemployees‟ commitment to their job/ organisation: “the trouble is they [members of staff] won‟t taketime off!” This confirms Eikhof et al‟s (2007) contention of truly balanced consideration of workand life, not one over another. However, some argue that this is linked to the notion of presenteeism,which is „necessary‟ in order to „get on‟; if these employees were reluctant to work long hours or totravel their career prospects could be severely compromised (Sturges, 2008). Further work isnecessary to explore this problem.Secondly, with regards to inter-role conflict, in several cases we heard of divorces or relationshipsending due to the pressures of work (this really is work-life conflict of most explicit form). Equally,one respondent noted that “my partner works in construction so he understands.” Notably, the latterwas from a female participant in the study.Using the Blair-Loy‟s (2001) „work devotion schema‟ to categorise the respondents in relation totheir commitments regarding work and/ or life, it is apparent that most of the men fit within the„career‟ category. Interestingly, this also applied to the women within the sample. However, therewere few men, particularly at more senior posts who made comments about „time squeeze‟ and henceperhaps would be leaning toward the second category of „men who attempt to combine career andcare.‟ Two of the lower level managerial respondents fitted the „patchwork career men‟ withcomments such as: “if they asked me to go to London or somewhere, forget it.” Their commitment tostaying close to home, or sacrifices in career terms, were emphasised by the fact that they wereworking on temporary contracts of employment. We found no evidence of „caring men‟ (or women!)in the research sample; however accept that this may be due to the potential bias in the snowballsampling technique employed.211

Two points important here: we found no differences in the preferences of men and women in terms oftheir commitment to work and life. In fact, our small scale study suggests that it is possible men,particularly within a male dominated industry such as construction, will „suffer‟ very similardifficulties to those usually considered relevant for female workers. It would be interesting to find outhow caring responsibilities and/ or care provision helps or hinders the balancing of different roles ofmen and women in the workplace and outside.Finally, the most controversial thing about our data was the fact that many construction organisationsactually practice work-life balance „the other way round.‟ This is not directly in terms of the genderedargument but in supporting employees informally, rather than formally. It appears that organisationalpolicy and systems need to develop to match the level of managerial flexibility and two-waynegotiation in place on a divisional/ individual level. Current literature presents the opposite as true.Thus it is important to study this in detail, particularly since there are areas that indicate that somecultural barriers are still in place to hinder the uptake of work-life balance initiatives more widely.This may change with new generations entering the workforce with their value system, such as the„new man.‟ The main beneficiary of work-life balance is still often the organisation. However, ratherthan suggest this should tip in favour of the employees, we argue that the kind of two-way practicenoted by some respondents may present a conducive way forward.Overall, our work calls for a more (gender-)balanced research in terms of the work-life balanceagenda.ReferencesBratton, J. and Gold, J. (2003) Human Resource Management, Basignstoke: PalgraveCarlson, D.S., Grzywacz, J.G. and Zivnuska, S. (2009) Is work-family balance more than conflict andenrichment? Human Relations (online first), Vol. XX, No. X, pp. 1-28Caven, V. (1999) Constructing a Career: Women Architects at Work. Unpublished PhD thesis,University of Nottingham.Dainty, A.R.J., Green, S. and Bagilhole, B. (2007) People and Culture in Construction, Abingdon:Taylor and FrancisDoherty, L. (2004) Work-life balance initiatives: implications for women, Employee Relations, Vol,26, No. 4, pp. 433-452Eikhof, D.R., Warhurst, C. and Haunschild, A. (2007) Introduction: What work? What life? Whatbalance? Employee Relations, Vol. 29, No. 4, pp. 325-333Emslie, C. and Hunt, K. (2009) „Live to work‟ or „work to live‟? A qualitative study of gender andwork-life balance among men and women in mid-life, Gender, Work and Organization, Vol. 16, No.1, pp. 151-172212

Felstead, A., Jewson, N., Phizacklea, A. and Walters, S. (2002) Opportunities to work at home in thecontext of work-life balance, Human Resource Management Journal, 12(1): 54-76Fowler, B. and Wilson, F.M. (2004) „Women Architects and their Discontents‟ Sociology Vol 38(1):101-119.Gregory, A. and Milner, S. (2009) Editorial: Work-life balance: a matter of choice? Gender, Workand Organization, Vol. 16, No. 1, pp. 1-13Langford, D., Hancock, M.R., Fellows, R. and Gale, A.W. (1995) Human Resources Management inConstruction. Ascot, Longman.Lingard, H.C., Townsend, K. Bradley, L. and Brown, K. (2008) Alternative work scheduleinterventions in the Australian construction industry: a comparative case study analysis, ConstructionManagement and Economics, Vol. 26, pp. 1101-1112Noon and Blyton (2007) The Realities of Work, Basingstoke, Palgrave.Russell, H., O-Connell, P.J. and McGinnity, F. (2009) The impact of flexible working arrangementson work-life conflict and work pressure in Ireland, Gender, Work and Organization, Vol. 16, No. 1,pp. 73-97Singleton, A., and Maher, J. (2004) The "New Man" Is in the House: Young Men, Social Change,and Housework, The Journal of Men's Studies, Vol. 12Smithson, J. and Stokoe, E.H. (2005) Discourses of work-life balance: negotiating „genderblind‟terms in organizations, Gender, Work and Organization, Vol. 12, No. 2, pp. 147-168Stevens, M. and Phillips, L. (2009) Fathers gain the right to use up maternity leave, PeopleManagement, 24 th Sept, p. 6Sturges, J. (2008) All in a day‟s work? Career self-management and the management of the boundarybetween work and non-work, Human Resource Management Journal, Vol. 18, No. 2, pp. 118-134Taylor, S. (2008) People Resourcing (4 th ed.), London: CIPDWatts, J.H (2007) „Porn, pride and pessimism: experiences of women working in professionalconstruction roles‟ Work, Employment and Society, Vol. 21, No. 2, pp. 299-316.Watts, J.H. (2009) „Allowed into a man‟s world‟ meanings of work-life balance: perspectives ofwomen civil engineers as minority workers in construction, Gender, Work and Organization, Vol. 16,No. 1, pp. 37-57213

Calculation of Construction Time for Building Projects– Application of the Monte Carlo Method to Determinethe Period Required for Shell Construction WorksHofstadler, C.Graz University of Technology(email: hofstadler@tugraz.at)AbstractConstruction time is of crucial importance when it comes to utilizing the production factors in anoptimal way. The client determines the available construction period, and the contractor prepares itsquotation on the basis of the specification whilst planning the construction process and logistics.Construction times that are too short usually result in higher cost, poorer quality and a larger numberof disputes. This paper outlines the calculation of construction time whilst considering keyconstruction management parameters. Beyond a simple, deterministic method, other options forcalculation are presented that rely on probability calculus. The deterministic method results in onevalue per each calculation process (calculation mode 1). In calculation mode 2, probability calculusis applied in a simple fashion. Both range and probability of occurrence can be considered for therelevant input variables. For the third calculation mode (calculation mode 3), the Monte Carlomethod is applied using the @RISK software. This method shows a probability distribution for eachof the parameters to be determined. Using a high-rise building project, the application of the MonteCarlo method (calculation mode 3) to determine construction time is demonstrated. Weightedtriangles are used as distribution functions, which makes it possible to consider minimum andmaximum values, as well as expected values. The correlation between probability of occurrence andconstruction times is reflected by a probability distribution.Keywords: construction time, production rate, consumption rate, risk, Monte Carlo method, shellconstruction works214

1. IntroductionProduction quantities and outputs are required to calculate construction time. If the entireconstruction process is divided into specific phases, additional allocation parameters need to bedefined in order to determine construction time. In this case, the shortest possible construction timewill result from the critical path. Production quantities result from the dimensions of the structuralelements. Production rate parameters are derived from labour (in the case of labour-intensiveactivities) or equipment outputs (in the case of work steps requiring a high degree of equipmentutilization). Depending on the individual project phases, project data and production rate parametersfluctuate to a varying extent. Even after the preparation of the specification, the exact volumes willnot be available in most cases.At the preliminary planning stage, construction time can be estimated using the average outputrelative to the gross volume of the structure. If, for instance, construction time is calculated for an insituconcrete shell, the amount of reinforced concrete needs to be used as the unit of reference. Theamount of labour required for the placement of formwork, reinforcement and concrete is related tothis unit.The various input variables used for the calculation are subject to inaccuracies that result from theprevailing structural, site, management and process conditions, as well as from the constructioncontract.2. Analysis of situation, objectiveThe type of work, the conditions under which this work is performed, the amount and quality of thework and the construction time required are factors that determine the cost level, and thus pricing.The client may influence cost and pricing by defining the construction time. Construction times thatare too short (i.e. where the maximum values for the productive use of equipment and/or labour areexceeded) result in productivity losses and also higher costs. To a certain extent, the limits forproductivity losses are not yet fully understood, or controversial.In most cases, the client does not sufficiently account for boundary conditions imposed byconstruction management, or neglects these conditions completely, when determining theconstruction time that is contractually agreed upon. However, boundary conditions arising fromstructural or management conditions, for example, have a significant influence on parameters thatdetermine output, such as the maximum number of available workers or the maximum number ofavailable machines or pieces of equipment.This paper is to systematically present construction time calculation methods. In addition, thecalculation procedure should account for limiting construction management factors. Bothdeterministic and stochastic calculation approaches should be outlined. It should be investigatedwhether the implementation of probability calculus leads to improved results.215

Blecken (1967) already stated that a deterministic assumption made for production would oversimplifythe production model. He considers the inclusion of a stochastic approach a way to achieve asignificant improvement of results.3. Bases for the calculation of construction timeThe following section includes and describes the equations used to calculate duration, production rateand total consumption rate. However, the calculation methods outlined do not in any way replacemore detailed analyses for the calculation of construction time.3.1 Duration and production rate of reinforced concrete worksIn Eq. 1, the average values for the concrete quantity Q C [m³] and daily production rate PR RCW [m³/d]are used to calculate the duration D RCW [d].QCDRCW(1)PRRCWTo account for disruptions, the calculation should include a buffer BU T,RCW [%], which results in thefollowing equation:BUT, RCWDRCW.BUDRCW1(2)100The magnitude of the buffer will depend on the complexity of the project and the number of winterconstruction phases. Experience shows that this buffer should range from 5 to 15 %.The average daily production rate for reinforced concrete works PR RCW [m³/d] is calculated using Eq.3. In the numerator, the multiplication of the number of workers W RCW [wh/hr] with the dailyworking time WT RCW [hr/d] results in the daily hours paid. In the denominator, the total consumptionrate TCR RCW [wh/m³] for reinforced concrete works is used. The consumption rate (for example asshown in Kenley et al. 2010) expressed as total working hours per unit of quantity [wh/UoQ] for therespective activity.WWTRCW RCWPRRCW(3)TCRRCWFigure 1 shows major influences on the amount of production rate achieved. Average production ratecan be calculated for the entire structure or for individual groups of structural components. Theaccuracy of the input variables, and thus of the calculation result, will usually increase in line withthe degree of detail of the project and project phase.216

ConstructionmethodType ofconstruction projectLocation of theconstruction projectWorking timeschemeWorking timeregulationsExternalInternalGeneral constructionsite conditionsDaily working timeDisruptiveinfluencesInfluences of theconstruction methodGeneral operatingconditionsInfluences of theconstruction methodConsumption rateProductionRatePracticeStaff qualificationComposition of theworking groupGeneral operatingconditionsSpecific structuralconditionsNumber of workersFamiliarizationGeneral constructionsite conditionsAvailabilityWork spaceSpecific structureconditionsNumber ofequipmentConstructionmethodFigure 1: Influences on the order of magnitude of the required production rate3.2 Number of workersIn building construction, the maximum number of available workers always correlates with theavailable workspace and number of cranes that can be used. In the literature, approximate values arestated for the number of workers per crane and construction method.As a rule, the number of workers does not remain constant over the entire construction period. Thenumber of workers required increases to the maximum value as the project ramp-up phase progresses(duration = D SP ), and remains at a relatively constant level thereafter. The number of workersdecreases again when the final project phase begins (duration = D FS ).Formwork, reinforcement and concrete placement works are the main activities associated withreinforced concrete works. Each of these activities is characterized by the methods, materials andmachines or pieces of equipment used. A certain number of workers is required to achieve a defineddaily production rate (depending on consumption rate and daily working time). Amongst otherfactors, the productivity of the workers will also depend on the number of hours worked per day andthe available workspace. When planning the construction process, a defined minimum workspace perworker should be ensured at all times.The minimum workspace (relative to the floor plan of the structure) is a very important parameter forconstruction process and logistics planning. Provided the minimum workspace requirement isadhered to, it can be assumed that no productivity losses will occur, for instance due to mutualinterference of workers or of one or more gangs or teams. In a survey on costing, process planning217

and construction work conducted by Graz University of Technology (i.e. an expert survey with 18respondents from the construction industry), the average minimum workspace was found to be 30 m²per worker.If the client specifies a construction time that is too short for any given building project, thisconstruction time can still be adhered to by utilizing existing potentials more effectively. However,the calculated productivity losses should result in higher unit prices to be paid for the work to beperformed. Ideally, the client is sufficiently aware of these boundary conditions and considers thesekey construction management parameters when determining the contractually agreed constructiontime.Figure 2: Correlation between number of workers and available workspacefor reinforced concrete worksOn the one hand, the use of resources (i.e. workers and machines) results from the availableconstruction time and production quantity. On the other, the shortest possible construction timeresults from the maximum amount of resources available. The number of workers always correlateswith the available workspace and the number of machines that can be installed. In buildingconstruction, for instance, the maximum number of available workers will depend on the maximumnumber of cranes that can be used.Figure 2 shows the correlation between the curve for “usable” workspace and the curve showing thenumber of workers. The trend in the number of required workers and the development of theworkspace are reflected in an idealized model over the construction period (overall duration ofreinforced concrete works = D TOT [d]). To simplify the model, a trapezoidal curve was assumed. The“practical feasibility” of this simplification was evaluated on the basis of resource plans prepared forvarious structures in building construction. A good approximation to the trapezoidal model wasfound.218

3.2.1 Calculation of the maximum number of workersThe average available workspace per employee for reinforced concrete works during the mainconstruction period D MCT [d] results from Eq. 4.WSTOTWSW , RCW(4)WRCW,MAXFor example, the total workspace TOT WS [m²] can be calculated from the floor area of the storey andthe number of storeys that can be worked on simultaneously n st [-] (see Eq. 5).TOT FA n(5)WSSTstThe number of cranes that can be used for construction work is limited by space, constructionmanagement and economic constraints. These constraints need to be taken into account whendetermining the maximum number of available workers. The crane proportionality factor indicatesthe average number of workers who can be “served” by one crane.When establishing a relationship between the number of workers and the number of cranes, themaximum number of workers W RCW,MAX [wh/hr] is calculated by multiplying the number of cranesNUM C [-] with the crane proportionality factor PF C,W [W/1].WRCW MAXNUMCPFC , W,(6)3.2.2 Calculation of the average number of workersThe lowest of the maximum values determined is used to proceed with the calculation of the averagenumber of workers. The maximum number of workers can be used only during the main constructionphase. The proportion of the average and maximum number of workers results in the workers factorf W [-] from Eq. 7.fWWWRCW,ARCW,MAX(7)The main construction phase is usually equivalent to 60 to 80 % of the overall duration of reinforcedconcrete works. This range can be narrowed down further, for instance on the basis of the experiencegained in similar, previously completed projects. The average number of workers can be calculatedfrom the maximum number of workers and the workers factor (see Eq. 8).WRCW, AWRCW , MAXfW(8)Depending on the type of building (e.g. high-rise, power plant), workers factors between 75 and 90 %may be assumed.219

3.3 Daily working timeThe daily working time per employee influences consumption rate. Limits to the maximum dailyworking time per employee result from applicable labour law and collective agreements entered intowith trade unions. In addition, productivity losses should be assumed from a certain daily workingtime level. Appropriate shift models can be used to increase the productive daily working time bydistributing it across several shifts. Shift models are necessary for certain construction processes andmethods (such as slip-form construction), or result from a very short construction time.3.4 Total consumption rate for reinforced concrete worksFor reinforced concrete works, the total consumption rate TCR RCW [wh/m³], which includesformwork, reinforcement and concrete placement works, is calculated using Eq. 9:TCRRCWCRA , FWFRA , BDCRA , RWRRA , BDCRA , CW(9)The first term is the product of the average formwork placement consumption rate CR A,FW [wh/m²]and the formwork ratio FR A,BD [m²/m³]; the second is the product of the average reinforcement workconsumption rate CR A,RW [wh/t] and the reinforcement ratio CR A,CW [t/m³]; the last term representsthe average consumption rate of concrete placement TCR A,CW [wh/m³]. Eq. 9 is used to eitherestimate or precisely calculate the mean values. A more accurate calculation is carried out as part of adetailed analysis. Depending on the item considered, total consumption rate can be calculated eitherfor the entire structure or for individual groups of structural components. The accuracy of the resultsusually increases in line with the degree of detail of the analysis.4. Calculation methods4.1 Calculation mode 1 – Deterministic approachCalculation mode 1 is used to calculate individual values for the duration. In each calculationprocess, and production rate value and, subsequently, duration are calculated. Parameters can bechosen to ensure that an upper and lower limit value is determined for the duration.4.2 Calculation mode 2 – Simplified Stochastic approachThree values are used for the respective input variables of the equations: a minimum value, anexpected value and a maximum value. These values are multiplied with the specific probability ofoccurrence, which was defined on the basis of a subjective assessment. We arrive at the value withthe greatest subjective probability by adding up the three products.220

4.3 Calculation Mode 3 – Application of Monte Carlo methodFor the stochastic method, a distribution function is allocated to selected parameters (see Figure 3 forflow chart). The values for the range are defined on the basis of construction management andspecific structural boundary conditions. The bases for these values can be, for instance, internal logsor data taken from the literature (such as approximate working times for building construction).Wahl der Verteilungsfunktionen und Eingabe der jeweiligen WerteAZ STB AK STBAW STB 221AW S * s g,bwk + AW BW * bw g,bwk + AW BTBT MPU STBLB STBD STBD STB,PUBerechnung mit @RISK – Monte-Carlo-SimulationFigure 3: Calculation Mode 3 – construction time: Flow chartResults can be improved significantly by including probability considerations in the calculations. Onthe basis of the ranges and distribution functions established, probability distributions are shown forthe required values depending on the number of simulations to be chosen. The Monte Carlo methodmakes it possible to calculate the probability distribution for the total consumption rate of reinforcedconcrete works. In a freely selectable number of iterative steps, a software program (in this case,@RISK) generates random numbers for the input parameters. These random numbers are eachallocated to the predefined distribution functions and combined according to a specified computationrule (i.e. the equations used for the deterministic method). The input parameters are ranges anddistribution functions.

As regards distribution functions, Raaber (2003) states that triangular, parabolic or, less commonly,rectangular distributions should be used for calculations in the field of construction, where limits arealmost always identifiable.5. Application of the Monte Carlo method5.1 High-rise building project - key detailsThe building comprises two basements, one ground floor, ten upper storeys and one attic floor (seeFigure 4). The maximum area of the building at basement level amounts to approx. 3,025 m². The twobasements, the ground floor, the standard floors and the attic storey have four different ground plans.However, some of the components or members are almost identical across several storeys. The highrisebuilding comprises a total of 14 floors, with the standard floor having the following dimensions:50 m * 47 m. Figure 5 shows the layout of a standard floor.Figure 4: Section (Doka, 2009)222

Figure 5: Floor plan – standard floor (Doka, 2009)Table 1 contains information on the quantities of formwork, reinforcement and concrete. Quantitiesare derived from the determination of quantities on the basis of available plans and drawings. Theformwork ratio of approx. 3.9 m²/m³ for the entire building is derived from a formwork surface ofapprox. 49,300 m² and a concrete volume of about 12,600 m³. The reinforcement ratio of approx.147 kg/m³ is calculated from the amount of reinforcement and concrete.Table 1: Quantities of formwork, reinforcement and concreteComponentsFormwork area Reinforcement quantity Concrete volume[m²] [%] [t] [%] [m³] [%]1 2 3 4 5 6 7Foundation plate 225 0.46 431 23.28 3,080 24.39Walls 5,553 11.26 103 5.56 739 5.85Columns 3,598 7.30 89 4.81 270 2.14Shafts and cores 15,554 31.54 266 14.37 1,902 15.06Slabs 24,386 49.45 962 51.97 6,638 52.56Amount: 49,316 100 1,851 100 12,629 1005.2 Solution for calculation mode 3 – Calculation usingthe Monte Carlo methodThe analysis of the ground plan and site conditions establishes that a maximum of two cranes can beused. The maximum number of workers (40) is derived from two cranes and a maximum of 20workers per crane. For an average floor area of 2,000 m², the assumption is made that 0.65 floors canbe worked on simultaneously during the main construction phase. The maximum available workspaceamounts to approx. 1,300 m² (insert in Eq. 5). Assuming that the minimum workspace amounts to 30m² per worker, we use Eq. 4 to arrive at a maximum of about 43 workers during the mainconstruction phase. The lower of the two maximum values calculated is to be used for the calculationof the average number of workers. The duration of reinforced concrete works is calculated using the223

mode shown in Figure 3. The values from Table 2 are used for the input variables to calculate totalconsumption rate, daily production rate and duration (weighted triangular distribution).Table 2: Input values to calculate the construction timeMIN EXP MAXAverage labor consumption rate - formwork works 0.65 wh/m² 0.70 wh/m² 0.85 wh/m²Average formwork ratio for the entire building 3.60 m²/m³ 3.90 m²/m³ 4.00 m²/m³Average labor consumption rate - reinforcement works 8.00 wh/t 9.00 wh/t 10.50 wh/tAverage reinforcement ratio for the entire building 140.00 kg/m³ 150.00 kg/m³ 160.00 kg/m³Average labor consumption rate - concrete works 0.45 wh/m³ 0.55 wh/m³ 0.70 wh/m³Maximum number of workers 37.00 wh/hr 38.00 wh/hr 40.00 wh/hrProportion of the average number of workers 75.00 % 80.00 % 90.00 %Daily working time 8.00 hr/d 8.50 hr/d 9.00 hr/dConcrete Quanity 12,000 m³ 12,629 m³ 13,000 m³Buffer 5.00 % 8.00 % 10.00 %50,000 iterative steps were performed in the @RISK program to calculate construction time. Figure 6shows the calculation results for the duration (including buffer) as a probability distribution. Thisprobability distribution can be used to determine the probability of occurrence for selected values. If,for example, it was specified internally that the probability of occurrence must at least be equal to40% for the duration, the corresponding value is easy to determine.Figure 6: Probability distribution for construction time, including contingenciesThe duration of the project will be between 216 and 269 days with a 90 % probability, whichtranslates into a spread of about 53 days. The probability for the duration to exceed 269 days amountsto 5 % (X 95 ). On the other hand, the duration will be shorter than 216 days at a 5 % probability (X 5 ).The expected value (mean) amounts to approx. 242 days, with a standard deviation of 16 days.6. ConclusionThe specification of a reasonable construction time makes a substantial contribution towards theeconomical use of elementary and dispositive production factors, or at least creates the preconditionsto do so. Workers, equipment and materials can be used cost-efficiently.224

A realistic construction time can be calculated once construction management boundary conditionshave been considered. Normal construction times still involve a certain potential for being shortenedwithout necessarily running the risk of immediate productivity losses. The application of probabilitycalculus (calculation mode 3) does not result in a single correct value. Rather, the correlation betweenthe probability of occurrence and the magnitude of the value is reflected (probability distribution).The decision-making process can be facilitated by showing the results as a distribution curve. If theranges can be reduced further by appropriate measures, the distance between the quantiles is alsoreduced (X 5 , X 95 ).As far as reasonably possible, clients should specify a normal construction time for their projects. Inthis regard, it is crucial to consider the construction management constraints in terms of the numberof resources and logistics-related boundary conditions. Construction time should at least becalculated using calculation mode 2 but ideally also by including a probability calculus approach(such as the Monte Carlo method). However, the correct interpretation of probability calculus resultswill always require expert knowledge with regard to construction management and related economicaspects.The author is currently conducting further research into the interdependencies of the risks and theinfluence of the type of distribution function used (not referred to in the paper). In particular, theresearch focuses on the possible implications on the construction time probability distributions. Thecalculation methods outlined above can be applied to a wide range of projects. They can be used byall parties involved in the project.ReferencesBlecken U (1967). “Die Produktions- und Kostentheorie im instationären Baubetrieb”, Teil 1.Bauwirtschaft: 199Raaber N (2003). “Beitrag zu Ausschreibung und Vergabe von Bauleistungen”, Graz, Verlag derTechnischen Universität GrazDoka (2009), http://www.doka.com/doka/de_global/planning/schools/pages/05394/index.php, [accessedon 09/03/2009, 18:05]Kenley R, Seppänen O. (2010). Location-Based Management for Construction, London and NewYork, Spon Press.Palisade Corporation (2009). @RISK225

Coping with Complexity: Towards a Framework forUnderstanding Knowledge Integration in ConstructionOrstavik, F.University College Vestfold and NIFU STEP(email: finn.orstavik@hive.no)Bygballe, L.E.Norwegian School of Management - BI(email: lena.bygballe@bi.no)AbstractThe purpose of this paper is to contribute to the understanding of the nature of complexity inconstruction, and how complexity impacts on the ability to make use of relevant knowledge in thecourse of the construction process. Based on theory of social systems, we show how integration, thatis, increasing the number of linkages between elements in a system, actually reduces complexity. Weargue that this kind of complexity reduction is a precondition for knowledge integration; learningacross specific (professional, craft and other) knowledge bases, and hence, for improved performancein construction projects and in the industry as a whole. Construction relies on a heterogeneous set ofknowledge bases, and presupposes effective interaction of specialists, and the integration andcoordination of a large number of diverse operations in space and time. There are significantdependencies between elements and operations in building. Many have argued that the complexitythat influences knowledge and learning in construction is not exclusively technical, and it has beenshown that a large number of diverse dependencies contribute to the high level of uncertainty inconstruction. The social dimension is essential in the building process, as dialogue and bargaining isrequired to achieve the necessary integration of knowledge. Hence, social arrangements contribute tothe complexity in the situations where decisions are made, and are at the same time a necessarymeans to cope with complexity. We in this paper draw on insights from Luhmann (1984, 1990,1995), and argue that the essential aspect of complexity is not the many dependencies in themselves,but the fact that dependencies are dynamic, time-dependent and sporadic in nature, rather than stable,predictable and ubiquitous. Complexity is multidimensional, and the dependencies involved are at thesame time technical, economic, logistic and social in nature. Coping with complexity means to handlethese multiple dependencies. This has to be done by establishing and using routines. But, inconstruction adequacy of routines is context dependent and often short lived. Routines are in realitysystematic and patterned selections among operative alternatives. They are effortfulaccomplishments, and therefore, overall building process is, and cannot but be, an ongoing process oflearning.Keywords: construction, complexity, knowledge, learning, integration226

1. IntroductionComplexity silently has emerged to become an essential feature of modern societies, and a majorchallenge for all engaged in managing ongoing operations and directing their further development – inthe public sector as much as in private enterprise. Artifacts that surround us and the technologies theyembody are becoming ever more complex, as is the organizing that it takes to develop, produce anddistribute them (Rycroft and Kash, 1999).The purpose of this paper is to contribute to the understanding of the nature and significance ofcomplexity in construction. Construction is a highly complex form of production and as an industry,among the least integrated. The complexity of construction projects is reflected in the large number ofspecialists, who contribute in the construction process with their various resources (Winch, 1998).Different and heterogeneous knowledge bases are represented by different professions and trades.In a growing scientific literature in the field, complexity is viewed as a key factor influencingconstruction performance (e. g. Gidado, 1996; Winch, 1998). Particular attention is paid to howcomplexity act as a barrier to knowledge integration and learning (Bresnen et al., 2003), andsubsequently to productivity and innovation (Dubois and Gadde, 2002). Discontinuities in flows ofpersonnel, materials and information, the fragmentation of the construction project team and theprocesses involved (Bresnen et al., 2003), in addition to inappropriate organizational and managementpractices (Love et al., 2004), hamper codification and transfer of knowledge within and acrossprojects (Brady and Davies, 2004).The paradox emerging from the literature and from the remedies proposed, is the countermeasurerecommended in the face of too much complexity, is even more complexity. This follows, when we,on the one hand, accept that systems are a set of elements bound together by various kinds ofrelationships and dependencies, and on the other hand, accept that the more people have to talk to oneanother and depend on each other, the more linkages and dependencies there are.In managerial terms, what follows from this, is the contradictory theses that integration andinvolvement is positive, but that strong project management and proper coordination and control is allthe same absolutely indispensable (Baccarini 1996).In general strategy and management literature, learning and the effective use and integration ofknowledge, as well as the development of appropriate competence, are considered pivotal for firms’long term performance and competitiveness (Prahalad and Hamel, 1990; Grant, 1996), Hence, theconstruction industry’s long acknowledged problems in learning is likely to be a root cause of itsobserved poor performance, represented by budget and schedule overruns, quality deficiencies, andpoor health and security systems (Love et al., 2004).A basic assumption underlying the work in the present paper is that the ability improve learning in theconstruction industry depends on coping in a more effective way with the high level of complexity inconstruction, and that this in turn would benefit greatly from a more thorough understanding of what227

complexity is, and what it means in construction. In order to look deeper into this, we in this paperexplore the German sociologist Niklas Luhmann’s analysis of complexity (Luhmann 1984, 1990,1995). His emphasis on the social and dynamic aspects of complexity is in line with several recentfindings in the construction literature, in analyses of the social and organizational dynamics ofconstruction processes (e. g. Cicmil and Marshall, 2005; Bresnen et al., 2003).2. Understanding complexityIn many scholarly discussions of the term complexity, as well as in everyday language, the termcomplex is used as the antonym of the word simple (Luhmann, 1990). Herbert Simon (1962) in hisdiscussion of the architecture of complexity argues that complex means “made up of a large numberof parts that interact in a non-simple way”. Weaver (1948) points out that while unorganizedcomplexity can be analyzed with relatively straightforward statistical tools, modern science is facing atremendous challenge in dealing with organized complexity, that is, settings in which a very largenumber of elements interact in manifold, patterned, but unpredictable ways.Luhmann argues that a study of the history of ideas in science shows that simplicity can no longer betaken as a point of departure for our general understanding of complexity as a phenomenon (Luhmann1990: 59-61). But if complex cannot be understood as the opposite of simple, then what exactly iscomplexity? In order to answer this question, Luhmann chooses – as did Shannon (1948), Weaver(1948) and Simon (1962) before him – to consider complexity a property of systems: Complexityconcerns collections of elements that are related to each other in systems. Luhmann argues that toform a system, all elements must be related to each other, albeit not necessarily by direct links. Allelements are related, but links can be both direct and indirect. In other words, in any one system, thereare links and potential dependencies between all elements, but not in ways that are straightforward tomap and to predict. Dependencies are of various kinds, they do not necessarily exist independently ofeach other, and they often do not exist independently of time.Mathematically, the number of possible dependencies between elements increases geometrically, thatis, much more than the number of elements themselves. This, as it seems to us, is the most obviousreason why systems become more difficult to comprehend as a whole, as the number of elements goesup. But, according to Luhmann and Simon, this is not in itself why a large system often is a complexsystem. Simon’s important insight is that elements interact in a non-simple way in complex systems.This implies that even in systems with a huge number of elements, the system would lack complexityif links between elements are easy to map and their interdependencies simple to understand. Luhmannconcurs with this point. He argues that complexity arises in social systems, not as the number ofelements increase and dependencies multiply, but as elements are increasingly unable to establishdirect relationships to all other elements. As systems grow, the number of possible direct links that arenot actually established increases rapidly. The reason, Luhmann points out, is essentially found in thelimited ability of elements to cope with multiple dependencies. In current language, one could say thatthe multitasking capacity of elements is restricted. In all systems, hence, the essence of complexity isthat as elements and dependencies multiply, real life conditions make it impossible for all potentialbilateral relationships between elements to be established.228

That lack of actual relating in systems, and the dynamics of the relating that does take place, isessentially what complexity is about, according to Luhmann. This implies that integration in generalis an antidote to complexity. But there is a fundamental difference between systems that Luhmanntakes as a starting point for his analysis. In his general theory, Luhmann is preoccupied exclusivelywith social systems, that is, systems of communication: flows and processing of information, relatedto ideas and to meaning, not to material realities.Luhmann in no way denies the reality of other kinds of systems, beside social systems. For instance,there are material systems, such as clockworks, other kinds of machines, or for that matter, theuniverse itself. Also a building is a material system, and a rather stable and clearly structured system.The inherent complexity of the building as a system can be assessed, by pointing out what elementsthe structure consists of, and how elements depend on each other for their adequate functioning.The situation is less straight forward in social systems. The qualitative and dynamic aspects ofcomplexity are moved to the centre stage by Luhmann, and selection, evolution and time becomescore concepts in his theory, as does the term self-organization (or autopoiesis). Basically, socialsystems with more elements, or members, will tend to have a higher share of “non-existing bilateralrelationships”, due to the connectivity limitations of individual elements. Hence, complexity will ingeneral be larger – and integration less complete – in bigger systems. Other things being equal, thefewer dependencies established as actual communication links, the more complex the system is. Andother way around: The more complete the “relating” between elements, the less complex the systemis. Most importantly, linkage patterning will often vary greatly over time.Figure 1, which must be interpreted as snapshots in the same way as similar illustrations made byLuhmann (1990: 65), three examples of patterned relating in a system are shown.ABCFigure 1: Selective and full integration in social systemsPart A in the figure could illustrate a situation of strict hierarchy in an organization, with minimalrelating, and where communication exclusively takes place along established “lines of command”.Part C shows complete relating, while part B is an intermediary form, in which lines of command areimportant channels of communication, but where at the same time, some communication takes place“laterally”, on what can be seen as the respective “levels of authority” in a hierarchical structure.229

Now, following Luhmann’s argument, what may appear a counter intuitive fact, is that C is a socialsystem without complexity, while A is as complex as a hierarchical system can get, given the numberof elements that are part of the system. “Obligatory points of passage” are abundant. The actualfunctioning of the whole system will depend heavily on the capacity of single elements to process andchannel information. C depicts a situation where all elements are effectively related. The system as awhole can be described as transparent; all dependencies are established as communicative links.Hence, everyone can know and can adjust to everyone else. This, when we follow Luhmann, meansthat the system lacks complexity. C is fully integrated.3. Complexity in constructionWe have so far dealt with complexity in highly general terms. In several insightful contributions to theconstruction literature, complexity has been named as a key characteristic of construction processes(e. g. Gidado, 1996; Winch, 1998; Dubois and Gadde, 2002). Different types of complexity have beenidentified and emphasised. For instance, contributions to the engineering management literature showhow technical and technological dependencies create complexity in projects (Baccarini, 1996;Williams, 1999). This complexity is often related to the difficulties of carrying out operations,because construction relies on heterogeneous knowledge bases and the coordination and integration ofa large number of diverse operations in space and time (Baccarini, 1996; Gidado, 1996).Differentiated operations depend on each other sequentially and reciprocally (Thompson, 1967).Differentiation in this respect relates to the variety or diversity of the tasks involved in theconstruction process, such as number and diversity of inputs and/or outputs, number of separate anddifferent actions or tasks by technology, time or territory, and number of specialities.Williams (1999) argues that technological and organizational complexity are exacerbated by the factthat project goals often are ambiguous and changing over the course of the project, while methodslack adequate specification. This acknowledgement draws our attention towards the social aspect ofcomplexity in construction. In recent years, attention has been paid to the social arrangements andprocesses involved in the construction process (Bresnen et al., 2005). Social interaction and theambiguity created by multiple and conflicting interests and goals, roles, identities and asymmetries ofpower, are emphasised (Cicmil and Marshall, 2005).Winch (2001) discusses governance issues in relation to needs of reducing transaction costs andhandling the uncertainty surrounding construction projects. He pays particular attention to complexcontracts needed in situations where there is a great uncertainty about clients’ actual needs and thecosts of performance, as well as difficulties in measuring the performance. Complex contracts areneeded in order to govern such uncertainty, describing decision making and conflict resolutionprocedures.Finally, in their analysis of increasing project complexity, Crawford et al. (2006) point to technicalcomplexity, dependencies of a social nature in the project organization, as well as time- and spacedependencies in carrying out a project, as important issues when we with to understand thesignificance of complexity in building. They also point out how new, integrated types of product230

deliveries, such as those stemming from contracts in which service deliveries are included overextended periods of time, adds another dimension of complexity to the overall construction project.Baccarini (1996) argues that the raison d’être for project management is to promote integration. Andit is obvious in the above, that to cope with the kind of complexity faced in building, communicationand effective information processing is essential. This appears to make things worse, in terms ofcomplexity: It is as if too many linkages between too many different elements can only be masteredby developing even more linkages. Baccarini is sensitive to this, as he moves on to point out that thisnecessary integration must come about also with the help of strict coordination and control (p. 203).But, as we have seen earlier, this amounts to a contradiction. Coordination and control, establishing abureaucratic, hierarchical structure, essentially means to increase complexity of the system, not toreduce it. A choice must be made: Control and hierarchy stands against systems integration.Increasing one reduces the other!In general, different factors have been identified in the literature as vital for successful integration inconstruction: Communication and involvement of key actors in all project phases (Love et al., 2004),facilitated by effective ICT systems (Vordijk, 1999); Use of standards, i.e. systems, components andprocesses (Sanchez-Rodriguez et al., 2006); Pre-assembly and off-site production (Gann, 1996;Vordijk et al., 2006); Partnering and long-term relationships (Dubois and Gadde, 2002; Love et al.,2004). According to Dubois and Gadde (2002), it is important to notice that integration of specificprocesses may have adverse effects on other processes and that there often is a need for trade-offs.4. Sticky knowledge and routinesThe scope and heterogeneity of construction projects, with many different contributing partners andbroad range of specialty knowledge and skills, make integration very difficult to achieve, and is a keyreason why building projects are as complex as they are. As Bresnen et al. (2003) remark, it is only onthe basis of a certain level of common understanding that new knowledge will be accepted andeffectively deployed. This relates to what has been called the sticky nature of knowledge, a trait ofknowledge which has been acknowledged in the fields of innovation (von Hippel, 1994) andorganisational learning (Szulanski and Cappetta, 2005).Stickiness originates from three main factors. First, when new knowledge lacks sufficient empiricalproof, its perceived appropriateness in new situations may be rejected. In other words, the knowledgeincludes causal ambiguity. Second, the recipient's lack of absorptive capacity rather than motivation isfound to be a main cause to stickiness. This capacity reflects the recipient’s ability to recognize,assimilate and use knowledge from external sources. One central precondition for this capacity isprior knowledge, which implies that knowledgeable actors, both individuals and companies, willpossess a better absorptive capacity than less knowledgeable actors (Cohen and Levinthal, 1990).Third, the arduousness of the relationship between source and recipient are seen as main barriers toknowledge transfer within an organization. Since knowledge is often tacit, transfer requires closeinteraction between the source and the recipient. Szulanski and Cappetta (2005) argue that stickinessin transfers of knowledge is caused by the particular characteristics of knowledge and the situation in231

which transfer is supposed to take place. Because knowledge may be seen as involving causalambiguity, and since new knowledge will often be considered to lack sufficient empirical proof, itsperceived appropriateness in new situations may be rejected. Ambiguity is as such related to whatactually happened and to the perceived causality of events. Ambiguity is also related to conflictingand unclear organisational goals, and will impact on the extent to which the experiences areconsidered successes or failures. Organizations will often have problems in developing consensus onthe interpretation of occurrences and outcomes, and on how to deduce appropriate responses to them.It is, in other words, challenging for an organization to frame and store experiences from severaldifferent individuals and groups into what could be seen as a “collective memory” (Levinthal andMarch, 1993). This has proven to be even more challenging in inter-organizational settings, wherethere is a lack of clear responsibility and power to decide what experiences should be retained or not(Holmqvist, 2004). In a construction project, which invariably is inter-organizational, this problem islikely to be particularly evident (Chan et al., 2005).Standardization and implementation of routines have been suggested as key means to simplification.Routines are vital for cognitive efficiency and have been in the centre of organization theory since theclassical work by Cyert and March (1963). Routines allow for the integration of knowledge (Grant,1996). Earlier notions of routines emphasised their stable nature often leading to inertia. Recentstudies, however, recognise the dynamic dimension of routines, and that variety and change areintrinsic features of these repetitive, recognizable patterns of interdependent action that involvemultiple actors. Pentland and Reuter (1994) describe routines as ongoing and effortfulaccomplishments, which are not to be seen as mindless behaviour, but rather as behaviour involvingcomplex patterns of interpretation and learning. Routines are seen as the grammar guidingorganisational behaviour, and just as grammars allow for producing a variety of syntax in sentences,routines allow for producing a variety of performances. Routine-based behaviour is on one handconstrained and enabled by the cognitive structures of individuals, and on the other hand the physicaland social structures of the organisation. Hence, some level of stability exists. At the same time,individual effort and agency are important features of these routine-based patterns. Feldman andRafaeli (2002) point out how routines provide connections among individuals. Through theseconnections organisational individuals develop shared understandings, which help the firm tomaintain a stable pattern of behaviour that co-ordinates the actions of individuals while also adaptingto variations in the internal and external environment. These connections may be both organisationaland inter-organisational. In a similar way, Grant (1996) argues that the essence of routines is thatindividuals develop sequential patterns of interaction, which permit the integration of their specialisedknowledge without the necessary need for communicating that knowledge. As such, they areappropriate to integrate tacit knowledge, compared to standard operating procedures that require theknowledge to be explicit.The view of routines as effortful accomplishments, providing connections among differentindividuals, is likely to provide important insights to our discussion of how integration can contributeto cope with the type of complexity that Luhmann (1984) suggests. Instead of hierarchical control,facilitating routines in which self-organizing teams learn and develop shared understandings may bethe raison d’être of management in construction.232

5. Coping with complexity and learning in constructionAn outline a model for the relationship between different types of complexities and learning barriersin construction and the role of routines in coping with these challenges is illustrated in Figure 2.Figure 2: Coping with complexity and learning in constructionCompetence has to be applied not only in itself, it has to be combined and used in a number ofdifferent combinations (Dubois and Gadde, 2002). Only in this way, skilled individuals and groups ofknowledgeable people transform manufactured materials and technical components, creating aconstruction on the basis of a plan which in itself has been developed on the basis of a multitude ofknowledge and skills. It is clear that parties involved in construction have to deal with all the differenttypes of dependencies and complexities identified in the above sections to execute projects, althoughnot in the same extent in all situations.The operations certainly reflect different technical knowledge and technologies, and the individualcomponents of construction as well as the connection between them indicate complexity in atechnological sense. The operations, however, also reflect a concern with economic issues.Organisational and economic complexity in a construction project on the level of the developmentalconstellation is a result of the many firms and value creating logics being involved, the diversity ofthe legal and economic arrangements binding them together, and the multitude of dependencies thatexist between them in technical terms. The operations undertaken by one firm depends not only on thefirm’s direct contractual partners, but on operations carried out by a number of other firms in thedevelopmental constellation.233

This complexity is structural, but there is also a temporal component in this, as the dependenciesbetween operations for both technical and other reasons vary over time. Furthermore, there are manysets of consequences to take into consideration, other than economic. What is done and when thingsare done, for instance depend on what is workable socially, reflecting status and relative position inthe social hierarchy. Those involved in building are part of different kinds of communities,professional groups, business organisations, work teams, etc. The heterogeneity of such groups andthe diverse understanding they have of responsibilities and status, influence the content and timing ofoperations.To be able to work effectively, it is essential to have adequate tools and materials, as well asknowledge of how operations are to be carried out. In construction, in spite of the fact that mostprojects are singular and have their own particular traits and challenges, most operations undertakenhave clear predecessors: That is to say, others have done similar things before and often many times.Nevertheless, relevant knowledge continues to be underexploited, in part because what is learnt in oneproject is not easily transferred to other projects (Brady and Davies, 2004). In this sense, knowledgeappears to be very far from the kind of public good that is described in classical microeconomictheory, where knowledge once it is available is assumed to be available to all and at no cost (Arrow,1962). By introducing the new conceptualisation of routines, as suggested by Pentland and Reuter(1994), a tool for coping with these complexities is offered. Routines provide both efficiencies, interms of being the repositories of prior experiences as well as effectiveness, as they allow for learningand effortful accomplishments.6. ConclusionWe started out this paper with the basic assumption that in order to overcome the problems of learningand knowledge integration in construction, a better understanding of the nature of complexity inconstruction processes is needed. The main purpose was to scrutinize the complexity concept andoffer a more precise interpretation of the concept based on social systems theory. This in turn, weargued, would increase our understanding of the problems of learning and how they could be handled.What we have illustrated by our argument and discussion is that handling learning issues inconstruction is really a matter of coping with different types of complexity. Examining technical,economic and social aspects of complexity, illustrating how these may be related to different types oflearning barriers, and presenting a new role for routines in coping with them, add to our currentknowledge of how learning and complexity interacts in construction. As such, it follows the stream ofrecent research within construction dealing with complexity, learning and management (e. g. Bresnenet. al., 2003; 2005; Cicmil and Marshall, 2005).The main implication and contribution to practice is that the management function in complexconstruction projects can be understood in a less ambiguous way. As we have seen, coping withcomplexity does not necessarily mean to reduce complexity, but does so when integration is givenpriority over hierarchical structuring and control. Neither does it have to involve simplification in thesense of reducing the number of linkages between elements. On this basis, we would propose that thekey task of management is to structure complexity, and to oversee complexity structuring throughoutthe project cycle. Management focus cannot solely be on technology, nor can it be on profitability234

alone. Management attention has to span the technical/conceptual, the social/relational and thepractical/economic domains. It would seem that the real raison d’être for management is related tothis one thing: The handling of complexity that is the constituted by the dependencies that arise in thegaps between the diverse domains of complexity. The meta-complexity constituted by thedependencies between complexity domains cannot but be the task of management to deal with.Everyone that builds have to deal with all aspects of building to a limited extent. But most individualsand teams specialize in the sense that they are predominantly preoccupied with their own special setof complexity: The bricklayer must focus on how to deal with his materials, the architect with hisdrawings, and the site manager with his project flow charts. They all solve problems and learn theirskills better over time. But there are dependencies that cross the borders of the domains, and unlessthese are taken care of, no learning will happen on issues that have their roots in these gaps.It seems obvious that a strict hierarchical organization cannot be an effective organisational structureto achieve the kind of domain spanning learning that seems to be essential in construction projects.Neither is the pure temporal organizational model, characterizing the construction industry. Instead,establishing routines that connect various project parties together and where the role of agency andinteraction in improving these routines is acknowledged and allowed for, may improve efficienciesand effectiveness. Furthermore, in line with Dubois and Gadde’s (2002) notion of loose and tightcouplings, the routines in projects should be so flexible as to allow for innovation, while productivitymay be enhanced by making the connection and routines more permanent, in terms of establishinglong-term relationships.ReferencesArrow K (1962) “Economic Welfare and the Allocation of Resources for Invention.” In R. Nelson,The Rate and Direction of Inventive Activity. Princeton, Princeton University Press.Baccarini D (1996) “The Concept of Project Complexity – A Review.” International Journal ofProject Management 14(4): 201-204.Brady T and Davies A (2004) “Building Project Capabilities: From Exploratory to ExploitativeLearning.” Organization Studies 25(9): 1601-1620.Bresnen M, Edelman L, Newell S, Scarbrough H and Swan J (2003) “Social Practices and theManagement of Knowledge in Project Environments.” International Journal of Project Management21: 157-166.Bresnen M, Goussevskaia A and Swan J (2005) “Organizational Routines, Situated Learning andProcesses of Change in Project-Based Organizations.” Project Management Journal 36(3): 27-41.Cicmil S and Marshall D (2005) “Insights into Collaboration at the Project Level: Complexity, SocialInteraction and Procurement Mechanisms.” Building Research and Information 33(6): 523-535.235

Chan, P., Cooper, R. and Tzortzopoulos, P. (2005) Organizational learning: conceptual challengesfrom a project perspective. Construction Management and Economics 23, 748-756.Cohen, W. M. and D. A. Levinthal (1990). "Absorptive capacity: A new perspective on learning andinnovation." Administrative Science Quarterly 35(1): 128-152.Crawford, L., P. Morris, et al. (2006). "Practitioner development: From trained technicians toreflective practitioners." International Journal of Project Management 24: 722 - 733.Dubois A and Gadde L-E (2002) “The Construction Industry as a Loosely Coupled System:Implications for Productivity and Innovation.” Construction Management and Economics 20(7): 621-631.Feldman M S and Rafaeli A (2002) “Organizational Routines as Sources of Connections andUnderstandings.” Journal of Management Studies 39(3): 309-331.Gann D M (1996) “Construction as a manufacturing process? Similarities and differences betweenindustrialized housing and car production in Japan.” Construction Management and Economics 14:437-450.Gidado, K.I. (1996) “Project Complexity: The Focal Point of Construction Production Planning.”Construction Management and Economics 14: 213-225.Grant R M (1996) “Prospering in Dynamically-Competitive Environments: Organizational Capabilityas knowledge integration.” Organization Science 7(4): 375-387.Holmqvist, M. (2004) “Experiential Learning Processes of Exploitation and Exploration within andBetween Organizations: An Empirical study of Product Development”, Organization Science 15 (1):443-466.Levinthal D A and March J G (1993) “The Myopia of Learning.” Strategic Management Journal 14(Special Issue: Organizations, Decision Making, and Strategy): 95-112.Levitt B and March J G (1988) “Organizational Learning.” Annual Review of Sociology 14: 319-340.Love P E D, Irani Z and Edwards D . (2004) “A Seamless Supply Chain Management Model forConstruction.” Supply Chain Management: An International Journal 9(1): 43-56.Luhmann N (1984) Soziale Systeme. Grundriss einer Allgemeinen Theorie, Frankfurt am Main,Suhrkamp Verlag.Luhmann, N. (1990). Soziologische Aufklärung 5: Konstruktivistische Perspektiven. Opladen,Westdeutscher Verlag.236

Luhmann N (1995) Social Systems, Stanford, CA, Stanford University Press.Pentland B T and Reuter H H (1994) “Organizational Routines as Grammars of Action.”Administrative Science Quarterly 39: 484-510.Prahalad C K and Hamel G (1990) “The Core Competences of the Corporation.” Harvard BusinessReview, May-June: 79-91.Rycroft R W and Kash D E (1999) The Complexity Challenge. Technological Innovation for the 21stCentury, London and New York, Pinter.Sanchez-Rodriguez C, Hemsworth D, Martinez-Lorente A R and Clavel J G (2006) “An empiricalstudy on the impact of standardization of materials and purchasing procedures and businessperformance.” Supply Chain Management: An International Journal 11(1): 56-64.Shannon, C. E. (1948). "A mathematical theory of communication." Bell System Technical Journal27(July and October): 379-423 and 623-656.Szulanski G and Cappetta R (2005) “Stickiness: Conceptualizing, Measuring, and PredictingDifficulties in the Transfer of Knowledge within Organizations.” In Easterby-Smith M and Lyles M AHandbook of Organizational Learning and Knowledge Management, Blackwell Publishing.von Hippel E (1994) “”Sticky Information” and the Locus of Problem Solving: Implications forInnovation.” Management Science 40(4): 429-439.Vordijk H (1999) “Preconditions and Dynamics of Logistics Networks in the Dutch BuildingIndustry.” Supply Chain management: An International Journal 3(4): 145-154.Vordijk H, Mejboom B and de Haan J (2006) “Modularity in supply chains: a multiple case study inthe construction industry.” International Journal of Operations and Production Management 26(6):600-618.Weaver, W. (1948). "Science and Complexity." American Scientist 36: 536-544.Williams, T M (1999). "The need for new pradigms for complex projects." International Journal ofProject Management 17(5): 269 - 273.Winch G M (1998) “Zephyrs of creative destruction: Understanding the management of innovation inconstruction.” Building Research and Information 26(5): 268-279.Winch G M (2001) “Governing the Project Process: A Conceptual Framework.” ConstructionManagement and Economics 19: 799-808.237

Managing Risks in International Growth Business ofConstruction Contractors and Building ProductSuppliersPalojärvi, L.Construction Management and Economics, Aalto University School of Science and Technology(email: lauri.palojarvi@tkk.fi)Huovinen, P.Strategic Management in Construction, Aalto University School of Science and Technology(email: pekka.huovinen@tkk.fi)Kiiras, J. Construction Management and Economics, Aalto University School of Science andTechnology(email: juhani.kiiras@tkk.fi)AbstractThe background involves the international business (IB) growth of the Finnish construction industryup to a level of EUR 17 billion (2008), which nearly exceeds the value of the domestic business.Despite of the global credit crunch, it seems that many vast markets e.g. in Russia and Asia aresustainable. Uncertainty and risk are inherent in firms‟ complex entries and growth operations inforeign markets. This paper is related to the primary author‟s doctoral thesis (Palojärvi, 2009). Theaim of the thesis is to develop better ways of managing major risks and their sources within the IB ofcontractors and building product suppliers. The empirical part is a longitudinal, self-ethnographicinsider action research that contains the testing of the validity of the hypotheses with the nine projectand/or business-specific cases. The hypotheses are derived from the primary author‟s long-termexperience at the service of the Finnish building product industry. He followed up and interferedwith these cases during 32 years (1974-2006). In turn, the purpose of this paper is to report on theresults of the testing of the hypotheses, i.e. it is beneficial to apply a project risk management (RM)approach (i.e. objectives setting, risk identification, and response launching) proactively on thebusiness level for more options and fuller impacts (Hypothesis 1) and that major risks are inherentwithin key managers´ competencies vis-à-vis cross-cultural and contractual issues (Hypothesis 2).The suggested early risk and opportunity management method (EROM) turned out to be highlyapplicable in managing risks in IB growth projects on the business level. The treatment of a businessgrowth transaction as a full bred project with the use of proven project RM tools is considered atheoretical novelty. The conditions of an effective application involve (i) a proactive, business leveldiagnosis at the outset of an IB operation and (ii) a reliance on (human) expert knowledge for makingqualitative decisions. When no statistical history exists, computer-aided, quantitative RM methodsare not applicable. Instead, when a RM method is being applied early on the business level, projectrisks can be avoided or managed effectively.238

Keywords: building product suppliers, contractors, crisis, international construction, riskmanagement239

1. IntroductionThe contextual background lies in the long-term growth of the international business (IB) of theFinnish construction industry in particular in Europe and Russia. Starting from scratch in 1970, itsvalue in 2008 (EUR 16 billion) exceeded the value of the domestic new building. Along this growthpath, both successes and failures have occurred. An exemplary list of seven problematiccontractual situations of Finnish firms is as follows (e.g. Brax, 2005; Palojärvi, 1986). (i) Thefloods in the 1960s destroyed the Diyala Bridge in Iraq twice. The Iraqi Government (the client)refused to pay for the damages, considering the floods were foreseeable, although they were“unexpected” to the Finns. (ii) The federal government in Nigeria became insolvent despite its highoil income in the late 1970s. Many large, negotiated, housing development contracts were stopped asa result of an unexpected lack of payments. (iii) A Finnish consortium IRCO signed a turnkeycontract with the Iraqi government concerning Conference Palace in the 1980s. Unexpectedly, thegovernment demanded during the contract period a much larger building than this had been foreseenduring the negotiations, partly based on the contract‟s turnkey clause and the overall qualityspecification of “best available”. (iv) The Finnish consortium FISC had entered a contract concerningthe complex for the life guards when the Shah in Iran was unexpectedly removed and the mullahstook power in the year 1979. FISC abandoned the site. Its unconditional performance bond was calledupon by the new Iranian Government. Under the international banking rules, the respective Finnishbanks had to honor that demand. However, a local court in Finland stopped the transfer of the funds,which it found contractually inappropriate. (v) Concerning Partek´s plant delivery project toSertolovo in Russia, Haka - the Finnish building contractor for the single largest project of theMilitary Village Program - went bankrupt in the year 1994. Partek - the technology contractor of thesame German client (GWU) - had no contract with Haka. This turned out to be an efficient responseaction against the unexpected bankruptcy of Haka, which could have been the source of acatastrophic risk for the other project parties. (vi) In Finland, Finnforest assumed a new contractualrole in the residential building business at the turn of 2004-2005, i.e. from the “supply and erection ofbuilding elements” to the much more demanding role and business culture of a residential buildingdeveloper. This new role was soon reversed by the owners. (vii In Finland, the problems of deliveringthe Olkiluoto nuclear power plant have been caused in part by the cross-cultural relations between theFrench turnkey contractor, the Finnish client, and the local construction industry. So far, this hasresulted in the disputes on the serious delay of the completion and the huge cost over-run.In international mergers, acquisitions, market entries, and joint ventures, two problematicexamples are put forth as follows. (a) In a merger, the future obligations of a buyer and those of aseller were specified unclearly and the poor transfer of the duties between the two organizations tookplace as the interruptions of the communication. The price mechanism was determined vaguely.However, the well-aligned, mutually set objectives encouraged the parties to maximize theperformance of the traded business, resulting in a great success. (b) Many market entry projectsthrough the joint ventures with the local partners suffered as the result of the misunderstanding of thepartner‟s local culture in general and the contractual culture in particular. This led to themisinterpretations of the parties‟ intentions and actual behavior on the given vital business issues(Palojärvi, 1992).240

In the same vein, the roots of the primary author’s doctoral thesis are within his licentiate thesis(Palojärvi, 1986) on the management of the risks in the Finnish construction project exports. BasedonTherein, it was posited that the most significant risks were twofold i.e. related to key managers anda a contractual balance between project stakeholders. Against the general expectation, much fearedpolitical risks had not directly caused severe problems for the investigated the Finnish actors.Nevertheless, the two principal risk types, i.e. political risks and economic risks are hidden in thecountry contexts of international construction, which is wrought with more risk than domesticconstruction. Many researchers have emphasized the cross-national factors also recently (e.g. Hanand Diekmann, 2001 and Ling et al., 2005). In the doctoral thesis, a focus has been on managingRisks inherent in the international growth business situations of Finnish construction contractors andbuilding product suppliers, e.g. in strongly emerging Asian and Russian markets. The relevantresearch question is “How does a manager or management team handle risks in growth situationssuccessfully?” Further, the two hypotheses were set based on the theoretical background ofPalojärvi‟s (1986) licentiate thesis and in part on the belief of practitioners i.e. that effective riskmanagement (RM) is a key factor of success in international markets.The purpose of this paper is to report on the results of the testing of the two hypotheses as well asthe consequent discussion, critique, and conclusions. Firstly, it is beneficial to apply a project RMapproach (i.e. objectives setting, risk identification, and response launching) proactively on thebusiness level for more options and fuller impacts (Hypothesis 1). Secondly, major risks are inherentwithin key managers´ competencies (Hypothesis 2). based the TThus, the impacts of applying thethe proven, project level RM methods at the upper business level within the focal context (“transferupwards”) were analyzedthe the risks embedded within the key managers and their competencies onmanaging in particular cross-cultural issues and contractual arrangements within the focal context(“major risk identification”) and the management of such risks were followed up. The sections of thepaper include the clarification of the insider action research (section 2), the results of the testing ofHypotheses 1-2 (section 3), the discussion and the critique (section 4), and the conclusions includingthe applicability of the results (section 5).2. Insider action research with nine cases2.1 Design and examination of the two hypothesesThe design of Hypotheses 1-2 was based on the theoretical and empirical findings of the licentiatethesis (Palojärvi, 1986) and the primary author‟s subsequent experiences, systematically documentedover a 20-year period on the author‟s project and business assignments (Figure 1). This follow-upwas justified by (i) the relative scarcity of the contextual literature, (ii) a fact that the literature issilent vis-à-vis Hypothesis 1, and (iii) a fact that longitudinal observations on RM practices within theconstruction industry had not exploited any computer-aided simulation methods for riskidentification, assessment, or response. Instead, many older and recent references alike suggest thathuman expert knowledge is the main tool for risk identification and response (e.g. Flanagan andNorman, 1993 and Palojärvi et al., 2008).241

Figure 1: Timeline schedule of the insider action researcher‟s multiple roles within the casesEach of Hypotheses 1-2 was examined against the findings from the case studies by applyingpragmatism. The most important encouragement to examine the hypotheses with the combinedinsider action and case study research was found from within Yin‟s (2003b: p111) guidance on casestudies. Yin adds that other interesting findings may emerge from within cases even to an extent thatforces a researcher to change his proposition. In the study at hand, this did not happen.2.2 Rationale for a case study researchIn industrial contexts, most strategic and risky decisions are qualitative by nature. Therefore,statistical or quantitative research methods are not valid in this study, which addressesmanagement situations without a history. No firm-specific, business-specific, or project-specificsituation in construction has such a long history that quantitative research methods would become ahighly valid tool for actual decision making. The old slogan “every project is unique” applies tobusiness decisions as well. Thus, the methodological part is an examination of Hypothesis 1-2 via alongitudinal insider action research on the 9 real-life cases of the Finnish construction industrybetween the years 1974 and 2006. Both business-level and embedded, project-level cases of the samecorporations, respectively, were studied to deepen the longitudinal analysis. On the one hand, manyempirical research approaches for this study were found to be non-valid for the following reasons.(i) Within the construction industry, test projects cannot be implemented only for the purposes ofresearch. (ii) Official statistics lack valid information (and basic data). (iii) No RM studies with validcase projects were available for the purposes of the examination of hypotheses such as this one, asthe case documentation for a deeper analysis is not easy to accomplish with the context. (iv)Interviews, surveys, and Delphi techniques were considered unreliable for various reasons. On the242

other hand, the conduct of a set of longitudinal case studies on individual projects was foundeligible to justify. The methodological guidelines were sought primarily within Yin‟s handbooks. Hehas encouraged the use of case studies wherein a goal is to expand and to generalize theories – not toenumerate frequencies (Yin 2003b: pp10-11). In addition, Eisenhardt (1989) has posited that casestudies are a suitable method for theory building when current perspectives seem inadequate orconflicting. Thus, the primary author decided to compile more case-based data for the likelyexamination of the hypotheses (and to meet the requirements of a doctoral thesis).2.3 Choice of an insider action researchThe most important choice was to rely on case studies where an author has a direct, stronginfluence, i.e. an insider action research (IAR), because: (i) it had not been possible to collectrelevant new data on risks from “outside” cases, particularly if they had turned out to be the failuresof competitors. (ii) The cases published in the reviewed literature are thin and short and do not rendersufficient information for a deeper (comparative) analysis. (iii) It seems that samples within literatureare based on questionnaires and/or semi-structured interviews (also recently, e.g. Ahadzie et al.,2008; Jha and Devaya, 2008). Their reliability is weakened by a fact that many real respondents arerandomly chosen from within firms‟ younger cadres of employees. (iv) Lewin (1946), the initiator ofthe action research “school”, argued early on that research for social practice should be concernedwith “... two ... questions … study of general laws … and the diagnosis of a specific situation.” Thelatter is what the construction business, with its one-of-a-kind projects, is all about.The admittedly long time to collect the case documentation, however, brought along the fiveadvantages of the selected empirical research methodology. There was ample time (i) to build a solidpre-understanding of the targeted situations (Gummesson, 1991) or the focal business contexts (Edenand Huxham, 2006), (ii) to assume the multiple role sets of an insider action researcher, and (iii) togain familiarity with the case-specific, organizational politics. (iv) An additional advantage of thelongish “maturing” of this researcher (Eden and Huxham, 2006 p401), as when theoretical constructsdevelop over many cases and often many years, a range of their validity will be extended.(v) Over the years, some key parts of the “total picture”, not fully recognizable within theoccurrence of the cases, have surfaced more clearly. This has made it easier to explain the process ofthe exploration (Eden and Huxham, 2006), which has a positive impact on the issue of validity.The empirical approach of this study was like qualitative IAR with the practical aim of solvingsevere problems and looking for a positive effect on RM practices (Ford et al., 2003). The IAR wasabout undertaking RM actions and studying those actions as they took place while being a memberof the organization (Coghlan and Brannick, 2005). This study aligns with Alvesson (2003) whoposits that the action being investigated must be understood from the actor’s viewpoint, as theprimary author had acted, through most of his nearly 40-year-long professional career, in relevantmanagerial positions within the case firms and/or projects or businesses (see the timeline, Figure 1).Biases have been fought against by relying on the original case documentation, evaluating the datachronologically and logically, and identifying any discrepancies within such “messy” data. This study243

is self-ethnographic due to the involvement of an insider action researcher. Therein, a commondanger is to remain in frozen positions. Instead, the primary author targeted opportunities to comeup with new, interesting findings such as some underlying currencies of a theoretical nature. Anadditional danger is inherent in cross-cultural contexts, i.e. researchers believe that the wholeresearch system rests on dominant assumptions and they are afraid of challenging them (Usunier,1998 p137). In this study, both dangers have been avoided. It is perceived that the primary author hasbeen competent enough to analytically draw the findings from the cases as well as to validate themand that he has been independent enough to shake, to rattle, and to roll the assumptions.2.4 Selection, data, structure, and examples of the case descriptionsThe nine cases were selected to be included in this study on the basis of the following six criteria(Figure 2): (i) The licentiate thesis indicated export management competencies and contractualbalances as two potential sources of major risks (Palojärvi, 1986). Thereafter, the prequalification ofthe relevant cases was based on the existence of these two issues. (ii) The selection of the businessleveland the related project-level cases implied the use of a longitudinal research approach. Thisenabled the examination of Hypothesis 1, i.e. whether proven project RM methods can be appliedreliably on the business level. Within the reviewed literature, no similar longitudinal case frame couldbe identified. (iii) The selected cases were the pioneering ventures to achieve growth. Therefore, thekey managers‟ cross-cultural competencies and e.g. the contractual arrangements could be reportedand assessed. (iv) It was possible to document these cases well including the decisions made as partof „business as usual‟ management. Thus, it was possible to map and to report on the actual businessobjectives, the relevant management decisions, and their outcomes against each of Hypotheses 1-2.(v) The most typical risky situations of international growth, including new establishments oracquisitions, market expansions through acquisitions and capacity investments, large and complexproject deliveries, and implementing new business concepts in new markets were covered. (vi) Thetargeted varieties could be reached in terms of times of occurrence, sizes, and outcomes, which variedfrom a crisis (and a disaster) to a great success, providing more evidence for a cross-case analysis.The type and collection of the data is an essential part of the research method. The authentic,case-specific documentation, saved by the author, explains the key elements of the RM methodapplied in the cases. The key documentation consists of the minutes of the decision-makingmeetings of the management teams and boards, and/or Boards of Directors as well as the formallyapproved strategies or action plans of the companies. The complementary documents included thememoranda, the expert studies, and the messages pertaining to each case. For the quotation, eachrelevant issue such as an objective, a risk, a decision, and a measure had to be mentioned in therelevant formal documentation. The confidential documents are in part quoted, referred to, and listedinside each case description. In addition, a substantial amount of public background information wascollected to explain issues of international construction in the respective periods of time and to gain adeeper understanding of the major situations.244

Figure 2. Timeline schedule of the real-life business-level and project-level cases Nos. 1-9 betweenthe years 1974 and 2005. (Examples of the actual RM actions are excluded due to spatial limitations)Within each Group, the time span covered the origins of the case business idea and theimplementation of the case internationalization strategy. After the identification of a risk, theplanning and launching of the efficient response measures often took place much later. Someconclusions, ex post, do not exactly follow the past thinking of the focal management cadres of thattime. Some crucial reported facts may have surfaced many years after the actual moment of thedecision-making. This has enabled the primary author to draw more valid conclusions (compared to asole reliance on the documents written during the actual case period).The structure of the case-specific descriptions consists of the following six parts: (i) Introduction:Case in a nutshell, observation level (business/project), the focal firm‟s role (contractor/buildingproduct supplier), the type of business transaction. (ii) Brief of the case business and/or the caseproject including objectives. (iii) RM process: risk identification and assessment, and responseactions, a list of the identified and non-identified major risks and their sources and consequences, alist of the primary RM actions (see Table 1), comments. (iv) Combined RM on the business level andthe project level: the actions on the business and project levels, their possible causal relations, theapplication of the project-level tools on the business level, and their effectiveness. (v) Evidencerelated to Hypotheses 1-2: the required competencies and the key managers‟ competencies related tocross-cultural and contractual issues. (vi) Conclusions: a statement on “how did it go, overall?”(e.g. abig success or a major failure), the conformity of the outcome to the hypothesis, discussion of thefindings including potential rivaling major risks.3. Results of the testing of the two hypothesesHypothesis 1. In the literature, more proactive RM processes are called for. Yet, the setting ofobjectives is not specified as a clear step. In this study, the setting of objectives is a founding step. Inline with the mainstream RM frameworks, risk identification is also herein a profound step for RM.In the literature, no integrated RM views are considered or even challenged. Some references245

Table 1. Example of a risk breakdown structure in the implementation phase of PCE Oy’s plantdelivery project in Sertolovo, Russia during the years 1993-1997.CausativeeventsIgnorance onRussianpoliticsNon-fitconsortiumstructure(PCE + Haka/YIT)Local RussianbuildersClient’sknowledgeRecession inFinlandSource => Identified mainrisksSerious political turmoil=> (1a) Project abortedModerate political turmoil=>(1b) Project delayedDisputes and crisis=> (2a) Project abortedBusiness objectivesand/or consequencesFighting over claimsOverheads increasePCE´s profit drops. Thisimplies layoffs.Management of identified risks1 Claims management2 Big advance payment3 No involvement in politics1 Claims management2 Big advance payment1 To manage claims well2 Big advance payment3 To monitor and to interfere fast4 To make a contingency plan for works=> (2b) Project delayed Overheads increase 1 To manage claims wellYIT´s local subcontractors=> (3) Performance ispoor and delayedInadequate tender scope=> (4) Process scope is notfit for the performanceContinuing recession=> (5) DEM isdepreciated against FIMProject is delayed.Non-performance of aplant and design delaysPCE´s lower profit2 Big advance payment3 To monitor and to interfere fast4 To make a contingency plan for works1 To make a direct contract with Client2 To manage claims well3 To intermediate btw. Suba and YIT1 To prepare the detailed tender2 To pre-visit Client and Owner3 To make a direct con-tract with Client1 To terminate the part of a contractsum, which is not used in DEMAn identified and realized risk on the consortium’s structure, not taken by PCE was as follows:Haka’s ownerruined Haka´sliquidityHaka went bankrupt=> (6) Suba had nocontingency plan[=> PCE only gave itshelpful advise to Suba]Project delay/abortion anda huge loss in the buildingworks if no competentbuilder is available forSuba1 To make 2 separate contractsfor the process and the works2 To monitor Haka’s status3 To contact other Finnishcontractors for a rescue plan(e.g. Langlo et al., 2007) suggest that uncertainty should be left with owners and RM withcontractors. In relation to the enlarged RM view, this study relies upon and integrates in particularthe five references, i.e. (i) Flanagan and Norman (1993) for managing risks in construction, (ii)DeLoach (2000) for managing risks in international non-construction businesses, (iii) Loosemore246

(2000) for managing crises in construction, (iv) Lichtenberg (2000) for managing uncertainty infirms, businesses, and projects, and (v) Shenhar and Dvir (2004) for managing complexity in nonconstructionprojects. From among many practical manuals and guides, one reference is hereinconsidered to be one of the most applicable guides: (vi) Institute of Civil Engineers‟ (2005) RAMP.The case-based evidence conforms well to Hypothesis 1, but the literature remains silent.Within the international construction context, this is a novel research object which has applications,i.e. to use project RM methods to attain the objectives of „business‟ projects through four steps: (i)To define objectives, (ii) to identify situation-specific major risks, (iii) to launch an early response onthe business level, and (iv) to monitor and to repeat this RM process.Hypothesis 2. In the literature, major risks inherent in key managers’ competencies to manage(2a) cross-cultural issues are not discussed in the focal context, although the relative importance ofmanaging cross-cultural issues receives support within the contextual and generic research (e.g.Ofori, 2003; Langford and Male, 2001; Johnson et al., 2006; Olson and Olson, 2000; Fisher andRanasinghe, 2000). On the other hand, contractual arrangements are widely considered importantwithin the contextual literature (e.g. Onishi et al., 2002). However, the literature is silent on the casebasedevidence of this study, i.e. it is likely that major risks are inherent in (2b) contractualarrangements and the proactive launching of an appropriate response on the business levelmay be highly effective. Instead, many tools e.g. relational contracts, joint RM, and alliances havebeen suggested to mobilize contractual parties to deal with unforeseeable events. This studyconnects the management of the both hypothetical risk types with key managers’ competencies.This connection is not to be found in the literature. Competencies to manage cross-cultural andcontractual issues can be connected to the attainment of goals and the competences of firms (as statedby Sanchez and Heene, 1996).The case-based evidence conforms well to Hypothesis 2a, but the literature does this onlyindirectly. Within the international construction context, cross-cultural risks and competencies tomanage them offer a novel research object. This has applicability in other „projectable‟ transactions,e.g. (i) to bring competency assessments and respective steps into business transactions converted toprojects, (ii) to apply the issue of “culture” to wider perspectives, e.g. industry types, (iii) to take intoaccount organizational cultures, instead of ethnic and national cultures only, and (iv) to adopt betterways of managing cross-cultural uncertainty, risk, and opportunity early on the business level.Further, the case-based evidence and the literature both conform well to Hypothesis 2b. This isan advance in understanding upon how contractual risks and related competencies are coupledthrough contractual roles and arrangements. This has applicability also in „projectable‟ transactions,e.g. to adopt better ways of managing uncertainty, risk, and opportunity early on the business level.Moreover, a contractual risk may be dependent on a cross-cultural risk, which invites future research.4. ConclusionsThe research method is the longitudinal, self-ethnographic, and qualitative IAR combined with theanalysis of the nine cases during a period of the 32 years (1974-2006). The cases cover the most247

common situations of the international growth among the major Finnish contractors and buildingproduct suppliers over the focal period. In summary, it is herein argued that the applied researchmethodology is valid.In qualitative research, the main validity criterion is the researcher himself. Thus, the study as awhole is reported upon in detail and the case descriptions are written to make the analysis“explainable to others” (Palojärvi, 2009). The dynamics of the focal RM phenomenon wasunderstood in the case settings (Yin, 2003a-b, 2004). The nine case studies cover the international,and growth conditions (Yin, 2003a p11) and explain many presumed causal links in these real-lifeinterventions (which are too complex for survey or experimental research strategies). Herein,internal validity means “Can readers believe the researcher‟s interpretations?” (Silverman, 2004p289). The qualitative approach was selected to match the aim, i.e. to develop ways of managingrisks. The IAR was adopted because it was not possible to collect new data from “outside” cases.External validity is assessed on a basis of the connection of the case data and the evidence vis-à-visthe conclusions: (i) The RM framework captures the key risk identification. (ii) The data covered therelevant issues widely. (iii) The data has been processed logically to reach the conclusions. (iv) Forthe analysis, the groupings were arranged to pinpoint the fundamental longitudinal issue, i.e. thebusiness-level and project-level observations within the same firm. (v) The results are also applicablein the case of investment objects. Thus, the external validity of the results can be consideredfairly high in changing building and investment project businesses.The empirical case data, the results, and their analysis can be considered reliable, too. Somecounterarguments are herein posed like (i) “Could any other risk, inherent in another independentsource, emerge as “a rivaling risk?” and (ii) “Was the researcher afraid to challenge the dominantschool of thinking?” The answer is no. (ii) “What about the method used to assess the competenciesof the key managers?” and (iv) “Is it reliable to depend on cases which have (objectively) turned outto be total failures?” The answer is simple. In such failed cases, the insider researcher wouldprobably have defended himself and blamed others involved. Besides, the researcher’s biases couldbe avoided to a satisfactory extent: (i) The true attitude stemmed from his lifetime work and therecognized complexity of international business. (ii) He had gained an ample pre-understanding andhe obtained the additional data to create (iii) a better understanding of the phenomenon and (iv) somebetter tools to manage it. (v) His thinking was free (e.g. from an academic career). Instead, theresearcher tried to overcome his subjectivity by establishing the neutral hypotheses and theirthorough examination. He would not have gained or lost anything from a particular result.Based on the hypothesis testing, the two main findings in the focal context are as follows. (1) Theproven project RM methods can be applied effectively on the business level, which enables proactiverisk identification and early responses. (2) Major risks are inherent in key managers‟ competenciesvis-à-vis cross-cultural and contractual issues and such risks can be managed more effectively earlyon the business level. Some other interesting findings were also made, i.e. (a) the emerging theoryon risk as derived from uncertainty worked well and (b) the formal risk identification meant “Whatcan go wrong?” The product suppliers, when investing for growth, recognized also the opportunities,e.g. the synergies. (iii) Traditional RM is facilitated by clear objectives. Uncertainty managementmay be relied upon when objectives are fuzzy or unclear. (iv) A high rate of complexity increases248

potential consequences. Complexity reduction should be a means in fighting risks with potentiallynegative consequences. (v) The development of practical RM over time was reflected in the cases.The main contribution to practice calls for converting the hypotheses to beneficial, practicalactions, i.e. (i) the development of early risk and opportunity management (EROM) and (ii)competency management in the areas of major risks, by context. Risk identification, based on aforesight as part of EROM, allows for more effective RM. Potential big gains based on better RM areevident, e.g. the international turnover of the 225 largest international contractors was USD 390billion in 2008 (ENR, 2009). The findings are applicable to the cross-cultural contexts of manyinvestment project businesses, i.e. (i) a complex, cross-cultural investment project is one of its kind;from the EROM view, there are no major differences between methods used in e.g. construction,production, power plant, or ship-building. (ii) Dyadic Finnish vs. another ethnic, cross-culturalcontext can be applied to more contexts, as long as the element of cultural difference is present.ReferencesAhadzie D, Proverbs D and Olomolaiye P (2008) “Model for predicting the performance of projectmanagers at the construction phase of mass house building projects.” Journal of ConstructionEngineering and Management 134(8): 618-629.Alvesson M (1996) Communication, power, and organization. Berlin, de Gruyter.Brax J, ed. (2005) Internationalization of the Finnish construction industry. Report No. RIL 228-2005. Helsinki, Association of Finnish Civil Engineers (RIL). (in Finnish)Busch T (2005) Holistisches und probabilistisches Risikomanagement-Prozessmodell fuer projektorientierteUnternehmen der Bauwirtschaft. Doctoral thesis. Zurich, ETH. (in German).Coghlan D and Brannick T (2005) Doing action research in your own organization. London, Sage.DeLoach J (2000) Enterprise-wide risk management. Edinburgh, Pearson Education.Eden C and Huxham C (2006) “Researching organizations using action research.” In Clegg S R,Hardy C, Lawrence T B and Nord W R, eds., The Sage Handbook of Organization Studies. 2 nd ed.London, Sage: 388-408.Eisenhardt K M (1989) “Building theories from case study research.” Academy of ManagementReview 14(4): 532-550.Fisher T and Ranasinghe M (2000) “Culture and foreign companies‟ choice of entry mode: The caseof Singapore building and construction industry.” Construction Management and Economics 19: 343-353.Flanagan R and Norman G (1993) Risk management and construction. Oxford, Blackwell.249

Ford EW, Duncan J, Bedalar A, Ginter P, Rousculp M and Adams A (2003) “Mitigating risks, visiblehands, inevitable disasters, and soft variables.” Academy of Management Executive 17(1): 46-59Gummesson E (1991) Qualitative methods in management research. Newbury Park, Sage.Han S H and Diekmann J E (2001) “Approaches for making risk-based go/no-go decision forinternational projects.” Journal of Construction Engineering and Management 127(4): 300-308.Institution of Civil Engineers and The Actuarial Profession (1998/2005) Risk analysis andmanagement (RAMP) for projects. 1 st ed./2 nd ed.. London, Thomas Telford.Jha K and Devaya M (2008) “Modelling the risks faced by Indian construction companies assessinginternational projects.” Construction Management and Economics 26(2): 337-348.Johnson J, Lenartowicz T and Apud S (2006) “Cross-cultural competence in international business.”Journal of International Business Studies 37: 525-543.Langford D and Male S (2001) Strategic management in construction. 2 nd ed. Oxford, Blackwell.Langlo J, Olson N, Johansen A and Torp O (2007) “Uncertainty management in owner´sperspective.” Proceedings of 21 st IPMA World Congress. 18-21 June 2007, Cracow, Poland.Lewin K (1946) “Action research and minority problems.” Journal of Social Issues 2: 34-46.Lichtenberg S (2000) Proactive management of uncertainty using the successive principle - Apractical way to manage opportunities and risks. Copenhagen, Polyteknisk Press.Ling F, Ibbs C and Cuervo J (2005) “Entry and business strategies used by international architectural,engineering and construction firms in China.” Construction Management and Economics 23: 509-20.Loosemore M (2000) Crisis management in construction projects. ASCE Press.Ofori G (2003) “Frameworks for analyzing international construction.” Construction Managementand Economics 21: 379-391.Olson G and Olson J (2000) “Distance matters.” Human-Computer Interaction 15(2-3): 139-178.Onishi M, Omoto T and Kobayashi K (2002) Risk-sharing rule in project contracts. IEEE SMC.Kyoto, Kyoto University.Palojärvi L (1986) How to manage risks in construction export. Licentiate thesis. ConstructionEconomy and Management Publication No. 76. Espoo, TKK Helsinki University of Technology.250

Palojärvi L, Huovinen P and Kiiras J (2008) “Role of expert knowledge in managing risks in internationalgrowth projects of construction contractors and suppliers.” Proceedings of CIB W102 andW96 Conference on Performance and Knowledge Management. 2-4 June 2008. Helsinki, RIL: 2-13.Palojärvi L (2009) Managing risks in the international growth business of Finnish constructioncontractors and building product suppliers. Doctoral thesis. Structural Engineering and BuildingTechnology Dissertations No. TKK-R-DISS-3. Espoo, Helsinki University of Technology.Sanchez R and Heene A (1996) “A systems view of the firm in competence-based competition.” InSanchez R, Heene A and Thomas H, eds. (1996) Dynamics of competence-based competition.Oxford, Pergamon (Elsevier): 39-62.Shenhar A J and Dvir D (2004) How projects differ. Wiley.Usunier J-C (1998) International & cross-cultural management research. London, Sage.Yin R K (2003a) Applications of case study research. 2 nd ed. Thousand Oaks, Sage.Yin R K (2003b) Case study research – design and methods. 3 rd ed. Thousands Oaks, Sage.Yin R K, ed. (2004) Case study anthology. Thousand Oaks, Sage.251

Sensemaking in International Construction JointVenturesBrockmann, C.University of Applied Sciences Bremen, Germany(email: christian.brockmann@fbb.hs‐bremen.de)AbstractSensemaking is an essential activity of human beings. In international construction joint ventures itbecomes a management task to take responsibility for the process as it pertains to work. A successfulsensemaking process allows to define common goals, build an identity, and advance teamwork. Resultsof sensemaking are stored in the form of cognitive maps and can therefore be transferred fromproject to project. All this improves effectiveness. While a large body of theoretical work exists froma wide range of scientific perspectives, no empirical data have been presented for the case of internationalconstruction joint ventures. The presented data were obtained through ethnographic interviews,grounded theory, and case study research. Comparing theoretical concepts and empirical dataallows to confirm findings. Sensemaking itself is not a construct used by managers in internationalconstruction joint ventures but they use similar terms. A large number of activities are employed tomanage the sensemaking process. It is hampered by lack of structure, ambiguity, and insecurity at thebeginning of a project. While identity building is possible, it is not realistic to expect the developmentof a corporate culture because of the limited project duration. Most international constructionjoint ventures are formed to implement megaprojects. These are defined by their overwhelming complexity.Delegation of work becomes mandatory accompanied by an increase in coordination. Theopenly discussed goal of sensemaking management is the advancement of teamwork which in turnallows to reduce coordination efforts. In this way a high performance team can reduce complexity.Cognitive maps are implicit knowledge. Making them explicit through qualitative research allowsmanagers to better control the sensemaking process.Keywords: sensemaking, international construction joint ventures, cognitive maps, team building,effectiveness252

1. Introduction“The absence of sense is the horror of the existential nothingness. It is that subjective condition inwhich reality seems to recede or dissolve completely.” (Watzlawick 1967, p. 247, translation by author).Heidegger (1927) differentiates between Dasein which is independent of human awareness, andbeing as the world we are thrown into. Being exists only in the meaningful understanding of Dasein.Without a meaningful understanding – sense – of Dasein, we cannot answer the question of our existence(1927). Cassirer (1923/25) understands humans most of all as “symbolic animals” relying ontheir ability to make sense of symbols.Sensemaking is not only one of the basic problems of philosophy and here especially one of ontologyand epistemology, it is also a practical problem. The “Illiad” of Homer is foremost not an historicalaccount of a war but a grandiose design of world interpretation. Not only the old Greeks but all othercultures are based on their own mythology as a first approach to make sense of the human condition.Later the topic became prominent in different areas of science. Every textbook of psychology dealswith: biology underlying behaviour, sensation and perception, consciousness, learning, and intelligence(e.g. Feldman 1994). These are the individual components of sensemaking. Social componentsare treated in anthropology (Geertz 1973); Weber (1922) postulated the understanding of the meaningof actions as aim of sociology ; Weick (1995) researched sensemaking processes in organisations. Henames in his text (p. 67) another 55 “important resources for organizational sensemaking”.It is not a point of discussion whether sensemaking takes place in international construction jointventures (ICJVs) as in all other human endeavours, but rather what form it takes and how to deal withit.1.1 Basics of sensemakingSensemaking is used in two ways: (1) receptive decoding and (2) active encoding. As we watch actionsor communicate we have a number of alternatives for interpretation. The selection of one alternativein the process of decoding is the former type of sensemaking. The actor, on the other hands,wants to be understood in a specific way and tries to create (encode) sense (Mead 1934).Four assumptions underlie a definition of sensemaking:1. Human beings search continuously for sense.2. All individuals are capable to make sense.3. All individuals have been socialized and acquired a meaningful set of values and norms.4. Culture is a coherent system of values and norms.253

Luhmannian systems theory interprets the world as infinitely complex. In order to survive in such aworld we are forced to create systems with a reduced and manageable complexity. This selectionprocess is sensemaking. It is easy to make inadequate choices and therefore selection must be accompaniedby risk compensation mechanisms. This again requires a capability and willingness for adaptationand the whole process leads to learning, learning of how to make sense. Accordingly Luhmann(1971, p. 31, translation by author) defines: “The notion of sense is the structuring form of humanexperience.” In the same way but adapted to the topic of ICJVs, we will understand sensemaking:Sensemaking in ICJVs = (def.) Sensemaking refers to all interpersonal activities through whichmembers of an international construction joint venture try to structure their human experiences withinsuch an organization. The term “human experiences” includes work and relational aspects.1.2 Sensemaking in organizationsAccording to Weick (1995) there are six properties of sensemaking of which the seventh (identityconstruction) will be dealt with in chapter 3.2:1. Sensemaking is retrospective since it refers to interpersonal activities that necessarily arepassed once we reflect upon them (Hartshorne 1962). They must have been encoded previouslyfor us to decode or they must have been thought out to encode them.2. Sensemaking is enacted and this means that we create part of our environment as a social construction(Berger and Luckmann 1967).3. Sensemaking is social action and as such it is enacted by groups. This becomes already clearby the use of the sender/receiver model underlying the notions of en- and decoding. This is alsothe basic model of communication (Dainty et al. 2006).4. Sensemaking is continuous and this finds a parallel in hermeneutics where the model of thehermeneutical spiral is used to illustrate that all interpretations are based on the horizon of previouslyacquired knowledge (Gadamer 1960). There are no blank sheets. The horizon is thecontext in which sensemaking takes place.5. Sensemaking is extracted from cues and focussed by them. Accordingly, Smircich/Morgan(1982) define leadership as an activity to generate points of reference for sensemaking.6. Sensemaking is plausible and not exact because the processes of en- and decoding is not exactand neither is the ensuing whole of what makes sense.There are many parallels to the construct of communication. Communication is also continuouslyenacted social action based on cues and mostly not exact. However, communication takes place in thepresent. Starting from the sender/receiver model of communication (Dainty et al. 2006) we can builda model of sensemaking. A minimum of two individuals are enacting this process by communicating.The sensemaking process draws upon the en- and decoding that takes place continuously and within254

the context of the specific organization. Not all verbal or non-verbal information are taken as a cue.The result of sensemaking is a shared sense (idea) about the organization based on plausible cues(fig. 1). Since not everything that makes sense to one person also makes sense to another, there is alsoa realm that is not shared and of course there are other realms that do not belong to the organizationalcontext.Organizational ContextShared SenseAbout OrganizationConceptEncodingDecodingConceptNewConceptDecodingEncodingNewConceptSensemaking ProcessOrganizational ContextFigure 1: Sensemaking processThe sensemaking is negatively influenced by a number of factors (Büchel et al. 1998):1. Ambiguous or unclear situations2. Novel situations without structure3. Lack of group cohesion and acceptance of leaders4. Conflicts between the sensemaking process and own identity255

2. Research methodologyOnce the contract is signed for an ICJV, managers plan, organize, staff, direct and control them duringthe build up, main and dismantling phases. Then they move on to the next ICJV. It seems plausiblethat managers going through these repetitive cycles, perceive, interpret and evaluate their physical,social and institutional world by forming shared sense. Knowledge thus is produced by this groupand becomes intersubjective. This is a constructivist view of epistemology (Luckmann and Berger1967). This constructivist view matches well with the understanding that ICJVs form a specific culture.Weber (1949) strongly advocates that social and cultural research cannot follow the approach ofthe natural sciences, where laws suffice to describe a static environment following a directly observablecausality. A better approach is to discover phenomena as interpreted within the framework bythe members of the focal cultural group.Given this background and considering the additional fact that no research has previously been carriedout on sensemaking in ICJVs, we used ethnographic interviews (Spradley 1979) to gather data,grounded theory to evaluate (Strauss and Corbin 1998), and case studies to extract theory from thedata (Eisenhardt 1989). We conducted 35 interviews in Thailand and Taiwan, all of them in ICJVscomprising five different nationalities. An open questionnaire was used to receive comparable answersto some questions while still keeping the opportunities for the interviewees to develop theirown ideas. All the interviewees had experience as managers in at least one, and in the majority ofcases, in several ICJVs. They came from nine different national cultures and represented ten differentparent companies. The interviews lasted on average a little more than one hour. The study was a multiplecase design allowing for literal and theoretical replication. Additional sources besides the interviewswere documentations (project management handbooks), direct and participant observation (Yin2003).3. Sensemaking in ICJVsICJVs are mostly formed to implemented megaprojects. Since sensemaking is retrospective, thereexists in the beginning no shared sense with regard to a specific ICJV. The process is difficult becausemany people meet in an ICJV for the first time. In addition, they often come from differentnational and professional cultures.A model for ICJV-management is shown in figure 2 (Brockmann 2009). The model combines complexengineering tasks (organizational planning, design, work preparation, site installation, construction)with management functions (planning, organizing, staffing, directing, controlling), basic functions(project knowledge, trust, sensemaking, commitment), and meta-functions (decision making,communication, coordination, learning). These are influenced by Hofstede’s (2005) cultural dimensions(masculinity, long-term orientation, power distance, uncertainty avoidance, individualism) andthe complex environment. The fundamental point of the model is that each task, function, or dimensionmust be carefully considered for success and that many of them interact.256

Management functions (Management)Organizational planningDesignWork preparationSite installationConstructionBasic functions (Sociology)With regard to the basic functions it seems plausible to assume a strong interaction between sensemakingand the other three. A successful process will enhance project knowledge, trust and commitment.The same holds true for an interaction between sensemaking and the four meta-functions. Theinfluence of culture on sensemaking is evident because culture is being created by sensemaking. InICJVs there is a conflict of different systems of values, norms, and interpretations.The start of ICJVs for megaprojects is dominated by an overwhelming complexity (manifold interrelatedand consequential problems of decision making). There is no structure, plenty of ambiguity, nogroup cohesion, leadership is based on trust and not performance, and the starting sensemaking processmight well conflict with the identity of some or even most. This is the backdrop of the model.Meta-functions(Management)ICJVs in a complex environmentLearningCoordinationCommunicationDecision makingProject knowledgePlanningTrustOrganizingStaffingSensemakingDirectingControllingCommitmentComplex Tasks (Civil Engineering / CEM)MasculinityLong-termorientationPower distanceUncertaintyavoidanceIndividualismsCultural dimensions (Sociology)Figure 2: Sensemaking3.1 Cognitive maps in ICJVsA large number of people might meet in an ICJV for the first time without the benefits of prior cooperation.They still do have common experiences, many will have worked in a different ICJV before,on a different megaproject. The experiences are stored in mental programs. These help us structureand understand our world. They provide the basic layer in an ICJV for coordination, decision making,communication, learning and they are the result of sensemaking. We can describe them as cognitive257

maps. The American Psychological Association (van den Bos 2007, p. 190) defines cognitive maps as“a mental understanding of an environment, formed through trial and error as well as observation.The concept is based on the assumption that an individual seeks and collects contextual clues, suchas environmental relationships, rather than acting as a passive receptor of information needed toachieve a goal. Human beings and other animals have well developed cognitive maps that containspatial information enabling them to orient themselves and find their way in the real world; symbolismand meaning are also contained in such maps.” Cognitive maps contain information for decisionmaking in dynamic environments and gain as such utmost importance for ICJV management. Cognitivemaps store the result of sensemaking from previous experiences. They provide for learningacross the borders of projects. It can be shown that the maelstrom of megaproject experiences inICJVs leaves rather uniform cognitive maps embossed in the minds of managers. These are a concretemanifestation of the construct “shared sense” in figure 1. Figure 4 is a representation of a cognitivemap of managers for sensemaking. Maps are man-made, they are plausible but not exact, andthey are subject to change. There are maps for different purposes and of different scale.3.2 Shared sense in ICJVsSensemaking supports the process of identity building and thus fulfils a human need (Ring and van deVen 1989). Identity is a concept for understanding ourselves, it answers the dynamic question of whowe are. As such it has an individualistic as well as a group aspect.At the start of an ICJV, the managers come together with their individual self perceptions. They alsoshare somewhat an idea of what it means to be involved in an ICJV implementing a mega-project inthe form of cognitive maps. However, the entity “ICJV” itself has absolutely no identity, its cognitivecomplexity is close to zero. This lack of identity manifests itself in numerous discussions and rumoursas an ongoing process of sensemaking and identity creation. From the viewpoint of encoding amessage we can understand an organizational identity as a self-portrayal based on the signals that aresent by its behaviour, communication, and symbolism (van Rekom et al. 1991). With effort at sensemakingand over time an identity can develop into an organizational culture. Unfortunately, ICJVs donot have this time (fig. 3). Thus, the normative goal for ICJVs is to develop as strong an identity aspossible.SensemakingShared sensecognitive mapsIdentityCultureTime258

Figure 3: Shared sense – identity – culture3.3 Empirical evidenceNot one of the managers ever used the word sensemaking in the interviews, the construct itself is notone shared by them. However, they employ different words and concepts to convey the same ideas,one of them being identity building, i.e. the notion of a possible outcome of the sensemaking process.The interviews were conducted and transcribed by Brockmann (2007, pp. 462-467). Having thechoice between an exact transcription and good English, the former was favoured. This avoids tamperingwith data and adds authenticity. Unfortunately, it sometimes obscures the statements.Sensemaking is concerned with creating a cohesion. This is understood and it is clearly expressedusing terms like “same understanding” and “one language”: “The project have to, everyone in theproject should have the same idea, should have the same understanding. Should have the same procedure.”Or: “Yeah, leadership, I think, you know, I think, I can mention this here, you know, when Icame here to this project, there were a lot of experts, but there was missing a little bit the combination,the teamwork. Everybody was working and, you know, was trying his best, but there was missingthe combined achievement of the target. This had to be sorted out very well and also, you know, thereis very important, first of all that the joint venture partners are speaking one language, let’s say, ...”In agreement with theory there is an understanding of barriers to the sensemaking process: “In thebeginning there was a lot of uncertainty and this was quite ambitious here to get this progress and soon, so on. The German side of the joint venture was always saying: Well, we can achieve this andthen the Taiwanese side was a bit skeptic.”Every ICJV starts with some imperative goals and these are laid down in the contract. Among themare a product definition, a budget, and a stipulated construction time. This focuses sensemaking byproviding some unambiguous cues. It remains the task to develop additional shared goals for theICJV: “I don’t know exactly the tell you, but only my opinion. If I be, I would like to ask all togetherfrom beginning and discuss and open mind, discuss what is goal of all of us, everyone have any question,and then we tuning up all together in the same, in the same thing. And then we go together.” Theprocess is not easy because everybody comes with different ideas to the ICJV: “I don’t think so. Veryfew people have the same idea.” It is the task of management to create a shared understanding and theuse of hierarchy is one possible way of implementation: “Not right from the very beginning. At thebeginning there were, of course, a lot of people that thought that certain rules and regulations, whichwe implemented were not right or were not correct, or not the best. But we just ignored them. We justsaid, this is the way we have to do it. Like I said earlier, you have make sure that everybody on theproject understands what the goal is, what the rules and regulation are, and whether he likes it ornot, but he has to follow. And pretty much everybody tried to follow. Some didn’t like it up to the veryend, but that’s fine.” This quotation does not refer to sensemaking for supporting the adaptationprocess but the following does so stressing management responsibility: “Oh, that’s the expertise ofthe senior management, in each of the, and I say in each of the departments. The upper management259

has to set the goals and procedures to put the organization in place, put procedures in place for theline managers to work to. And then there has to be an education process and in some ways a controlprocess in place to make sure that what’s happening in the joint venture is, what the joint venture hasdecided and that you don’t have one section of the company following the procedures and policies ofone partner and the other section of the joint venture following the procedures and policies of theother partner. So it’s a management skill, but you have to do it very quickly and you have to developyour procedures and your policies, the blending with the beliefs of both partners and then put theminto operation and insist that the joint venture operates to those.”While common goals are developed, it is impossible to fine tune the agreement on goals but this isnot a major concern: “The normal situation is always, wherever you work, that all your people, theymay have one big goal, but this is affected by many small individual goals, every worker, every staffhave, they have also individual goals. As long as they go in the same direction than the goal of thecompany is alright, but there is always a slight difference in the direction.”Sensemaking in ICJVs is supported by communication and making get-togethers possible : “Well, youwork together, you drink together and party together. It is also part of, you have to have a Christmasparty, whatever way you get everybody together. Some people only can complain after they drinkthree beers. So you give them three beers to get their complaints, otherwise you never know. Youhave to play football against another team, we had baseball . There are frequent official and unofficialmeetings to provide a chance for sensemaking: “Well, technically we have several meetings, likethe project control meetings every month. I have meetings in between, so at various levels, but alwaystogether with the project management, this is important, and then we have other means like Christmasparties, birthday parties, whatsoever. It’s a mix of the pure management and also the other sideof life, yeah.”The outcome of the sensemaking process is the build-up of an identity with the ICJV: “They shouldhave their identity, they should say, yes, we are working for this joint venture.” Or: “I think as anidentity in the sense that there is a pride and a satisfaction of being associated with a successful jointventure, and therefore they are identified being part of [name of ICJV] because especially when theyare talking to other people in the industry that this project is recognized as being successful and theylike to feel to be part of it.” However identity building is not easy and definitely short of ideal: “Yeah,that’s what I like doing, but I feel it’s very difficult, we had it amongst the senior staff, knowing themfor years or being more loyal to the company, coming from the home office. But if you have twentyeightnationalities and two thirds, I don’t know what the numbers are, are hired on the streets youcannot expect that identity. These peoples just have their jobs.“ The progress from identification tosomething similar to a culture can be possible even in relatively short-lived projects: „I think we havea high identification in the joint venture, for all our nationalities. We have more than twenty nationalitieshere, working here so and then you can feel, you can see that, if you meet families of them orfriends who are not related to the project, you hear, oh, yes, they are quite proud. Of course, youdefine almost every day new goals and they are also defined in the teams, working for the wholeproject. It’s not like that I command every day, so, this is a new target, and everybody has to followthat. There is some culture developing and this depends on the people and if you have chosen theright people in the respective positions and you exchange ideas with them quite often, so you, and the260

teamwork and I think the keyword on this project was really the teamwork.” A definite corporateculture cannot develop because of the time restrictions of ICJVs: “I don’t even know what a jointventure culture is because they are never in place long enough. Your corporate culture of a companydevelops over a very long period joint ventures as a fully operational joint venture is rarely in placemore than three years.”The goal of developing common goals and identity building is to improve teamwork: “As I tried toexplain before, you know, we tried to have a team, where the professionalism is there, and the teamworkand I think the keyword on this project was really the teamwork.”4. ConclusionThe interviewees never used the term “sensemaking”. This is the theoretically chosen construct tosum up all the ideas uttered by the managers in ICJVs.Theory and empirical data allow to put together a model of sensemaking in ICJVs. Helpful is thecontract with the stipulated obligations that form a first set of accepted goals. The lack of structure,ambiguity of tasks and personal insecurity are some typical noise that makes sensemaking difficult.The goal of the sensemaking process is to create a high performance team and thus become moreeffective. Mentioned components of high performance teams are the development of additional commongoals and identity building. The sensemaking process is managed using different opportunities:personal communication, formal and informal meetings, celebrations, events, and intranet. In an abstractway, sensemaking reduces complexity because it reduces the high degree of diversity that characterizesespecially the beginning of ICJVs (cf. fig. 4).EffectivenessDevelopment ofcommon goalsTeambuildingIdentitybuildingPersonalcommunicationFormalmeetings CelebrationsReducedcomplexityInformalmeetingsEventsIntranetSensemakingNo structure(noise)Insecurity(noise)Ambiguity(noise)Accepted goalsCognitive map of sensemaking in ICJVsFigure 4:261

ReferencesBerger P and Luckmann T (1967) The Social Construction of Reality: A treatise in the Sociology ofKnowledge, Garden City, Anchor Books.Brockmann C (2007) Erfolgsfaktoren von Internationalen Construction Joint Ventures inSüdostasien, Zürich, Eigenverlag des IBB an der ETH Zürich.Brockmann C (2009) Megaprojects: Getting the Job Done, Proceedings of the LEAD2009 Conference,Lake Tahoe.Büchel B, Prange C, Probst G and Rühling C (1998) International Joint Venture Management:Learning to Cooperate and Cooperating to Learn, Singapore, Wiley.Cassirer E (1923) Philosophie der symbolischen Formen. Erster Teil: Die Sprache, Berlin, BrunoCassirer: Translated as The Philosophy of Symbolic Forms. Volume One: Language, New Haven,Yale University Press, 1955.Cassirer E (1925) Philosophie der symbolischen Formen. Zweiter Teil: Das mythische Denken,Berlin: Bruno Cassirer. Translated as The Philosophy of Symbolic Forms, Volume Two: MythicalThought, New Haven, Yale University Press, 1955.Dainty A, Moore D and Murray M (2006). Communication in Construction: Theory and Practice,London, Taylor & Francis.Eisenhardt K (1989) Building Theories from Case Study Research, Academy of Management Review14 (4): 532 – 550.Feldman R (1994) Essentials of Understanding Psychology, New York, McGraw Hill.Gadamer H (1960) Wahrheit und Methode, Tübingen, Niemeyer. Translated as: Truth and Method,London, Continuum, 2006.Geertz C (1973) The Interpretation of Cultures, New York, Basic Books.Hartshorne C (1962) Mind as Memory and Creative Love. In: Scher, Theories of the Mind, NewYork, Free Press.Heidegger, M (1927) Sein und Zeit, Tübingen, Max Niemeyer, 2001. Translated as Being and Time,Oxford, Blackwell, 1993.Hofstede G and Hofstede G (2005) Cultures and organizations: Software of the Mind, New York,McGraw Hill.262

Luhmann N (1971) Sinn als Grundbegriff der Soziologie, in: Habermas /Luhmann, Theorie derGesellschaft oder Sozialtechnologie, Frankfurt a.M., Suhrkamp: 25 - 100Mead G (1934) Mind, Self, and Society: From the Standpoint of a Social Behaviorist, Chicago, Universityof Chicago Press, 1967.Ring P and van de Ven A (1989) Sensemaking, Understanding, and Commitment: Emergent InterpersonalTransaction Processes in the Evolution of 3M’s Microgravity Research Program, in: van deVen/Angle/Poole, Research on the Management of Innovation: The Minnesota Studies, New York,Ballinger: 171-192.Smircich L and Morgan G (1982) “Leadership: The Management of Meaning”, Journal of AppliedBehavioral Science 18 (3): 257 –273.Spradley J (1979) The Ethnographic Interview, Belmont, Wadsworth Group.Strauss A and Corbin J (1998) Basics of Qualitative Research: Techniques and Procedures for DevelopingGrounded Theory, Thousand Oaks, Sage.Van den Bos G (ed.) (2007) APA Dictionary of Psychology, Washington, American PsychologicalAssociation: 190.Van Rekom J, van Riel C and Wierenga B (1991) Corporate Identity: Vaan Vaag Concept naar HardFeitenmateriaal, Working Paper, Corporate Communication Centre, Erasmus University Rotterdam.Watzlawick P, Beavin J and Jackson D (1990) Menschliche Kommunikation: Formen, Störungen,Paradoxien, Bern, Hans Huber. Original: Pragmatics of Human Communication, New York, Norton,1967.Weber M (1922) Wirtschaft und Gesellschaft: Grundriss der verstehenden Soziologie, Tübingen,Mohr-Siebeck, 2002. Translated as: Economy and Society: An Outline of Interpretive Sociology, Vol.1 and 2, Berkeley, University of California Press.Weber M (1949) The Methodology of the Social Sciences, New York, Free Press.Weick K (1995) Sensemaking in Organizations, Thousand Oaks, Sage.Yin R (2003) Case Study Research: Design and Methods, Thousand Oaks, Sage.263

Risk Management on a Major Property DevelopmentProject in New ZealandQu, J.Unitec New Zealand(email: jboon@unitec.ac.nz)Boon, J.Unitec New Zealand, New Zealand(email: jboon@unitec.ac.nz)AbstractThe development of a commercial investment property such as a large office block often involves alengthy process which may extend for 5 – 8 years from inception to completion. Over that time therisk profile of the development may change due to changes in the economy or with technology. It istherefore useful to ask how the risks that arise from the long term nature of such developments canbe managed. This paper presents a case study of an office block in Auckland, New Zealand with afocus on these risk management issues. It was found that the case project was managed by breakinginto phases much as the literature suggests. A major component of the developers risk managementstrategy was to negotiate with the principal tenant and landowner (a bank) for a period of over fouryears. At the end of this period the developer had either eliminated or reduced to an acceptable levelall major risks. Only at that point did the developer finally commit to the project. The project alsodemonstrated a clear use of review points and decision gates as a means of exercising projectgovernance and risk control. The arrival in the market of a green star rating system and technologyresulted in a late decision to change the building design to achieve a five star ratingKeywords: property development, risk management, project governance.264

1. IntroductionThe development of a commercial investment property such as a large office block often involves alengthy process which may extend for 5 – 8 years from inception to completion. Over that time therisk profile of the development may change due to changes in the economy or with technology.Developments of this nature completed in 2009 were initiated in a period of economic boom butdelivered into the market post the global economic collapse in 2007. In addition over the period oftheir development significant advances have been made in the design and assessment of greenbuildings and with that market perceptions of the desirability of green buildings as investments. It istherefore useful to ask how the risks that arise from the long term nature of such developments can bemanaged. This paper presents a case study of an office block in Auckland New Zealand with a focuson these risk management issues.2. Literature ReviewThe literature review conducted prior to the collection of the case study data looked firstly theproperty development process, then the risks involved in property development and finally at theprocess of managing risks.2.1 Property development processThe literature generally describes the property development process as a phased process with authorsvarying in the number of phases and sub-phases. Byrne and Cadman (1984) take a simplisticapproach breaking the process into three parts, acquisition, production and disposal. Cadman andAustin (1978) have a slightly more complex approach which acknowledges better the strategising andinvestigation that is undertaken at the outset of the process. They have four phases, evaluation,preparation, implementation and disposal. Ashworth (2002) develops thinking further with a fivephase approach which acknowledges the full life cycle of the building by including occupation anddemolition phases. Ashworth also breaks the phases into parts so that within the inception phase heincludes appraisal, strategic briefing and feasibility & viability. Similarly the design phasebreakdown acknowledges that the design is taken through a number of proposal iterations beforedeveloped design and production information is produced. Many authors including Ashworth makereference to the RIBA Plan of Work which in its 2007 version has five main work stages, preparation,design, preconstruction, construction and use. These work stages are then broken down into elevensub-stages. Particularly useful for the purposes of this paper are the division of the preparation stageinto appraisal and design brief and the design stage into concept, design development and technicaldesign. However whilst the RIB Plan of Work (2007) provides an authoritative outline of the processto design and construct a building it does not concern itself with other aspects of commercial propertydevelopment such finding tenants for the building, finding an investor to purchase the completeddevelopment nor the issues in obtaining funding for the development. The UK Office of GovernmentCommerce (OGC) (2007) follows the RIBA Plan of Work but goes further in defining the control265

mechanisms within the process by establishing a series of “decision gateways”. At each of thesegateways the project must be reviewed and receive formal approval before proceeding further. Miles,Berens and Weiss (2000) offer an eight stage model with more emphasis on the development andtesting of the basic proposal (3 stages) as well as recognition of the ongoing asset managementactivity on completion of the development. Whiteside (1993) goes into the most detail with a fourteenstage model which extends beyond the RIBA Plan of Work in recognising the extent of pre-designinvestigation (five stages) as well as the financing, leasing and sale activities of entrepreneurialproperty development.2.2 Risk factors in property developmentThe literature recognises that property development is an inherently risky business. Flanagan andNorman (2000) distinguish between pure risk where there is no potential for gain (such as an accidentor technical failure) and speculative risk where there is potential for both loss and gain (such asmovement in price levels in the property market).Extensive lists of risks can be derived from many authors such as Harvard (2008), Cadman andAustin (1978) Millington and Anderson (2007) and Newell and Steglick (2007). However Byrne1996 usefully puts property development risk into three categories, Acquisition (the risks associatedwith acquiring the right piece of land and planning approvals) Production (the design andconstruction of the development) and Disposal (leasing and selling the completed development).2.3 Risk management processThere are well established standards for risk management processes, the Australia/ New Zealandstandard AS/NZS 4360: 2004 is similar to most international standards and advocates a steppedprocess of: establish the context, identify risks, analyse risks (including determining consequencesand likelihood) evaluate risks, treat risks and monitor and review. The Project ManagementInstitute’s PMBOK Guide (2004) has a similar approach with the following steps: risk managementplanning, risk identification, qualitative risk analysis, quantitative risk analysis, risk monitoring andcontrol. Flanagan and Norman (2002) and Sadgrove (2005) both advocate similar processes.Various techniques are advocated for identifying risks, AS/NZS 4360: 2004 lists, “checklists,judgements based on experience and records, flow charts, brainstorming, systems analysis, scenarioanalysis and systems engineering techniques” (p16). PMBOK (2004) has a similar list.Risk quantification is dealt with extensively in the literature with recognition that both qualitative andquantitative techniques are needed. The need to quantify both sensitivity (consequences) andprobability (likelihood) is generally accepted and recommended by both AS/NZ 4360:2004 andPMBOK (2004). Some authors advocate advanced mathematical modelling techniques such as MonteCarlo simulation (e.g. Flanagan and Norman 2000). Suggestions regarding the presentation of riskanalysis most typically propose a matrix showing the risk event together with its probability and266

sensitivity. (e.g. OGC 2004) Sometimes probability and sensitivity are shown as a score out of 5(or10) and then multiplied to produce a total score, this is advocated by Harrison & Lock 2004. Otherauthors such as Flanagan and Norman advocate the use of spider diagrams.Within the literature risk treatment options are typically grouped under a limited number of headingssuch as, avoid, transfer and mitigate (PMBOK 2004) or avoidance, reduction, transfer and retention(OGC 2007).Most authors such as Sadgrove (2005) and PMBOK (2004) recommend that risk managementdecisions be recorded in a “risk register” and be subject to ongoing monitoring and review withoutbeing specific about how such monitoring and review is to be conducted. However OGC (2007) doesprovide useful guidance that risks should be formally reviewed at the decision gate events describedabove and the project not being allowed to proceed to its next phase until all risks are satisfactorilyunder control. OGC (2004) also make clear recommendations regarding the need for a “riskallowance” in the budget to cover the potential financial impact of risks that the client has retained.More recent literature such as Haimes (2009) and McIndoe (2009) argue that risks aremultidimensional and nuanced and as such a systems based approach looking at the resilience of thewhole organisation is needed. Such an approach needs to prepare the organisation to be resilient to awide spectrum of major risks including IT failure, pandemics and global economic crises.3. Research methodologyThe data for this case study was assembled firstly by collecting publicly available information frompress reports, websites etc on both the project and the environment within which it was carried out, aswell as direct observation of the projects progress. Then members of the project team and themanaging director of the development company were interviewed. Interviews were of a semistructured nature that focussed firstly on the progression of the development and how that wasmanaged, then specifically on risks as perceived by the property development team and how thoserisks were managed.4. The case study4.1 The contextThe office development that is the subject of this case study was initiated in 2002 and completed foroccupancy in late 2009. It is located in the central business district of Auckland New Zealand.The Auckland region has a population of approximately 1.3m (2006 census) which is about one thirdof the total population of New Zealand. It is the largest city in New Zealand and the principalcommercial centre. Its significance as the principal commercial centre has grown progressively over267

the last three decades. Auckland currently has a population growth rate of approximately 2.5% (ARC2007) arising from, natural growth and internal and external migration.Auckland’s growth in the post war period has occurred firstly within a national economic regime thatuntil 1984 provided protection to local industry through import controls and encouragement to exportthrough tax incentives. However since 1984 a liberal economic management regime has existed withfew controls or restrictions. In the 2009 Heritage Foundation / Wall Street Journal survey NewZealand was rated fifth out of 179 countries surveyed for economic freedom. It is also substantiallyfree from corruption with a score of 94% in the same survey which notes that TransparencyInternational ranked New Zealand first in its Corruption Perception Index for 2007.At the time of inception of the project New Zealand was experiencing positive economic growth, thiscontinued through to 2007 when the economy went into decline as part of the global economiccollapse.Source National Bank Quarterly Economic Forecast October 2009In line with the overall economy returns on property investment (both income return and capitalgrowth) were also positive through to the end of 2008 when capital growth turned negative.Source IDP/PCNZ June 2009268

Office face rents grew through the period to peak in 2007. By late 2009 they had fallen about 8% onnew leases. In addition the practice of offering new tenants incentives such as rent holiday and fit outallowances had also increased (Colliers 2009). However rents on existing leases had not fallen asthey are generally prevented from doing so by ratchet clauses.A number of other office buildings in the CBD were also developed during the period all of whichwere substantially leased by the time of completion with one exception. The exception is a fullyrefurbished office building of approximately 14,500m 2 which was redeveloped in the period 2006 –2009 and is currently unleased.Overall vacancy rates declined from about 14% at the start of the period to a low of 5% in 2007 andthen rose to about 8% in late 2009 (Colliers 2009).4.2 Green buildingsSignificant interest in green Buildings emerged later in New Zealand than in Europe. The NewZealand Green Building Council was not formed until 2005 and published its Green Star office ratingsystem in 2007. However most CBD office buildings reaching the market in 2008 / 2009 were GreenStar rated.4.3 The projectThe case study project is a 25 storey office building with retail at ground level and basement parking.Net lettable area is approximately 22,000m 2 of offices, 1,000m 2 retail and 180 car parks. It is locatedin Queen St the main street of the Auckland CBD.Prior to development the site was occupied by an early 80’s office building used as bank offices witha 1930’s art-deco building at the rear of the site which had been used as a post office. The site wasowned and occupied by a major trading bank (the bank).4.3.1 The partiesIn 2002 the bank decided it wished to consolidate its Auckland operations onto one site and that inorder to achieve this it should redevelop the case study site. After scoping options the bank enteredinto negotiations with an Australian headquartered developer (the developer) with a view todeveloping the site as a joint venture. The developer had established operations in New Zealand overthe previous five years which included, development, construction, investment and managementactivities. A memo of understanding was signed between the two parties towards the end of 2003.This memo served as the basis for the parties working together to evolve the development. A finaldevelopment agreement was not signed until August 2006 a month before construction commenced.269

4.3.2 Project phasingFrom the developers perspective the project was phased in a manner similar to that found in theliterature as shown below.4.3.3 Project managementThe project was managed by the developer through a project control group (PCG) chaired by adevelopment manager. Membership of the PCG changed over time as the project evolved. Initially itcomprised representatives of the developer and the bank and then grew to include representatives ofthe construction division, the design team and the major non-bank tenant.4.3.4 Leasing and sellingThe initial concept for the project was a regional headquarters for the Bank. However thedevelopment potential for the site within the District Plan (zoning regulations) allowed for a buildingthat was almost twice the size of the banks requirements. By the time the Development Agreementwas signed in August 2006 negotiations had progresses to the point where the basis of the agreementwas that the developer would purchase the site from the bank and develop the building. The bankagreed to lease 60% of the floor area and take the naming rights.Negotiations to lease the remainder of the building took place in 2007 (during the first year ofconstruction). As a result of those negotiations, the bank reduced its commitment to 55% and gaveup naming rights. A major accounting firm committed to leasing the upper 45% of the building andto take the naming rights. Ground floor retail not required by the bank was leased to a third party.270

At the time of signing the Development Agreement the developer decided to hold open the option ofselling the building or retaining it in their own investment portfolio. In 2008 they put thedevelopment on the market for sale but were unable to achieve a sale at a satisfactory price level.4.3.5 Risk managementDuring the inception phase of the project the developer perceived their major risks to be:Leasing the building beyond the banks commitmentProject takeout – either sale or transfer to one of their own investment portfolios, of thebuilding at a level that would produce a satisfactory development profit.Project funding – obtaining the required funds to carry out the development at a satisfactoryprice.Design and construction risks – getting the building built to a design that met leasing andsales obligations on time and to budget.During the inception stage detailed financial feasibility studies were produced which enabledsensitivity studies to be conducted. Within the feasibility studies contingency sums wereincorporated for risk items such as tenant incentives and design risk. These sums were arrived at byjudgements based on experience.Risk management was exercised at two levels. At the higher level it was controlled by the developers“Development Investment Risk Committee” (DIRC). This comprised the group chief executiveofficer, divisional managing director, group general counsel and chief financial officer. DIRC heldresponsibility for reviewing and approving the project proceeding (or not proceeding) at each majormilestone. Those milestones included, the original memo of understanding, major design milestones,the development agreement, major construction contracts, major lease agreements and majorvariations to contracts. At the second level month by month risk management was exercised by thePCG who maintained and reviewed a risk register as part of their monthly meeting process.4.4 Management of specific risks4.4.1 LeasingAfter negotiations had progressed to the point where it was understood that the development wouldbe done entirely by the developer (rather than as a joint venture) the developer formed the view thatthey would be unwilling to proceed unless they had a lease commitment for a minimum of 60% of thespace. This threshold met their own internal risk management requirements and those of potentialfunders, as it would provide the cashflow needed at completion of the project to service development271

loans if the project was not sold on completion. It also would make the project more attractive topotential purchasers.In order to ensure the project proceeded the bank undertook to lease that level of space despite itexceeding their requirements. Their intention was to then sub-lease the surplus space beforecompletion of the project. However the bank was able to reduce some of its commitment whennegotiations were completed with the accounting firm to take 45% of the space together with namingrights some fifteen months after the development agreement was signed.4.4.2 Project takeoutAs indicated above the developer retained this risk at the time of signing the development agreement.In 2008 they attempted to sell the development but were unsuccessful and have consequentiallyretained the building. Whilst information on this specific building is not available, Property Councilof New Zealand (2009) data shows that capital values have declined by 6.9% since the peak of themarket in 2007.4.4.3 Project FundingBecause the minimum leasing threshold as described above was achieved as part of the developmentagreement the developer was able to provide potential funders with certainty of cashflow to servicedevelopment loans on completion of the project. In addition the project financial feasibility studiesdemonstrated that the project met funders other criteria such a profit margins. Obtaining project fundswas therefore not a problem.4.4.4 Design and construction risksDesign and construction risks were substantially passed to the developer’s construction division bynegotiation during the inception phase and by formal contract at the time of signing the developmentagreement. However not all risks were passed.Immediately prior to the signing of the development agreement the developer took the decision inprinciple that the building should have a five star green building rating. This was largely driven by adesire to ensure the building would be competitive in the market place in the long term and to meetthe needs of the accounting firm tenant. Changes to the design and final commitment to the additionalcosts were not confirmed and signed off by DIRC until a year later in October 2007. However somework to achieve the green star rating was implemented before final sign off. For instance therecovery and recycling of demolition material and adjustments to the structure to incorporate doubleskin cladding on the west face. The costs of the changes to meet the green star requirements werecovered by contingency sums built into the financial feasibility before the development agreementwas approved by DIRC.The developer also retained the risks associated with unforeseen ground conditions and inclementweather. Delays for these reasons did eventuate and amounted to about one hundred days. The272

contractor mitigated some of this delay through accelerating the tower construction by using a secondcrane, nevertheless some delay and expense was experienced.4.4.5 Heritage issuesAlthough not seen as a significant issue at the outset of the project the art – deco building at the rearof the site did provide difficulties during the planning consent stage. The City Council deemed thatthe façade of the building together with some interior elements were of historical significance.Through a process of negotiation which took over a year it was agreed that the façade would beretained and that some interior elements adjacent to the facade (particularly ceiling details) would bereplicated in the new building. This added cost to the development and compromised the floor toceiling height of the podium floors. It also caused a significant delay in the design phase of theproject. However this issue was fully resolved and all impacts understood at the time of signing thedevelopment agreement.5. ConclusionsThe case study in many ways reinforces the findings of the literature review but also providesadditional insights into risk management on this type of project.The project was managed through a series of well defined phases much as described in the literature.In the case study risk management is an integrated part of the management of the project rather than aseparate stream of management as the literature tends to imply.In this case there was less emphasis on risk quantification than suggested in much of the literature.Those interviewed were of the view that they understood the risks and did not need furtherquantification. For instance the risk of not having secured the cash flow that comes from leasing theproperty is so large that had to be brought under control before the developer was willing to proceed.Having detailed quantification of probability and sensitivity would not have altered the requiredmanagement action.The use of contingency sums as allowances for retained risks appears to follow the recommendationsin the literature and to have worked in a satisfactory manner. However the theoretical underpinningof the risk allowances appears weak, relying solely on judgement based on experience.With regard to the risks on this type of development of changes in technology the case does providean illustration of the nature of the risk with the decision to implement design changes to incorporategreen building technology at the start of the construction phase some three years into the project butalso three years before building completion. It also illustrates the practical difficulty of managingsuch changes with work being implemented before final sign off by DIRC.The observed practice in the case is clearer than most of the literature in the use of decision gates atcritical points. At these points the project and its risks were reviewed and decisions made to either273

allow the project to proceed further, require further work before proceeding further or potentially tohalt the project. The two tier structure used for risk management makes this practice clearer with theDIRC exercising a governance role at these decision gate points and the PCG a continuous projectmanagement role between decision gates.The other insight into the practice of risk management that the case provides is in the lengthy periodof negotiation and the amount of work that was done before the developer finally committed toproceeding with the project. Negotiations between the developer and bank started in early 2003 andthe memorandum of understanding was signed at the end of that year. However the developer did notfinally commit to the project until they signed the development agreement in August 2006 more thanthree years later. In the intervening period the design had been substantially completed and risksregarding planning approval, construction costs, funding and tenant commitment had been eithereliminated or substantially reduced. Although by that time the developer had committed significantexpenditure in design and legal fees, given the size of their organisation they could have absorbedthose costs if the DIRC had decided not to proceed and sign the development agreement. The processof negotiating over a period of three years until risks were reduced to an acceptable level was themajor component of the developers risk management strategy.The one risk that was not under control at the time of signing the development agreement was the endvalue (sale or transfer price) of the project. The developer potentially could have eliminated this riskby negotiating a sale to a third party before finalising the development agreement but chose not to doso. This risk is in Flanagan & Norman’s (2000) terms a speculative risk, the developer had thepotential to gain if property prices continued to increase during the construction period or loose ifthey fell. DIRC was prepared to take that risk (with a view to the potential gain) because the leasecommitment from the bank provided certainty that a cashflow was available to service the loansneeded to execute the project once the project was completed. As things currently stand at thebeginning of 2010 the value of the project is less than that anticipated and the potential benefits oftaking the speculative risks have not been realised.This situation of the exposure to the risk of the value and timing of the sale of the project, to someextent illustrates the issue of organisational resilience found in the literature. The global economiccollapse in 2007 not only caused problems to this project but would also have caused problems to allprojects to which the developer had similar risk exposure. In fact this project was the only majorproperty development that the developer was involved with in NZ. The developer appears to haveappropriate mechanisms to assess issues of organisational resilience to this type of risk by dealingwith all major risks through a single board level committee the DIRC.ReferencesAS/NZS 4360: 2004 Risk Management (3rd ed.). Sydney and Wellington: Standards AustraliaInternational Ltd. & Standards New Zealand.Ashworth, A. (2002). Pre-Contract Studies: Development Economics, Tendering & Estimating (2ed.).Oxford: Blackwell Science Ltd.274

Byrne, P., & Cadman, D. (1984). Risks, Uncertainty and Decision-making in Property Development(1st ed.). London: E. & F. N. Spon Ltd.Cadman, D., & Austin-crowe, L. (1978). Property Development (1st ed.). London: E.&F.N Spon Ltd.Colliers (2009) New Zealand CBD Office Report Quarter 4 2009. Colliers International. Auckland.Flanagan, R., & Norman, G. (2000). Risk Management and Construction (1st. ed.). Oxford:Blackwell Science Ltd.Haimes. Yacov Y. (2009) On the Complex Definition of Risk: A Systems Based Approach. RiskAnalysis: An International Journal Vol 29 Issue 12.Harrison, F., & Lock, D. (2004). Advanced Project Management: a Structured Approach (4th ed.):Gower Publishing.Havard, T. (2008). Contemporary Property Development (2ed ). London: RIBA Publication.Heritage Foundation: 2009 “Heritage Foundation / Wall Street Journal Survey of EconomicFreedom” www.heritage.org/index/country/newzealand downloaded 14.01.09.IDP / PCNZ (2009). Property Investment Performance Index June 2009. Property Council of NewZealand. Auckland.McIndoe B. (2009) A Decade of Risk Management; Risk Management Vol 56 Issue 10.Miles, M. E., Berens, G., & Weiss, M. A. (2000). Real Estate Development: Principles and Process(3rd ed.). Washington: Urban Land Institute.Newell, G., & Steglick, M. (2007). Assessing the Importance of Property Development Risk Factors.Sydney: University of Western Sydney.PMBOK (2004). A Guide to the Project Management Body of Knowledge: American NationalStandard (3rd ed.). Newtown: Project Management Institute.RIBA (2007)Outline Plan of Work London: Royal Institute of British Architects.Sadgrove, K. (2005). The Complete Guide to Business Risk Management (2ed.). Aldershot: GowerPublishing Limited.Whiteside. (1993). Developers and The Property Development Process. New South Wales: TheHeritage Council of NSW. http://www.heritage.nsw.gov.au/docs/economics_partb2.pdf275

Checking the Healthiness of Commitment Profilefrom Its Prediction of BurnoutJia, Y.The University of Hong Kong,Hong Kong(email: yunyanbright@gmail.com)Rowlinson, S.The University of Hong Kong, Hong Kong,(email: steverowlinson@hku.hk)Kvan,T.University of Melbourne, Australia(email: t.kvan@unimelb.edu.au)Lingard, H.RMIT University, Australia,(email: helen.lingard@rmit.edu.au)Yip, B.The University of Hong Kong,Hong Kong(email: brenda@hku.hk)AbstractThis paper examines the commitment profiles of Hong Kong Chinese architecture studentswith the 3-factor model of professional commitment and its impact on burnout. The Chineseversion of Maslach Burnout Inventory – Student Survey and adapted version of OccupationalCommitment Questionnaire are administered to measure burnout and commitment profile.Multiple regression models are performed with burnout dimensions as dependent variables, thethree facets of commitment, namely affective, continuance and normative commitment, asindependent variables, and demographic variables as controlling variables. The findings areconsistent across different models that continuance commitment is positively, affective andnormative commitment negatively, associated with burnout. The study suggests, from itsrelationship with burnout, a healthy commitment profile is composed of more affective andnormative commitments and less continuance commitment in the population of architecturestudents. Architectural schools are advised to be more aware of the types of commitmentsencouraged in their curriculum and pedagogy.Keywords: student burnout, healthiness of commitment profile, affective commitment,continuance commitment, normative commitment276

1. IntroductionStudent drop rate of architectural schools has been one of the highest among universityfaculties, especially in the first year (Lazell, 2007). Those who remain are committed toarchitecture program by a mixture of different motives. Individual students are committed toarchitecture partly by affection, partly by norm, and partly by the concern of the cost of leaving.How healthy the commitment profile of architecture students can be examined through itsrelationship with burnout, a stress syndrome that kills creativity in design learning and prohibitsproductivity in their future career (Amabile, 1998).Commitment is defined as people‘s psychological link with their job in a working context, orwith their study in an educational context. Students‘ motives of study can be understoodthrough the three-dimensional construct of commitment. Commitment is a people‘spsychological attachment to and identification with their profession, organization or studyprogram. People choose to stay for three kinds of motives: they want to (affectivecommitment), they have to (continuance commitment), or they think they ought to (normativecommitment) (Meyer et al., 1993). All of the three facets of commitment functions as retainingpersonnel in an organization or profession. But different motives in the commitment profile willresult in different outcomes. Affective commitment (AC) is found to be positively related withjob performance, while continuance commitment (CC) is found to be negatively related withthe outcome variables. That is, more AC and less CC in individual‘s commitment profile areassociated with better outcome. Burnout reflects a relationship of hostility and alienationbetween the person and his/her job, the opposite of which is engagement, a relationship ofreconciliation and acceptance (Schaufeli et al., 2002). Burnout is found to be the mediatorbetween working context and work-related outcomes such as diminished commitment andturnover (Leiter and Maslach, 2004). The three symptoms of burnout—exhaustion, cynicismand inefficacy—are developed from different aspects of work environment and contributedifferently to the outcomes. For architecture students, burnout is especially damaging in that itshifts motives of study, paralyze creativity, and develops unhealthy copying styles for futureprofessional‘s burnout.Precedent studies reported that burnout is associated with diminishing affective commitment(Leiter and Maslach, 1988). But few have investigated the relationship between burnout and thefull profile of commitment. As part of a large project on architecture students‘ burnout, thisstudy investigates burnout‘s consequence on individual‘s commitment profile among HongKong architecture students.277

2. Literature review2.1 BurnoutBurnout is defined as a crisis in people‘s relationship with their work (Maslach et al., 1996). Aburnout person is locked into a destructive mode of interaction with his/her work. He/Sheperceives, interprets and reacts to the work with hostility and alienation. The brokenrelationship is manifested in three syndromes: exhaustion (EX), feeling of stressed-out by thework; cynicism (CY), feeling of meaningless of the work; and inefficacy (IE), feeling of lowcapacity for the work. The three dimensions are indispensable but distinctive factors toconstitute burnout. They are related with different individual and organizational precursors andoutcomes (Maslach, 2003) . For example, Leiter (1991) in his study of 177 workers in hospitalreports that emotional exhaustion is developed from work overload and interpersonal conflict ofthe working environment, depersonalization (cynicism) is developed from lack of social supportand emotional exhaustion, reduced personal accomplishment (inefficacy) is resulted form lackof social support and underutilization of skills. In a review and development of the burnoutstudies, Maslach, Schaufeli and Leiter (2001) proposed six mismatches between theorganizational context and the individual employees that can lead to burnout, among whichexhaustion is proposed to be related with workload, inefficacy with reward, and cynicism withunfairness. The three dimensions of burnout are also found to be related differently withdifferent individual copying strategies (Leiter, 1991; Yip and Rowlinson, 2006). In anAustralia-Hong Kong comparative study of burnout experience among construction students,Lingard et al (2007) reported EX is related with university-to-work conflict in the Australiansample, with amount of study time and number of conflicting demands within studies in theHong Kong sample. CY is found to be significantly correlated with peer support and conflictingdemands within studies in the Hong Kong sample. IE is found to be related with both work-touniversityand university-to-work conflict in the Australian sample, and with family support inthe Hong Kong sample. As a consequence of the complex links, the effectiveness ofintervention strategies varies. Strategies that help alleviating one dimension of burnout maybring a side effect of aggravating the other two (Maslach, 2003).2.2 Commitment as a multi-dimensional constructCommitment in the management language refers to a psychological state that characterizes aperson‘s tie to his/her job (Meyer et al., 1993: 539). The target of commitment can be thegroup, organization, occupation, institution, or study program. The commitment constructexplains how people would like to stay and why they stay. A widely accepted definition oforganizational commitment is ―the relative strength of an individual‘s identification with andinvolvement in a particular organization‖ (Mowday, 1982: 27), which is dealing with the―how‖. An in-depth examination of the ―why‖ reveals three facets within the motives ofcommitment: people stay because a sense of devotion (affective commitment), because of the278

profit of staying and cost of leaving (continuance commitment), because of a sense ofobligation (normative commitment) (Meyer et al., 1993; Meyer and Allen, 1991).The multidimensionality of the commitment construct provides an insight into the actual targetsfor which people are committed. With AC, the individual is committed to the task. With NC,the individual is committed to the community. With CC, the individual is committed to theexpected reward. Although all the three factors of commitment retain people in the targetoccupation or organization, the different motives are related differently with the quality of work(Meyer et al., 1993; Scholl, 1981). Meyer et al (1989) in their study of 114 first-level managersin a Canadian food service company found that AC is positively, and CC negatively, relatedwith supervisor-rated performance. Meyer et al (1993) proposed that ―affective commitment, toa somewhat lesser extent, normative commitment, should be positively related to jobperformance and organizational citizenship. Whereas continuance commitment was expected tobe unrelated, or negatively related, to these consequence variables‖ (p.539). The hypotheseswere verified in a sample of 603 registered nurses with a result that AC positively, CCnegatively, and NC not, related with supervisor-rated performance. Iverson and Buttingieg(1999) in their study of 505 Australian male fire-fighters found that ― affective and normativecommitment are associated with positive organizational outcomes (lower turnover intentionsand absenteeism, as well as higher acceptance of change for affective commitment) while lowperceived alternatives (a subset of continuance commitment) lead to greater organizationalinflexibility (lower acceptance of change) (p.326).‖CC can paralyze creativity and diversity by weakening both organizational and individuallearning. If people are committed to their work to avoid the cost of change, they will also resistchanges in their responsibilities or taking up new opportunities (Iles and Robertson, 1990). Forthe organization, if ―…employee feels blocked, trapped or only reluctantly a member of theorganization, …(he) is not likely to be very positive about responding to new organizationaldemands and requirements‖ (Iles et al., 1996: 20). Though a 12-week management developmentworkshop to reduce CC whilst maintain NC and AC, Iles and his colleagues significantlyimproved personal flexibility to organizational change among their subjects of senior servicemanagers.2.3 Students’ commitment and approaches of learningIn the university context, the role of a student is both the client and the frontline worker. Theywon‘t get the best service unless they perform an excellent work. The architecture curricular arecentered on design studio, where students learn to think and act architecturally, to synthesiswhat they learned form other courses in design project and improve through critics fromteachers and fellow students (Ledwitz, 1985). A studio task used to start with an ill-defineddesign problem. Through a process of exploring, framing and solving, facilitated by crits, juriesand public reviews, students develop analytical and synthetical thinking, sensitivity andcreativity (Anthony, 1991; Koch et al., 2002; Kvan, 2000; Schön, 1984a; 1984b).279

The multi-dimensionality of the commitment construct reveals that students remain in thearchitecture study programs for various concerns. To translate it into educational language, thethree factor model of commitment is an analogue of the model of three learning approaches(Biggs, 1992; 1999; Biggs and Telfer, 1987). Student approach learning in three different ways:the surface approach, the deep approach, and the achieving approach.Students with deep learning approach are intrinsically motivated. They are driven by curiosity.Their learning strategies are characterized by meaning discovery, which will come up withunderstanding of structural complexities and problem solving competencies (Biggs and Telfer,1987). Contextualized in the architecture schools, this echoes the mechanism of AC, by whichstudents are affectively committed to the task. The commitment serves as an anchor, focusingstudents on the design problem throughout the process of crits, juries and reviews, to ensure the‗right‘ competencies being developed.Students with surface learning approach are externally motivated to study. They are driven byavoiding failure. The subsequent learning strategies are characterized by doing the bareminimum and selected details, which lead to an outcome of ―retention of factual detail at theexpense of the structural relationship inherent in the data to be learned‖(Biggs and Telfer,1987: 4). For architecture student, the ‗bare minimum‘ means to produce good-lookingdrawings and label them with words of concept without struggling though the thinking process.Tay (1998) describes how Asian architecture students develop personal politics to survive(which means to maintain face in) critics and juries in the design studio: ―Where politics isdominant, learning is superficial. Functionality is replaced by functionalistic gesture.Rationality is replaced by rationalizing and aesthetics is an exercise in styling and privatemeaning‖ (Tay, 1998: 2). This seems to be identical to the mechanism of CC. The concerns ofbeneficial calculation drive students to look for the easy ways thus defocus them from thedesign problem. ‗Pseudo-competencies‘ are developed when they get through the studioprocess.Students with achievement learning approach are motivated by recognition from the learningcommunity. Acquired through socialization, the norm of their learning environment drives them―to obtain highest grades, whether or not material is interesting‖(Biggs and Telfer, 1987: 3).The subsequent learning strategy is to consciously ―optimize organization of time andeffort‖(Biggs, 1992: 16). The outcome of the achievement approach depends on whether it isunited with deep approach or with surface approach within the individual. This is congruentwith the mechanism of NC, by which students committed to the norm, the ‗right‘ self-image ofa community member that one should fulfil.2.4 Relationship between commitment and burnoutA handful of studies looked into the relationships between commitment and burnout, amongwhich even fewer examined commitment from the multidimensional perspective. Wittig-Berman and Lang (1990) in a sample of 270 MBA students found strong negative association280

etween value commitment and stress syndromes. In this study stress syndromes are taken asoutcome variables of value commitment and continuance commitment. Leiter and Maslach(1988) and Leiter (1991) reported negative association between exhaustion and commitment. Inboth studies, commitment was measured with the Organizational Commitment Questionnaire(Mowday et al., 1979), which measures the AC dimension in the 3-factor construct ofcommitment. Neumann et al (1990) identified diminished student commitment as aconsequence of burnout (in terms of exhaustion and inefficacy) and the learning context.However, commitment was measured by a three-item scale focusing on students‘ identificationwith their college, which does not reflect motives of study. Draper et al (2004) in a survey of596 cadet students found negative correlation between stress and AC and NC, but no significantcorrelation between stress and CC. However, stress in their study was measured by an AnxietyScale (Warr et al., 1979) which measures general feeling of anxiety in everyday life.In summary, previous studies of commitment and burnout failed to recognize the difference ofhidden motives behind different types of commitment. Noting this gap, this study investigatesthe commitment profiles of Hong Kong Chinese architecture students and its relationship withburnout.3. HypothesesBased on the rationales of the hidden motives behind multiple dimensions of commitment, thisstudy proposes the following hypotheses:H1: AC is negatively, NC is not, and CC is positively associated with EX.H2: AC is negatively, NC is not, and CC is positively associated with CY.H3: AC is negatively, NC is not, and CC is positively associated with IE.4. Design of studyStudent commitment levels, burnout, and demographic information are collected through selfadministeredquestionnaires in Chinese. The questionnaire was translated into Chinese andchecked with back-translation by two bi-lingual experts. Principal Component Analyses (PCA)were performed to validate the measures of commitment. Correlation analysis, ANOVA, andmultiple-regression are employed to test the hypotheses.281

5. Results5.1 Sample596 students from the two architecture schools in Hong Kong are administered thequestionnaire through online or paper-based survey. A total of 294 responses are received,making a response rate of 49.3%. Of the respondents, 165 (56.4%) are female and 128 (43.5%)are male (one missing information); 256 (87%) are Hong Kong students, 28 (9.5%) are frommainland China, and 10 (3.4%) from Macao or other places. The information of age is collectedin six intervals: 16~19 (13%), 20~22 (44%), 23~23 (20.1%), 25~26 (13.3%), 27~29 (6.8%),and above 30 (2.7%). The cohorts of students in the sample are evenly distributed: BachelorYear 1 (18.1%), Bachelor Year 2 (22.6%), Bachelor Year 3 (18.1%), Master Year 1 (17.0%),and Master Year 2 (24.3%).5.2 Measures5.2.1 Measure of student burnoutStudents‘ burnout is measured with Maslach Burnout Inventory-Student Survey (MBI-SS)(Schaufeli et al., 2002a). Each question is rated on a 7-point scale anchored by 0 (never) to 6(everyday). The scale has a good validity and acceptable reliability. The proposed three-factorstructure broke into four factors in this sample. While exhaustion and inefficacy remain thesame, cynicism broke into two factors: doubt of significance, and lack of interest. Details of thevalidation have been reported in Jia et al (2009).5.2.2 Measure of students’ commitment to architectureStudents‘ commitment to their study is developed from Mayer et al (1993) occupationalcommitment questionnaire. The scale was validated by Irving et al (1997) across occupations.The three component model has been validated in the Chinese sample of 226 employees (Chengand Stockdale, 2003). Principal Component Analysis of the current data yielded a three-factorstructure accounted for 65.03% of the total variance. In terms of reliability, Cronbach's Alpha is0.77.5.3 Descriptive statisticsLevels of commitment are shown in Table 1. The commitment levels of Hong Kongconstruction professionals reported by Rowlinson (2001) are paralleled in the table as acomparison. The current sample of architecture students has considerable higher AC and NC,and lower CC than that of the construction professional sample. It seems that the low CC ofarchitecture students is appropriate for the creative field. In contrast, the high CC among282

construction professionals may indicate one of the problems of inflexibility in their worksetting or even embedded in the knowledge of the discipline.Table 1: Levels of burnout in this study compared with that reported in Rowlinson (2001)AffectivecommitmentNormativecommitmentContinuancecommitmentHong Kong architecture studentsmean (SD)Europe4.96 (SD=1.33) 1.79 (SD=0.45)4.03 (SD=1.02) 2.81 (SD=0.66)4.60 (SD=1.10) 5.46 (SD=1.10)Hong Kong construction professionalsmean (SD)5.4 Testing of regression modelsPearson correlation among continuance variables, and Spearman‘s rho involving year of study,gender and age are computed. Sample size of the correlation analysis ranges from 220-295.Significantly correlated variables were entered into four regression models, with the fourdimensions of burnout as dependent variables respectively. Hierarchical regressions using stepwisemethod were performed to test the four models. Demographic variables were entered intothe model at first step, followed by the three dimensions of commitment. The optimized modelswere exhibited in Table 4. All the four models were significant at the .000 level. Among thedemographic variables, year of study and age are significantly related with EX. Gender issignificantly related with IE and CY in terms of doubt in significance. Female studentsexperience significantly higher inefficacy than their male counterpart; while male tend to doubtthe significance of their architecture study more often than their female counterpart. Cynicismin terms of lack of interest in architecture does not vary with demographic variables. The threedimensions of commitment showed consistent results in the prediction of burnout dimensions:AC and NC are significantly negatively associated with burnout dimensions; CC is significantlypositively associated with burnout dimensions, with only an exception that it is not related withIE.Table 2: Results of regression model testing (sample size is 295)No. Dependent Independent Beta Adj. R2 F Sig.Model 1 Exhaustion Year 0.290**283

Age -0.291**CC 0.419***AC -0.247***NC -0.202** 0.278 15.021 .000Model 2 Cynicism Gender 0.132*(significance) CC 0.349***AC -0.386***NC -0.301*** 0.383 23.653 .000Model 3 Cynicism CC 0.210***(interest) AC -0.528***NC -0.217** 0.424 27.874 .000Model 4 IE Gender -0.130*AC -0.317***NC -0.348*** .0.298 16.481 .000*** p< .001 ; ** p< .01; * p< .056. Discussion and ConclusionTo summarize, the results partially support the hypotheses that different types of commitmenthave diverse effect on burnout among Hong Kong architecture students. As burnout scaleyielded into a four-factor structure in this sample, in which cynicism was further divided intodoubt of significance and lack of interest in architecture, four models were tested with multipleregressions. The results are consistent across the predictive models of the four dimensions ofburnout: AC is negatively and CC is positively associated with burnout dimensions. However,NC, instead of being neutral, is found to be negatively associated with all the four dimensionsof burnout. This result implies that among the population of architecture students, normativecommitment has a similar effect as affective commitment does on stress syndromes.Professionalism in architecture is more of a positive aspect than in other professions ordisciplines. Consistent results were found in three of the four models that CC is a strongpredictor of burnout among architecture students. Students who are ―locked‖ in architecture arevulnerable to burnout. However, CC was not found to be correlated with IE, which implies themotivation of study is not related to students‘ self-evaluation of effectiveness. In conclusion,from its relationship with burnout, a healthy commitment profile contains more affective andnormative commitment, and less continuance commitment in the population of Hong Kongarchitecture students. To avoid burnout among students, architectural schools are advised tobuild healthy student commitment profiles by encouraging the right motives in their curriculumand pedagogy.284

AcknowledgementThis paper is partly the work of a research project -- Job Burnout and Construction ProjectPerformance (Code No. HKU 711303) supported by Research Grants Council of the HongKong Special Administrative Region, P. R. China.ReferencesAmabile, T. M. (1998) How to kill creativity. Harvard Business Review, September-October.Anthony, K. H. (1991) Design Juries on Trial: the Renaissance of the Design Studio, NewYork, Van Nostrand Reinhold.Biggs, J. (1999) Teaching for Quality Learning at University: What the Student Does,Buckingham :, Society for Research into Higher Education, Open University Press.Biggs, J. B. (1992) Why and how do Hong Kong students learn? , Hong Kong, Faculty ofEducation, University of Hong Kong.Biggs, J. B. & Telfer, R. (1987) The Process of Learning, Syndey, Prentice-Hall.Cheng, Y. & Stockdale, M. S. (2003) The validity of the three-component model oforganizational commitment in a Chinese context. Journal of Vocational Behavior, 62, 465-489.Draper, J., Halliday, D., Jowett, S., Norman, I., Watson, R., Wilson-Barnett, J., Normand, C. &O'Brien, K. (2004) NHS cadet schemes: student experience, commitment, job satisfaction andjob stress. Nurse Education Today, 24(3), 219-228.Iles, P., Forster, A. & Tinline, G. (1996) The changing relationships between workcommitment, personal flexibility and employability: An evaluation of a field experiment inexecutive development Journal of Managerial Psychology, 11(8), 18-34.Iles, P. & Robertson, C. M. I. (1990) HRM Practices and Employee Commitment: Possibilities,Pitfalls and Paradoxes. British Journal of Management, 1(3), 147-157.Irving, P. G., Coleman, D. F. & Cooper, C. L. (1997) Further assessments of a three-componentmodel of occupational commitment: generalizability and differences across occupations.Journal of Applied Psychology, 82(3), 444-452.Iverson, R. D. & Buttigieg, D. M. (1999) Affective, normative and continuance commimtment:can the 'right kind' of commitment be managed? Journal of Management Studies, 36(3), 307-333.285

Jia, Y. A., Rowlinson, S., Kvan, T., Lingard, H. C. & Yip, B. (2009) Burnout among HongKong Chinese architecture students: the paradoxical effect of Confucian conformity values.Construction Management and Economics, 27(3), 287-298.Koch, A., Schwennsen, K., Dutton, T. A. & Smith, D. (2002) The Redesign of Studio Culture:A Report of the AIAS Studio Culture Task Force, American Institute of Architecture Students,Available at: http://www.aias.org/studioculture/studioculturepaper.pdf [Accessed 13th March2008].Kvan, T. (2000) Teaching architecture, learning architecture. IN TAN, B.-K., TAN, M. &WONG, Y.-C. (Eds.) Proceedings of CAADRIA 2000. Singapore.pp.181-190.Lazell, M. (2007) High drop out rate for architecture. Building Design, Aug 3 (2007), 3.Ledwitz, S. (1985) Models of design in studio teaching. Journal of Architectural Education,38(2), 2-8.Leiter, M. P. (1991) Coping patterns as predictors of burnout: the function of control andescapist. Journal of Organizational Behavior, 12(2), 123-144.Leiter, M. P. & Maslach, C. (1988) The Impact of Interpersonal Environment on Burnout andOrganizational Commitment. Journal of Organizational Behavior, 9(4), 297-308.Leiter, M. P. & Maslach, C. (2004) Areas of worklife: a structure approach to organizationalpredictions of job burnout. IN PERREWE, P. L. & GANSTER, D. C. (Eds.) Emotional andphysiological processes and positive intervention strategies: research in occupational stressand well being (Volume 3). Amsterdam ; London, JAI.pp.91-134.Lingard, H. C., Yip, B., Rowlinson, S. & Kvan, T. (2007) The experience of burnout amongfuture construction professionals: a cross-national study Construction Management andEconomics, 25(4), 345-357.Maslach, C. (2003) Job burnout: new directions in research and intervention. CurrentDirections in Psychological Science, 12(5), 189-192.Maslach, C., Jackson, S. E. & Leiter, M. P. (1996) Maslach Burnout Inventory Manual (3rded.), Palo Alto, CA, Consulting Psychologists Press.Maslach, C., Schaufeli, W. B. & Leiter, M. P. (2001) Job burnout. Annual Review ofPsychology, 52, 397-422.Meyer, J., P., Paunonen, S. V., Gellatly, I. R., FGoffin, R. D. & Jackson, D. N. (1989)Organizational commitment and job performance: it's the nature of the commitment that counts.Journal of Applied Psychology, 74(1), 152-156.286

Meyer, J. P., Allen, N., J. & Smith, C. A. (1993) Commitment to organizations andoccupations: extension and test of a three-component conceptualization. Journal of AppliedPsychology, 78(4), 538-551.Meyer, J. P. & Allen, N. J. (1991) A three-component conceptualization of organizationalcommmitment. Human Resource Management Review, 1, 61-89.Mowday, R. T. (1982) Organizational Linkages: the Psychology of Commitment, Absenteeism,and turnover, San Diego, CA, Academic Press.Mowday, R. T., Steers, R. M. & Porter, L. W. (1979) The measurement of organizationalcommitment. Journal of Vocational Behavior, 14(2), 224-247.Neumann, Y., Finaly-Neumann, E. & Reichel, A. (1990) Determinants and consequences ofstudents' burnout in universities. Journal of Higher Education, 61(1), 20-31.Schön, D. A. (1984a) The Architectural studio as an exemplar of education for reflection-inaction.Journal of Architectural Education, 38(1), 2-9.Schön, D. A. (1984b) Toward a marriage of artistry & applied science in the architecturaldesign studio. Journal of Architectural Education, 41(1), 4-10.Schaufeli, W. B., Martinez, I. M., Pino, A. M., Salanova, M. & Bakker, A. B. (2002) Burnoutand engagement in university students: a cross-national study. Journal of Cross-culturalPsychology, 33(5), 464-481.Scholl, R. W. (1981) Differentiating organizational commitment from expectancy as amotivating force. Academy of Management Review, 6(4), 589-599.Tay, K. S. (1998) Towards a new concept of Asian architectural education. Report at theARCASIA Council MeetingWarr, P., Cook, J. & Wall, T. (1979) Scales for the measurement of some work attitudes andaspects of psychological well-being. Journal of Occupational Psychology, 52(2), 129-148.Wittig-Berman, U. & Lang, D. (1990) Organizational commitment and its outcomes: differingeffects of value commitment and continuance commitment on stress reactions, alienation andorganization-serving behaviours. Work & Stress, 4(2), 167-177.Yip, B. & Rowlinson, S. (2006) Coping strategies among construction professionals: cognitiveand behavioural efforts to manage job stressors. Journal for Education in the BuiltEnvironment, 1(2), 70-79.287

Digital Infrastructure, Management Practices and theDesign OrganizationWhyte, J.University of Reading(email: j.whyte@reading.ac.uk)AbstractDigital information presents new challenges to managing and organizing the design of buildings andinfrastructure. The literatures on complex organizations indicate paradoxical requirements for tightcoupling between tasks to deal with their interdependencies; and loose coupling to deal with theexceptions arising in day-to-day work. This paper draws on this research to consider digitallyenableddesign work on a tightly constrained infrastructure project. In this case, a major stationrefurbishment, the engineering consultant’s team pioneered model-centric ways of working. Theempirical research is qualitative in nature and involved spending time with the design team (i.e. inthe project office during RIBA Stage F), talking informally to stakeholders about the project and alsoconducting formal interviews. The research collaboration focused on understanding the designteam’s experience and learning through the use of new digital tools; and also sought to uncoverprocesses and systems to improve effective tool use. There are two major findings from the study ofthis case. First, the new digital tools and processes increase the coupling between the variousdisciplines involved in design, implying wider organizational changes across firm boundaries.Second, this change in the coupling of activities challenges the currently institutionalisedunderstandings of design stages and effective processes.Keywords: digital infrastructure, design work, complex organizations, projects288

1. IntroductionDigital information is having a profound effect on the nature and structure of organizations(Kallinikos 2006). Off-the-shelf packaged software solutions are becoming central to informationmanagement in the modern firm and have a homogenising effect on corporate processes in areas suchas Enterprise Resource Planning (Pollock et al. 2007). As digital technologies scaffold newprocesses, they provide a digital infrastructure for delivery. Researchers are conducting detailedstudies of the role of information technologies in reorganizing broad sectors of the economy, such ashealthcare (Martin et al. 2006); aerospace (Berente and Yoo 2007); pharmaceuticals (Nightingale2000), and computer hardware design (D'Adderio 2003). Yet, until recently, there has been relativelylittle critical analysis of the practices of using digital technologies in building and infrastructureprojects.This paper contributes to a trajectory of research that is now beginning to draw on managementtheory, organization studies and sociology to explore digitally-enabled work in the constructionindustry. For example, Boland et al. (2007) have tracked innovation on a project, arguing that the useof 3D digital technologies allows waves of innovation to propagate across the firms involved. Taylor(2007) draws attention to the antecedents of 3D on construction projects, articulating how workallocation, interdependence and current technology provide pre-conditions; alignment of theinnovation to project network and firm interests affect the implementation; and relational stability,interests, boundary permeability and an agent for change affect acceptance. Leonardi and Bailey(2008) look at how work is changed as it becomes distributed globally and then reintegrated throughdigital tools, while Harty and Whyte (2008) pull back from the computer screen to chart the hybriddigital and physical ways that project work is achieved through both formal procedures andimprovised practices.The organizations that are engaged in the design of buildings and infrastructure are often complex,having non-linear and multiple interdependencies between their sub-systems (Perrow (1999 [1984]).Complex organizations are an important form of industrial organization as production efficiency isgreater in them than it is in linear organizations (Perrow 1999 [1984]). However, the literatures oncomplex organizations indicate paradoxical and incompatible requirements for tight coupling to dealwith interdependencies and loose coupling to deal with the exceptions arising (Perrow 1999 [1984]).In this paper I draw on this set of literatures to consider the new digital infrastructure and itsassociated management practices. Digital technologies enable new forms of interaction and coupling(Kallinikos 2005), increasing the interactive complexity in complex organizations. Dossick and Neff(2008) have argued that it is a set of leadership skills that enables managers in design andconstruction organizations to deal with the increasing tight coupling of technological solutions withinloosely coupled organizational structures. In their work, they treat the degree of coupling in theorganization and technology as separate. In this paper, data is analysed in a way that does not holddigital technologies separate from organization, but rather sees them as scaffolding neworganizational structures and processes.289

In so doing, new digital infrastructures are seen as presenting new challenges to management. Theyalso raise empirical questions for researchers. How and where does tighter coupling betweenactivities takes place as digital infrastructures become used? Where does coupling become looser? Inline with grounded theorising approaches, the paper starts by describing the research setting and datacollection and analysis methods and then discusses the implications of the findings for theoreticalunderstandings in this area.2. Research setting in constructionThe design and construction of buildings and infrastructure takes place in pluralistic, multi-firm,contexts. The construction industry is also undergoing rapid change in many countries with a rapiddiffusion of model-centric approaches to integrating and sharing information. A recent study in theUSA, for example, notes that half of contractors are using digital models, a 75% increase in usage in2 years (McGraw Hill 2009). Among scholars of lean construction, there is now substantial researchon digital project models (e.g. Eastman et al. 2008), with a generic and well-disseminated discoursewithin the industry about the benefit obtained through moving information flows on projects fromtraditional one-to-one information exchange practices to interactions around a shared model. This issummarised in an often-reproduced set of diagrams in Figure 1.sharedmodelprofessional stakeholder,e.g. architect, engineer,surveyor etc.Figure 1: Idealised information flows between different professional stakeholders on a project, a)without a central project model and b) with a central model.Design work on building and infrastructure projects is conducted through a number of stages that aredescribed in standard industry documents such as the Royal Institute of Architects’ (RIBA) Plan ofWork, which details stages from A – appraisal to L – post practical completion, where A to F are themain stages in which design work is conducted. At each stage information is approved and releasedto the client, and then archived and there are structured processes for this work, which involvemanagers checking data and document controllers approving its release. The processes for doing thisin a model-centric way of working have been worked out through a UK government-funded initiative(Avanti 2006), as shown in Figure 2.290

SharedDocumentationWork inprogressArchiveWIPWIPWork in progress in thedifferent professionsFigure 2: Diagram to show the process of transferring information (based on Avanti 2006)Where this study contrasts with this wider academic and industry literature is that the inevitabilityand efficacy of these models is treated not as a starting assumption, but as an empirical question,something to be interrogated and explored. The case study that is analysed and discussed is a stationrefurbishment project in which a major engineering design consultancy was implementing newdigitally-enabled ways of working. It is a good example of complexity in design work, as it includingupgrades to the platforms, a services building, enlarged ticket hall and entrances, all for a tightlyconstrained site in central London. The case is one of a set of cases studied as part of ongoingresearch on technology use in major building and infrastructure projects.The design work in this case provides congestion relief / capacity enhancement; additional escalators;additional connections to platforms and improved interchange. Objectives include step-free access;station modernisation and fire safety improvements and the scheme is a seven-year constructionproject. Work on the scheme is procured through a New Engineering Contract (NEC) contract andinvolves interaction with government bodies including English Heritage, the Highways Authority,and local boroughs. The engineering design consultancy was engaged at detail design stage to lead ateam that would develop the design further and produce contract documentation. They inherited aprevious scheme design, which had been designed to RIBA Stage D (detail design) and was all in 2D.The team implemented a digital infrastructure that allowed them to work in a model-centric way.Staff working on the project brought significant experience from a wide range of other infrastructureprojects as well as from other industries such as automotive and petrochemical. However, for theteam as a whole, as well as for a number of the engineers, CAD technicians and architecturaldesigners, the project was their first time working in a 3D centric way, using 3D as a design toolacross all disciplines and project areas. Sharing of data is achieved through two software packages,from the software provider ‘CAD tools’, which are similar in nature to those provided by itscompetitors:‘Coordination’ is the Electronic Data Management Tool (EDMS), in which CAD data is storedand workflows are applied.‘Modelling’ is the base Computer Aided Design (CAD) package.Together these tools provide a shared model. As the basic infrastructure for the design work, they aresupplemented with the software provider’s wider suite of add-on tools, with a specialist 3D modelling291

tool and structural, mechanical and electrical tools for the various disciplines; a package for highwaysdesign and for the reinforced concrete (RC) detailing. A separate provider’s viewing software is usedfor viewing 3D files and for clash detection.3. Research methodThe research was conducted with the engineering design consultancy under principles of engagedscholarship (Van de Ven, 2007). Following an initial 2 hour set-up meeting with the project manager,design manager, R&D director and rail director from the engineering design consultancy, access tothe project was agreed. The engineering design consultant was engaged as the leader of a multidisciplinaryteam, which involved their own structural, tunnel and mechanical and electrical (M&E)engineers and CAD managers, as well as the architects and other consultants. The study seeks animpact on practice by providing useful material for reflection about how to improve processes andsystems. After a case report was prepared for the industrial collaborator, there was a 2 hour meetingto discuss this with the project manager and design managers.The two broad research questions that guided data collection are: What experience and learningabout using digital modelling, collaboration and document management tools has been developed onthe project? What are the processes and systems that can improve effective use of these tools indesign work on a complex, tightly constrained infrastructure project? Rather than focusing onindividual technologies, or digital models as objects; the work draws on ideas about the mangle ofpractice (Pickering 1995); ecologies (Star and Griesemer 1989; Harty and Whyte forthcoming) andinfrastructures (Edwards et al. 2007) to consider the set of digital modelling, collaboration anddocument management tools as a digital infrastructure for delivery.The research focuses on the use of this digital infrastructure in the engineering design consultancy’swork on RIBA Stage F (production information), from June 2008-December 2008. The fieldworkstarted as the report for RIBA stage E (detailed design), was prepared and followed the project workthrough the stage. As there is a commitment to studying practices (Gherardi and Nicolini 2000;Styhre 2009; Orlikowski, 2007), days were spent in the project offices talking to stakeholders withinthe firm and interviews were also conducted with the architects, engineers and client involved in theproject about their ongoing work. The research uses a well developed interview protocol that hasbeen used across a number of case studies, with interview questions about digital tools, learning andthe effectiveness of processes and systems. Interviews are semi-structured to allow participants totalk widely about challenges and opportunities of new technologies in their work.The paper is based on an initial analysis of the data collected during days spend in the project officewhere the engineering design consultancy team were collocated. The team involves tunnels,structures and M&E engineers; subcontractors including two architectural firms; and engineers fromthe client. Data was collected through the semi-structured interviews and informal conversations with13 members of staff, the project manager; design manager; administrator; CAD manager; documentcontroller; structures modeller; three architects, structures engineer; tunnels engineer; M&E modellerand the client project manager. As the office was visited monthly, there were conversations with the292

CAD manager and other key members of staff on a number of occasions throughout RIBA Stage F.Data has been analysed in light of existing bodies of work on complex organizations and the analysiswork is ongoing. This process began with typing up field notes and transcribing the interviews, and itis iterative between the empirical data and the literatures, looking for themes across the interviews,writing the case summary, and continuing to iterate between a narrative description and the sourcedata on which it is based as the emerging theoretical ideas raise new questions about interpretation.4. Management practices in digitally-enabled designA major benefit of working in a shared 3D model is the ability to co-ordinate the designs of differentspecialisms on the tightly constrained site, particularly important in the mechanical, electrical andpublic health (MEP) design; and in co-ordinating these services and the structures. In the words of thepractitioners, the work on the project involves ‘complex transfers of information and data’ in which‘participants are mutually dependant; uncertainty exists surrounding design problem and potentialsolutions’ and the ‘problem is understood by speculating and testing design solutions.’The office in which the station refurbishment was being designed was open-plan, high above the site,with views down over it. The various disciplinary teams sit together and the central corridor throughthe office contained cardboard models of the station, with colour 3D print outs on the wall near theentrance to the office. Around the corner, beyond the coffee area, there is a wall that containsmanagement information, including printed out schedules, with ink marks showing how progress istracked against them; and risk registers for the various aspects of the design. The architects are basedpart-time in these offices, spending a few days a week back in their home offices, and the client hassome staff that work in this office alongside the team.Managers on the project note that such co-ordination and integration requires both ‘competent staffthroughout team’ and ‘robust systems and processes.’ The literature on management practices andperformance supports such a characterisation, addressing these issues under headings of peoplemanagement, performance management, operations management (Bloom et al. 2009). Populardescription of management cover similar ground in terms of people, their selection and development;processes, achieving delivery targets and tracking and ensuring project performance; and technology,optimising the use of physical and other resources.This discussion of management practices will consider aspects of both ‘competent staff throughoutteam’ and ‘robust systems and processes’, with a focus on the: 1) allocation of responsibilities; and2) management of design and modelling timescales.4.1 Allocation of responsibilities within the design teamThere is a strong contrast between the way the divisions of labour between design and modellinghave become institutionalised in architecture and engineering. Architects do their own drawing andmodelling work, whereas in engineering, CAD technicians work beside the engineer. The allocation293

of responsibilities within the sub-teams is shown in Figure 3. The boundaries between softwarepackages indicate organizational boundaries, with the architects and engineering CAD specialistsusing the software ‘Modeller’ with specialist add-on solutions relevant to their discipline.Integrated softwareStructuresMoTunnelsM&ECoordination PackageModelling PackageArchitecture3D CAD professionalEngineer or architect2D CAD professionalFigure 3: Idealized illustration to show the different structure of responsibilities in the engineeringsub-teams (structures, M&E and tunnels) and the architecture firmsIn the three engineering disciplines (structures, M&E and tunnels), the plan was to have one 3Dmodeller per discipline area and to use the 3D model to take extractions, and produce drawings. Thisgives one person the ownership of modelling the engineering design work of each disciplinary group.However, in practice this also causes a bottleneck in the work process.It caused difficulties in recruitment as the research was conducted during a boom in constructionwork in the UK. Traditionally construction design work is in 2D and there are few CAD designerswith modelling experience. The modelling skills were in demand (and hence expensive as difficult toreplicate), and the team did not have a modeller per disciplinary team throughout the stage observed.As the CAD manager notes:you find that its all well and good saying you want it in 3D, but you have also got to have the people who canuse and think in 3D. I find a lot of CAD designers, CAD users are not experienced in it. Don’t know how touse the software. (CAD manager)The process of creating 3D models presented new difficulties in motivating 2D CAD technicians. Theengineering teams included both 3D modelers and 2D CAD technicians, with for example, one 3Dmodeller and three to four 2D CAD technicians in the tunnel engineering team. The 2D CADtechnicians take the extraction created by the 3D modeler and add any additional required linework.They are not involved in the set up, or as involved in actively thinking through the constructiondetails. Across the project:we have a team of 2-3 modellers that are basically modelling everything and they extract all the plans andsections that then go to the 2D CAD technicians to put together on drawings. The only draw back of this isthat the guy putting the drawing together doesn’t have any real involvement in the design of something.(CAD manager)The scarcity and status of 3D modellers has also caused some problems with collaborative work.Within the project, there was an expectation that everyone would do everything, picking up the work294

of others to deliver the project, but modellers brought a new set of expectations to their role and:‘some of them think they are too good to do the basic model.’ Although this caused significantmanagement problems over the period observed, when findings were reported to project managers afew months later, they noted more compliance and interworking in the context of the economicdownturn.Use of this digital infrastructure for delivery draws attention to the classic management challenge ofdividing up the work in ways that give people ownership of particular tasks. The new processesrequired new ways of framing work, giving people fulfilment in their roles and incentivising them towork to deliver the project.4.2 Management of design and modelling timescalesThe release of information to the client and the various regulatory bodies requires it to be checked,verified and approved, and the workflow is summarised below in Figure 4. Approximately 3000drawings and documents need to be approved at the end of each stage, so in Stage F, the team, whichhad been involved since Stage D, was managing a project that involved 10,000 records. A documentcontroller ensures that no work goes out from the team without having been through the process.Design and modelling work of discipline design teams3D model3D modelcheck2D drawingextractiondisciplinecheckcoordinationcheckapprovalFigure 4: The design workflow from the 3D model to co-ordination and approvalAlthough the team is committed to a model-centric approach to design, the wider system withinwhich they operate is institutionalised around 2D plans and sections, and they are still required toproduce these as a deliverable to the client and for approval from regulatory bodies. Within eachengineering discipline, after the modeller works with the engineer to model the design, these modelsare then extracted to plans and sections that go to CAD technicians to develop into the drawings.Using the ‘Modelling’ tool, details are then added to the 2D drawings before issue. Hence the designwork itself is conducted using a combination of 2D and 3D, with all the 2D plans and sectionscoming from the 3D model.The ‘Coordination’ tool shows the workflow for each part of the model, and for each drawing thatcomes from the model. Within it, drawings have different statuses: Work in Progress; DesignerCheck; Co-ordination Check; Manager Approval; Approved and Issued. A major challenge discussedin interviews was that modelling in 3D takes ‘a lot longer’, but the team is working to the ‘same timescalesas 2D’. According to the interviewees, this new way of working has long-term benefits,reducing errors on site, but there is extra work to get to the 2D plans. It is a ‘larger process’ but is‘worth it in the end.’295

From a management perspective, the new processes present a ‘technological black box’ with littlevisibility of the completeness of the design work represented in models and drawings. This is achallenge, as it makes it difficult to manage client expectations, especially where the completeness ofdesign may have contractual implications. 3D modellers and 2D CAD professionals also commentedthat they found it more difficult to estimate timescales; when sometimes they are asked to do thingsthey: ‘don’t know how to do [them] so [they] don’t know how long [these things] will take.’ This is aparticular problem around stage deadlines, and one example given was that at the September 2007deadline, adding annotations to drawings, which should have been a five minute job, took half a day.One interviewee estimated that the production of a drawing took 3-6 weeks to the final 2D drawingsusing the new processes whereas it would have taken 2 weeks to draw on a 2D basis. Anotherestimated that it takes a week to do what would have taken a couple of days to do on a 2D basis. Onprevious stages, such as the September 2007 deadline, resources issues, particularly difficultyobtaining and retaining 3D modellers, meant the model was dropping behind design work exceptwhere there were changes that affected others. The departure of the services sub-consultant also ledto additional service design work. This lead to a perception that: ‘They have delivered all their workin 2D, just basic 2D plans and sections and now they are doing the modelling after they haveproduced the drawings.’The way in which infrastructure is configured and organized has a major impact on delivery. In thiscase, management challenges related to process or performance management become salient. Theteam was under pressure to deliver to traditional timescales though it took longer to develop 3Dinformation that could then add benefit at later stages. The new digital tools and processes impliedwider organizational changes across firm boundaries. In a practical sense, these have implications forthe deliverables to the client and regulatory bodies and for the nature and duration of different stagesof design work.5. Experience and learning about digital infrastructureWhile much of the technological infrastructure of practice is taken for granted by practitioners(Edwards et al. 2007), new technologies become salient in day-to-day work as they require significantlearning. The professionals working on this station refurbishment project were reflective about theirown practices and how they could be improved.One area for reflection was the problems with the software tools themselves. For most interviewees,the ‘Coordination’ package had teething problems and was overly complex, but it was useful. Thereare a number of issues within the software package, described by one interviewee as: ‘Ghosts in themachine’, which relate to generic software bugs. This interviewee described how there were changespeople thought they have done ahead of a previous deadline that were not there in the system. Foranother of the interviewees, it had little advantage as plotting was not set up. ‘Coordination’ leaves anaudit trail, but a number of interviewees pointed to issues with information going missing and corruptfiles. One felt it needed a lot of customization and the Windows folder structure would be easier touse, although this would not have had the advantage of tracking file changes.296

There are also some limitations of the ‘Modelling’ package that mean it takes extra work to get 2Dplans and is not just a slice through the model. The team was using the ‘CAD tools’electrical/mechanical software solution that is an add-on to the basic ‘Modelling’ package for the firsttime. When they piloted and tested it they came across issues with the maturity of this softwaresolution. The specialist functions supporting mechanical engineering design functioned well, butthose supporting electrical design were not adequate. The software was ‘90% complete and updating,[it] can’t do what [it] says on tin’. This was particularly challenging as the work ‘involves processesoutside of core design.’ There was also a problem with the viewing software in that if there werechanges in the model then it needed to be re-imported and the clash detection needs to be done fromscratch again. The changes were not automatically updated in the software.These limitations led to a significant interest in process improvement. Some of these were justproposed, or dreamed of, such as the idea of one member of the architectural team, who could see thevalue of setting parameters for tiling etc so that the design could be quickly changed by changing theparameters, but could also see problems of undocumented new tools as any architect that might takeover their role at a later stage might not understand how to use a parametric model: ‘And that’s – Ithink that’s great and I’d love to be able to – the problem with that I think is if I set it up, nobody elsecan do it.’ Others were implemented through new tools, for example the document controllerdescribes the development of new tools on the project where they ‘happened to have an Accessdatabase developer – used her to set up a system for document tracking.’There was also reflection on the organization of modelling activities, for example how the 3D modelwas constructed out of model files, and how these mapped onto the 2D plans and sections that werethen extracted. One designer commented that here there are: ‘More models and reference files [were]going into a drawing than [they] would expect.’ Other ways of allocating work were considered:It is really between the engineer and the guy that is modelling it. The other option is that all the CAD guyscould be modellers and they all sit there doing 3D models and then they produce their own drawings. I thinkthat, probably depends on the kind of job, […] if you’ve got lots of people doing things, trying to control theoutput can be difficult – everybody has their own ideas. (CAD manager)Another area for reflection was the challenges in finding staff that combined practical constructionexperience and digital technology skills. Traditionally a draftsman or CAD technician would providethe practical construction experience to help a younger engineer. However with 3D, modellers cannotprovide that support to the less experienced engineers as modellers are often also early in theircareers or they are from non-traditional backgrounds such as product design. Their lack ofconstruction knowledge means that they do not always understand how to interpret the model theyare building. When relationships between services and structures are analyzed by exporting the modelto the viewing software, it is relatively easy to see physical clashes, for example where you havepipes going through columns, but a person with construction experience is needed to understandwhere there are construction details that won’t work, for example from a reinforcement point of view.297

6. Conclusions and discussionThis case study shows the increasing integration and ‘tight coupling’ of activities in the organizationof design as organizational capabilities become embedded in a set of packaged software solutions andstandardised processes. Information management has a strong relationship with the management ofprojects (Whyte and Levitt, forthcoming) and the case shows the co-evolution of managementpractices with new digital technologies. There are two major findings from the study of this case.First, that new digital tools and processes increase the coupling between the various disciplinesinvolved in design, implying wider organizational changes across firm boundaries. Second, thischange challenges the currently institutionalised understandings of design stages and effectiveprocesses.This design organization operates within a wider set of institutionalised practices, which includeformats for delivery, building regulations, local authority permissions and construction schedules.The case study suggests that to be effective 3D modes of working require a wider process of change,as this digital infrastructure for delivery challenges institutionalised understandings of the activitiesin and duration of different stages of the process.This work has implications for practitioners, as digital infrastructure is changing the nature ofprofessions. Figure 1 is a useful conscription device allowing champions of the new ways of workingto enrol the various professions by representing the new processes in a politics useful way. However,the relationships between the various professionals and the model are not as symmetrical or as staticas implied by the idealised charts shown. In the case studied professions have asymmetricrelationships with the digital infrastructure. In engineering, the 3D modeller takes a prominent role,but the availability of 3D modellers becomes a bottle-neck in this proposed new way of working. Thisfinding is supported by Abbot’s (1988) description of a system of professions, jostling for positionby expanding the scope of their expertise. Here document controllers, CAD managers, 3D modellers,2D CAD technicians are among the new roles in the modern design office.The work also has implications for researchers. In reflecting on the tight and loose organizationalcoupling, this paper attempted to keep visible the context of the real design organization, on whichthis study is based, collocated in a project office above their site. This implies a new way of studyingtechnologies in construction, drawing on literatures that have an interest in the material nature ofinteractions between objects and people in particular settings There are a need for further studies tobuild on this work to understand digital infrastructure in practice, to draw fine-grained researchattention to how different professions structure their interaction with the integrated software, and tounderstand how commercial value is obtained in this evolving area of practice.298

ReferencesAbbott, A. (1988) The System of Professions: An Essay on the Division of Expert Labor. Chicago,University of Chicago Press.Avanti (2006) Project Information Management: a Standard Method & Procedure. London, AvantiToolkit 2 Version 2.0.Berente, N. & Yoo, Y. (2007) Conflicting Institutional Logics and the Façade of Alignment: LooseCoupling in NASA’s Enterprise System Implementation. Academy of Management Conference,PhiladelphiaBloom, N., Garicano, L., Sadun, R. & Van Reenen, J.M. (2009) The Distinct Effects of InformationTechnology and Communication Technology on Firm Organization, NBER Working Paper No.w14975. Available at SSRN: http://ssrn.com/abstract=1408895.Boland, R.J., Lyytinen, K. & Yoo, Y. (2007) Wakes of Innovation in Project Networks: The Case ofDigital 3-D Representations in Architecture, Engineering, and Construction. Organization Science18(4): 631-647.D'Adderio, L. (2003) Configuring software, reconfiguring memories: the influence of integratedsystems on the reproduction of knowledge and routines. Industrial and Corporate Change 12(2):321-350.Dossick, C.S. & Neff, G. (2008) How Leadership Overcomes Organizational Divisions in BIMEnabled Commercial Construction. LEAD, Stanford SierraEastman, C., Teicholz, P., Sacks, R. & Liston, K. (2008) BIM Handbook: A guide to buildinginformation modeling for owners, managers, designers, engineers and contractors, Wiley.Edwards, P.N., Jackson, S.J., Bowker, G.C. & Knobel, C.P. (2007) Understanding Infrastructure:Dynamics, Tensions, and Design. Ann Arbor, DeepBlue.Gherardi, S. & Nicolini, D. (2000) To Transfer is to Transform: The Circulation of SafetyKnowledge. Organization 7(2): 329-348.Harty, C. & Whyte, J. (2008) Translating between media in construction design work: the rise ofcurious hybrids. Leadership and Management in Construction (LEAD), South Lake Tahoe, USAHarty, C. & Whyte, J. (forthcoming) Emerging hybrid practices in construction design work: the roleof mixed media Journal of Construction Engineering and Management.299

Leonardi, P.M. & Bailey, D.E. (2008) Transformational technologies and the creation of new workpractices: making implicit knowledge explicit in task-based offshoring. MIS Quarterly, 32(2): 411-436.Martin, D., Hartswood, M., Slack, R. & Voss, A. (2006) Achieving Dependability in theConfiguration, Integration and Testing of Healthcare Technologies Computer Supported CooperativeWork 15(5-6).McGraw Hill (2009) The Business Value of BIM: Getting Building Information Modeling to theBottom Line.Nightingale, P. (2000) Economies of scale in experimentation: knowledge and technology inpharmaceutical R&D. Industrial and Corporate Change 9(2): 315-359.Orlikowski, W.J. (2007) Sociomaterial Practices: Exploring Technology at Work. OrganizationStudies 28(9): 1435-1448.Pickering, A. (1995) The Mangle of Practice: Time, Science and Agency. Chicago, University ofChicago.Pollock, N., Williams, R. & D'Adderio, L. (2007) Global Software and its Provenance: GenerificationWork in the Production of Organizational Software Packages. Social Studies of Science 37(2): 254-280.Star, S.L. & Griesemer, J.R. (1989) Institutional Ecology, 'Translations,' and Boundary Objects:Amateurs and Professionals in Berkeley's Museum of Vertebrate Zoology, 1907 - 1939. SocialStudies of Science 19: 387-420.Styhre, A. (2009) Managing Knowledge in the Construction Industry. London and New York, SponPress.Taylor, J.E. (2007) Antecedents of Successful Three-Dimensional Computer-Aided DesignImplementation in Design and Construction Networks. Journal of Construction Engineering &Management 133(12): 993-1002.Whyte, J. & Levitt, R. (forthcoming) Information Management and its Impact on ProjectManagement Oxford Handbook on the Management of Projects. P. Morris, J. Pinto and J. Söderlund.Oxford, Oxford University Press.300

Risks Shared and Allocated by Construction Clientsand Contractors in Dutch (hybrid) Project AlliancesKoolwijk, J.S.J.Delft University of Technology, Faculty of Architecture, Department of Real Estate & Housing(email: j.s.j.koolwijk@tudelft.nl)AbstractSince the first Dutch project alliance in civil construction, the Waardse Alliance Project (2000-2003), took place in the Netherlands, the project alliance delivery method have gradually gained theinterest of Dutch construction clients. This study focuses on one of the main elements of the projectalliance delivery method, namely the risks shared by clients and contractors. It is observed in twocases that in Dutch practice not the pure project alliance is applied but a hybrid form of the projectalliance. In this hybrid project alliance only certain risks are shared and other risks are allocated,while other typical alliance basics are adopted. These basics are unanimous decision making, openbook accounting and a no blame culture. This paper focuses on the risks shared and allocated byclient and contractor.Keywords: project alliance, risk sharing and allocation301

1. IntroductionRisks are present in every construction project. Risks are perceived as the likelihood of unforeseenfactors occurring, which could adversely affect the successful completion of the project in terms ofcosts, time and quality (Akintoye & Macleod, 1997). Risks can be transferred, accepted, managed,minimized, or shared, but cannot be ignored (Latham, 1994). Under a traditional form of contract,different parties have specific individual obligations and risks are generally allocated to a particularparty.It‟s a widely accepted notion that „risks should be allocated to the party best able to anticipate andcontrol that risk‟ (Beard, 1982). This party should also have the financial ability to sustain theconsequences of, and also must be willing to accept the risks (Abednego & Ogunlana, 2006). Somerisks may also require the combined efforts of contracting parties for their effective management,because their allocation in standard conditions of contract are inappropriate for today‟s high-riskscenarios and multiparty complex projects (Rahman & Kumaraswamy, 2002).Thompson and Perry (1992) see that a tailor-made contract strategy for the active joint managementof risk by all parties is more suitable. Rahman and Kumuraswamy (2002) place Joint RiskManagement (JRM) under the umbrella of Relational Contracting principles. These principles are thefundament under several approaches, such as partnering, (project) alliancing, joint venturing, longterm contracting and other collaborative working arrangements (Jones, 2000).Under a pure project alliance risks and responsibilities are shared and managed collectively, ratherthan allocated to individual parties. Though the pure alliance is the most common form of allianceused in Queensland Australia, alliance owners have pursued deviations from the pure alliance(Davies, 2007). In the Australian practice these are called hybrid alliances (Queensland GovernmentChief procurement office, 2008). One of the variations in hybrid alliances is allocating certain risksrather than sharing all risks. This variation is also observed in the two Dutch cases which areexamined for this paper.In the Dutch practice the project alliance delivery method is gradually gaining the interest ofconstruction clients. In the Netherlands pure project alliances have not yet been applied. It has beenobserved in two cases that clients apply a hybrid form of the project alliance. In this form certainrisks are shared and others are allocated to one of the parties, while other typical alliance basics areadopted. These basics are unanimous decision making, open book accounting and a no blame culture.This paper will focus on the risks that are allocated and shared by in hybrid project alliances whichare applied in two cases in the Netherlands.302

2. Methodology & aimThe aim of this research is the gain an insight in the risks (Dutch) clients and contractors are willingto share under an alliance agreement. This insight can help clients and contractors in the futuredevelopment of (hybrid) alliance agreements.The two hybrid alliance projects which have been analysed for this paper are a large rail constructionproject and a ground-sanitation project. Both projects where selected for this paper based on thepresence of typical alliance features in the alliance agreement (see paragraph 3).Based on desk research on the contract documentation of the two construction projects the risksshared by client and contractor have been analyzed. The analysis was mainly done on the allianceagreement which contained an appendix which describes the risks which are shared in great detail.The analyses of both cases have been brought together and the findings are generalised to a list ofshared risks (see paragraph 6).3. Project alliancingAlliances are arrangements focussed on collaboration. It are arrangements where parties jointly worktogether to deliver the agreed outcomes of a project. The project alliance can be characterised by risksharing and a no-diputes/no-blame regime. The common features of a pure project alliance are(Department of treasury and finance Victoria, 2006):All risks are shared between customer and supplierThe alliance contract typically contains a „no dispute clause‟ with no liability between theparticipants (except for wilful default),The customer and supplier share common goals for project success,All transactions are of an „open book format‟, andAll participants win, or all participants lose, depending on the outcomes actually achieved.It has been observed in the two Dutch cases that clients apply a hybrid form of the project alliance. Inthis form certain risks are shared and others are allocated to one of the parties, while other typicalalliance features are adopted. These features are unanimous decision making, open book accountingand a no blame culture.303

4. Reasoning behind sharing or allocating risksThe basic principle behind sharing or allocating risks in the hybrid form of project alliancing, ismainly determined by the risks best allocated to the client or the contractor. The reasoning behindsharing or allocating risks can be described as follows:The client isn‟t competent in carrying out the construction (realization under a traditional form ofcontract) of a project. As said in one of the two cases, participating in the risks of the constructionphase would not make any sense for a client, because it has no ability to control the events that mighttrigger its occurrence. Therefore the client will not share nor carry risks involving the construction ofthe works.The contractors risks are bounded by the requirements of the client. These requirements describewhat the client wants achieve with its project. The consequences of scope changes cannot besustained by the contractor, nor are uncertainties that are non-amendable by the contractor.The risks that are shared by the client and the contractor are located between the two boundaries. Therisks that are shared, are mistakes in the requirements in relation to the contract (until a certain levelcalled „caps‟) like surveys on explosives (2 nd world war), contamination of the soil, describedcircumstances on cables, etc. The shared risks are further described in paragraph 6.5. Contracting conceptThe reasoning behind the allocation or sharing of risks results in two contracts. The first part is atraditional form of contract between the alliance, formed by the client and contractor, and thecontractor. In this contract the alliance forms the client and the contractor executes the works.On top of this contract an (hybrid) alliance contract is closed by the client and the contractor. Theactivities the alliance conducts are aimed at the design, the execution method, management of thesurroundings and controlling the executing contractor. Under the alliance contract certain risks areshared (lifted out of the traditional contract) by the client and the contractor. Both work togetherbased on the basic alliance principles.6. Case analysis on shared risksThe following table (1) shows the risks shared by the client and the contractor under the hybridalliance agreements applied in two cases. It is observed that most risk items can be related to thereality that some of the risks cannot be foreseen at the planning and design stages of a project. Otherrisks are need to combined effort of more than one contacting party for their effective management.It is also observed that the risks that are shared are similar with the risks that are described byRahman and Kumaraswamy (2002) in the article “Joint risk management through transactionally304

efficient relational contracting” (see table 3, page 50 in that particular article). In this article Rahmanand Kumaraswamy surveyed clients, contactors and consultants on the present risk allocation andhow the risks should be allocated. They found that 16 risks items are seen to be suitable for JRM.Table 1: Allocation of risks in Dutch hybrid project alliancesType of RiskAllocation of RiskContractor Alliance Client Allocation intraditionalcontract (Clientor Contractor)Risk item alsoidentified byRahman andKumaraswamy(2002)Design phaseMistakes in the design X Client XBasic design information supplied by client isfaulty (conditions of the soil, groundwaterlevel, digital terrain model, etc)X Client XMistakes in detail engineering by contractor X ContractorChanges in requirements as a result ofchanges in regulations set by the authoritiesX(capped)X Client XScope changes by the client X ClientScope changes by the allianceRealization phaseUnforeseen ground conditions (cables,explosives, archaeological objects,underground obstacles)Not (in time) acquiring the needed permitsNot (in time) getting the ground unoccupiedwith cablesConflicting works with third partiesDamage to the surrounding properties as aneffect of the work by the contractor(infrastructure, plots, buildings, cables, etc)XXX(capped)X(capped)X(capped)X(capped)X Client XXClient orContractorX Client XX Client XContractorChanges in prices of materials X X X Client orContractor(depends onarrangements)Accidents on the workfloor X ContractorDelay as a result of other circumstances (extreme weather conditions, not enoughworking area, blockades of surroundingroads, etc)X(capped)XClient orContractorProblems due to subcontractors / suppliers X Contractor XXX305

Problems due to (failing) machinery X Contractor7. Summary and conclusionsIt‟s a widely accepted notion that „risks should be allocated to the party best able to anticipate andcontrol that risk‟ (Beard, 1982). This party should also have the financial ability to sustain theconsequences of, and also must be willing to accept the risks (Abednego & Ogunlana, 2006). Somerisks may also require the combined efforts of contracting parties for their effective management,because their allocation in standard conditions of contract are inappropriate for today‟s high-riskscenarios and multiparty complex projects (Rahman & Kumaraswamy, 2002).Thompson and Perry (1992) see that a tailor-made contract strategy for the active joint managementof risk by all parties is more suitable. Rahman and Kumuraswamy (2002) place JRM under theumbrella of Relational Contracting principles. These principles are the fundament under severalapproaches, such as partnering, (project) alliancing, joint venturing, long term contracting and othercollaborative working arrangements (Jones, 2000).In 2002 Rahman and Kumaraswamy conducted research on the risk items recommended for JRM.They identified 16 risk items to be most suitable. In this study the risk items that are shared by clientand contractor in two hybrid project alliances are investigated. These risk items show a closesimilarity to the items identified by Rahman and Kumaraswamy.It is observed that most risk items that are shared can be related to the reality that some of the riskscannot be foreseen at the planning and design stages of a project. Other risks need the combinedeffort of more than one contacting party for their effective management.The aim of this study is to give an insight in the risks clients and contractors are willing to shareunder an alliance agreement. This insight can help clients and contractors in the future developmentof (hybrid) alliance agreements.ReferencesAbednego, M P, Ogunlana S O (2006), “Good project governance for proper risk allocation in publicprivatepartnerships in Indonesia”, International Journal of Project Management, vol. 24, pp. 622-634.Akintoye A S, Macleod M J (1997), “Risk Analysis and management in construction”, InternationalJournal of Project Management, vol. 15, no.1, pp. 31-38.Beard J M (1982) “Risk allocation through contract clauses”, Proceedings of the ASCE symposiumManaging Liability, ASCE, USA.306

Davies J (2007) “Preliminary results – Alliance contracting in the Australian Public Sector”, GriffithLaw School, the Socio-Legal Research Centre, Australia.Department of treasury and finance State of Victoria (2006) “Project Alliance Practitioners‟ Guide”,Melbourne, Australia.Jones d (2000) “Project Alliances”, Proceedings of Conference on „Whose Risks? Managing Risk inConstruction – Who Pays? Association for Projectmanagement, Hong Kong.Latham M (1994) “Constructing the Team: Joint Review of Procurement and Contractualarrangements in the UK Construction Industry”, Department of the Environment, London, UK.Queensland Government Chief procurement office (2008) “Procurement Guidance Series, AllianceContracts”, Queensland, Australia.Rahman M, Kumaraswamy M M (2002) “Risk management trends in the construction industry:moving towards joint risk management”, Engineering Construction and Architectural Management,vol. 9, no. 2, pp. 131-151Thompson P, Perry J (1992) “Engineering Construction Risks: A guide to Project Risks Analysis andRisk Management”, SERC Project Report, Thomas Telford, London307

Comparative Study on Quality Assurance ofConstruction Project in Taiwan and JapanTsung‐Chieh, T.National Yunlin University of Science & Technology, Taiwan(email: tctsai@ce.yuntech.edu.tw)Furusaka, S.Kyoto University, Japan(email: furusaka@archi.kyoto‐u.ac.jp)Han,T.Kyoto University, Japan(email: cs.serena2305@archi.kyoto‐u.ac.jp)AbstractConstruction project is the foundation of economic development where it represents the index of acountry’s development. The degree of its quality relates to national image and further closely relatedto public life, property and living quality. Taiwan’s construction quality is not yet ideal that they wereoften denounced by users. How to establish a quality assurance system and implement the qualityassurance system for overall upgrading of the construction quality has become a very essential topic.On the other hand, the mechanism of laws and standards related to construction industry in Japan,which ensuring quality is mortgaged to some degree. However, a lot of problems concerning qualityoccur actually in construction projects. The intention of this study is to probe into the profoundattention of the overall construction quality under currently practicing framework of the constructionquality control system in order to develop a reasonable quality assurance model suitable toconstruction environment, social structure, traditions and culture. Moreover, the study is alsoprocessed with the comparison and analysis of the quality control operation status and differences ofconstruction projects in Taiwan and Japan. In this paper, the mechanism where the quality problemsoccur is presented as a failure model. Then, a failure model is compared with the mechanism ofensuring quality under the laws and standards which relate to construction industry in Taiwan andJapan, and the problems of the mechanism of ensuring quality are clarified. Finally, some conclusionsand recommendations shall be obtained from the comparison for further improvement of problemssolving in order to ensure the advantages toward the construction quality.Keywords: quality assurance system, mechanism of ensuring quality, construction industry, failuremodel308

1. BackgroundConstruction project is the foundation of economic development where it represents the index of acountry’s development. The degree of its quality relates to national image and further closely relatedto public life, property and living quality. Taiwan’s construction quality is often claimed andunsatisfied by users. How to establish a quality assurance system and implement the qualityassurance system for overall upgrading of the construction quality has become a very essential topic.Most of the reasons claimed to the construction quality are 1Market – low pricing in biddings2Money – insufficient money that constructors should survive with additional projects 3Management – the domination without professional management 4 Men – personnel is lack oftechnical training 5 Materials – no integration of different working interfaces for various materials6Motivation – apply only used method without any pursuit of innovation 7Machine andMechanization – improper timing of machine and mechanization application 8Modern Information –related work plan fails to catch up with the information technical 9Mounting Product Requirement –apply lower grade material or process skipping operation.On the other hand, the mechanism of laws and standards related to construction industry in Japan,which ensuring quality is mortgaged to some degree. However, a lot of problems concerning qualityoccur actually in construction projects. Most of the reasons claimed to the problems are 1Multilevelsubcontractors of design and construction 2 Unclear responsibility of design and supervisory3Ambiguous contract relationship 4Low pricing in biddings weaken the capability of generalcontractor 5Short of training and quantity of engineer and skilled labour.The intention of this study is to probe into the profound attention of the overall construction qualityunder currently practicing framework of the construction quality control system in order to develop areasonable quality assurance model suitable to construction environment, social structure, traditionsand culture. Moreover, the study is also processed with the comparison and analysis of the qualitycontrol operation status and differences of construction projects in Taiwan and Japan.2. Quality assurance of building projectAs shown in Figure 1, in order to prove the assurance of construction quality, the proper process plan,management of process and correct contents which are compatible with plan are requires. And, theprocess reflects on the project base may be shown as the model of Figure 2 for the differentstakeholder and different project phases. This study is based on the process of Figure 1 and the modelof Figure 2 to discuss the concerning topics in Taiwan and Japan.309

WhatWhoResponsibilityCapabilityRegulationStandardsTechnical StandardsRegulationQualificationContractRole in RegulationContractRegulationQualificationCivil IdentificationProcess Plan and ManagementOutput of Pre-processMaterial/ProductProcessOutput of processHuman ResourceEnvironmentFigure 1: The criteria and regulation of quality assuranceFigure 2: Descriptive model of construction quality3. Quality assurance of building project in TaiwanThe regulations on Government’s Procurement Laws Clause 70 (Public Construction Commission ofTaiwan, 2007) for the Construction Procurement Quality Control and the regulations as specified in“Quality control system of construction project” for ensuring the construction outcome in compliancewith the quality requirement of the design and specifications. This system is processed through the 3-level quality control systems such as the construction quality inspection system executed by theconstruction authority, the construction inspection system executed by undertaking party (Client) &the supervisory party and the construction quality control executed by the contractor. The frameworkof 3-level quality control systems is shown as Figure 3(Public Construction Commission of Taiwan,2003).310

Figure 3: Framework of Public Construction Quality Control SystemThe quality control system of public project in Taiwan can be divided as: construction quality controlsystem, construction quality assurance system and construction quality evaluation mechanism. These3 levels of quality control are described as follows.3.1 Construction quality control systemFor accomplishing the construction quality target, the construction quality control system should beestablished by the contractor. Prior to construction commencement, the contractor should draft theconstruction plan in compliance with the project nature and contract requirement, produceconstruction drawings, setup construction operation outline and propose the quality control plan andestablish QC organization. Various items of construction quality control standard, material andconstruction inspection procedure, self inspection checklist, defects remedy record and documentrecords management system should be established to enable working personnel getting familiar withdrawings, specifications and every item of quality control operation regulation for realizing thequality control.3.2 Construction quality assurance systemTo ensure the construction outcome of a project in compliance with the quality target of the designand specification, the Client (or Supervisory party) should establish construction quality assurancesystem and setup quality management (supervision) organization. Moreover, the quality management(supervision) plan should be established for implementing the supervision of construction andmaterial/equipment inspection operation. Further, the inspection result should be recorded forreviewing the efficiency and defect; through sustainable repair and improvement to achieve the targetof overall upgrading of construction quality.311

3.3 Construction quality evaluation mechanismFor confirming the execution result of the construction quality management, the constructionauthority should apply construction quality evaluation. The result of the evaluation can be applied asbasis for evaluating the authority and it also can be used as reference for improving the contractor’squality control operation and selection of excellent bidder. Moreover, by convincing the Client (orsupervisory party) and contractor’s substantial practice of quality control, it is intended to achieve thetarget of upgrading construction quality. Project inspection operation should be established with“Construction Evaluation Team’s Operation Regulations” 7). The regulations were established inaccordance with the Government’s Procurement Laws Clause 70, Sub-clause 4 and “Projectconstruction evaluation team” . In this evaluation, the team should confirm the process in compliancewith the construction quality control system which is relevant to laws & regulations and therequirement of the contract conditions. Further, by referring to the construction evaluation operationreference standards in their evaluation on the items such as construction quality and progress, etc.The major evaluating items to be performed by the Evaluation Team are as follows.1Quality directing mechanism of the authority, the record of the reviewed supervision plan,construction progress management measures, handling of construction defect and the defectimprovement tracing.2Supervision organization of the supervisory party, the review procedure of construction plan &quality plan, the evaluation procedures and standards of material/equipment random inspectionand construction evaluation, quality audit, document record management system from thesupervision plan content and executed condition; the executed condition of defect remedy tracingand construction progress supervision, etc.3Contractor’s quality control organization, construction outlines, quality control standard, material& construction inspection procedure, self inspection checklist, control of unqualified product orwork, remedy & prevention, internal quality audit, document record management system, etc.4Construction planning & designing, environmental protection, material & equipment, significantdefects of drawings & specifications, necessity of design change, whether the architect,contractor’s professional engineer and quality control personnel perform their obligations incompliance with relevant laws & regulations and contractual requirement, etc.3.4 Operation procedures of 3 levels of quality controlThe implementation of 3-level quality control systems aims at upgrading the construction quality.Effective quality control system should be established for motivating, remedying, preventing thedefects of the contractor’s quality control. The content of the establishment are 3 parties respectivelyas the authority, the client supervision party and the contractor. The operation procedure of theconstruction quality control systems are as shown in the Figure 4. The construction quality must beindependently completed and guaranteed by the contractor, i.e., the contractor must be capable of312

Pre-constructionContractor`sconstructionRepairUnder -constructionCompletionprocessing the quality control system through self inspection, quality assurance, quality directing andquality audit.Client ( Supervisory ) Party Contractor’s ConstructionConstruction Quality Control SystemQuality Control SystemQual i t y ManagementPlanMaterial / Equipmentinspection planConstruction operationevaluation planPaper certification planConstruction outlineConstruction drawingConstruction planEvaluationQuality control planApprovedMaterial & constructionquality management standardMaterial & constructioninspection processInspectioncertificationMaterial /equipmentinspection reportConstruction operationinspection reportConstruction operationevaluation reportInspection applicationComply with therequirementNot comply withthe requirementSelf inspectionNot comply withthe requirementRepair noticeImprovementmeasuresData file safekeepingAll information in listedpackage hand over to thesafekeeping departmentafter completionQuality control data filingFeedback constructionoutline operation methodfor improvementFigure 4: Operation Flow Chart of Public Construction Quality Control System313

4. Quality assurance of building project in JapanBasically, the concept of quality assurance in Japan is different with that in Taiwan. The law isstipulated concerning with the area of economic behaviour to secure the product’s process is correctin Taiwan. But, Japan lays the stress on the professional activities and responsibility as shown inFigure 5.The Figure 4 of the Taiwan’s stipulation may explain to pay attention on the lower portion of Figure1, and Figure 5 of Japan’s stipulation may explain to pay attention on the upper portion of Figure 1.WhatWhoResponsibilityCapabilityDesignDesignConstructionConstructionRegulationStandardsTechnical StandardsBuilding CodeTechnicalStandards(JIS、JASS)Building CodeTechnical Standards(JIS、JASS)Tender DocumentBuilding CodeTechnicalStandards(JIS、JASS)ConstructionDocumentRegulationQualificationContractBuilding CodeProfessional LawDesign ContractBuilding CodeContracts(Designer,Supervisor, SiteManager)Building CodeProfessional LawConstruction LawConstructionContractsSupervisorContractFigure 5: Regulations of Japan in construction phasesRole in RegulationContractBuilding CodeProfessional LawDesign ContractBuilding CodeContracts(Detail Drawing,Spec., ShopDrawing,Construction Plan)Building CodeProfessional LawConstruction LawConstructionContractsSupervisorContractRegulationQualificationCivil IdentificationBuilding CodeProfessional LawBuilding CodeProfessional LawConstructionLawConstructionContractsSupervisorContract4.1 Construction quality control systemBasically, the quality control system of Japan follows the stipulation of Building Code, TechnicalSpecification and Project Plan, and has the same concept of the quality assurance system with tediouschecks by multi-level subcontractors. As shown in Figure 6, the quality control of project is oneexample executed in jobsite due to the Building Code, Technical Specification, Project Plan and theguideline of project participants’ contracts which may describe the relationship of instruction, designdrawings and shop drawings. But the structure of tedious checks by multi-level subcontractors alsomay cause the ambiguous contract relationship and unclear responsibility of all parties. This situation314

also makes the fails of product’s quality as the finial result of the example of Figure 6 (Hirano andFurusaka, 2008).Figure 6: Descriptive failure model of construction quality4.2 Construction quality assurance systemA multi-level subcontract to secure the quality of construction project is not only used by generalcontractor, but also by design office. As shown in Figure 7, the number of multi-level subcontractsmay be 3 or 4. This situation makes the complicate communication and information delivery amongmain contractor and subcontractor. And, the coordination and delivery method become veryimportant to all participants. This quality assurance system is compatible with the regulation systemas shown in Figure 5. Actually, the specialization of construction professionals is a normal situationin construction industry of Japan. But, it also leaves the problem to client who may not know how tohandle this vague project environment.315

Figure 7: A multi-level subcontract of design5. Comparison of analyses(1) Professional work division5.1 Topics of TaiwanInsufficiency of information and technical exchanges among professional engineer, QCpersonnel and supervisory engineer make the difficulty to integrate difference of drawings injobsite and immediate remedy coordination. Site instruction of architect during the constructionenables a probe into whether or not the designing, planning are easy for construction. But thissystem should be identified at early stage of designing & planning for preventing the conflictsbetween the drawings and site construction.(2) Personnel trainingThe good or bad of quality depends on “manual” execution. Therefore the self inspection of thecontractor at the first level of quality control system is the key factor of successful upgrading ofconstruction quality.316

(3) Site Inspection System of Private ConstructionReview of working manpower to increase supervision responsibility may be contracted toarchitect and professional engineer to go to the site for inspection and certification, but relatedincentive or penalty should be stipulated for binding and demand their enthusiastic execution.(4) Legalization and stipulation of private sector’s 3-level quality control systemA set of quality control of public project related laws & regulation should be established forprivate project, and quality control of private project also should be maintained in uniformity inorder to enable each quality management more systematic.5.2 Topics of Japan(1) The structure of multi-level subcontract in design and constructionAs mentioned above, the structure of multi-level subcontractors may cause the ambiguous contractrelationship and unclear responsibility of all parties. Also, it is very difficult to describe the failuremodel and to find out the causal effect of poor quality.(2)Unclear boundary of design and supervisoryThere is very clear concept for professional definition in the Building Code of Japan, but it isintended or not intended to neglect in the real project. On the other hand, low pay for design andsupervisory compared other country also makes the uncompleted design document be used untilconstruction commence. Sometimes the designer should use design fee to compensate the short ofexpenses of supervisory phase.(3) Ambiguous contract relationship of participantsThe long-termed relationship business in the construction industry of Japan creates very uniquecontract environment. Basically, few participants look seriously to the contents of contract andown very strong knowledge concerning with contract.6. Conclusion and suggestionThis study made the comparison of different concepts on quality assurance of construction project inTaiwan and Japan. In Taiwan, the process may be concerned as important due to the quality is theissue of law level, but not commercial level. But in Japan, the qualification and who is in charge maybe concerned as important due to quality is the issue of social coconscious concerning with skilltradition and mutual reliability of participants. There are still some problems should be clarified inthe future study.317

1) Who should take the responsibility and make the quality plan?2) Who should make sure the property of quality plan?3) What is the method to make sure the property?4) What is the complete description of the failure in quality assurance?5) What are the solutions of these failures?ReferencesKao Cheng-Chuen, Kuo Shi-Chei, Lin Ming-Chiang (2003), “Research on building construction siteinspection system”, thesis of Graduate School of Civil Engineering, National Taiwan University,Taiwan.Lan Wei-Kong (2004), “Public construction quality system-the construction quality control of theDirectorate General of Highways”, No. 4 Issue, Volume 31, Taiwan Highways Engineering, Taiwan.Public Construction Commission (2007), “Government’s Procurement Laws”, Taiwan.Public Construction Commission (2002), “Implementation Regulations of Government’sProcurement Laws”, Taiwan.Public Construction Commission (2003), “Project Construction Evaluation Team’s OperationRegulations”, Taiwan.Shuzo FURUSAKA, Yoshinobu HIRANO (2007), “The study of multi-level organization and qualityassurance of building project”, Proceeding of 23 th Symposium on Building Construction andManagement of Projects, 30 July Tokyo, Japan.Wu Han-Chang, Lin Chi-Tong (2006), “Research on the construction quality performance status andproblem improvement countermeasures for the supervision work commissioned for PublicConstruction”, thesis of Graduate School of Civil Engineering, National Taiwan University, Taiwan.Yoshinobu HIRANO, Shuzo FURUSAKA (2008), “Mechanism of Ensuring Quality and OpenSeam/Failure Model for Building Construction Project in Japan ”, Proceeding of 24 th Symposium onBuilding Construction and Management of Projects, 22 July Kyoto, Japan.318

Implementing a System for Achieving InnovationOpportunities in a Construction companyYepes, V.ICITECH, Universidad Politecnica de Valencia(email: vyepes@cst.upv.es)Pellicer, E.School of Civil Engineering, Universidad Politecnica de Valencia(email: pellicer@cst.upv.es)Correa, C. L.Faculty of Engineering Sciences, Universidad Catolica del Maule(email; clcorrea@ucm.cl)Alarcon, L.F.GEPUC, Pontificia Universidad Catolica de Chile(email: lalarcon@ing.puc.cl)AbstractSmall and medium-sized contractors are characterised by organisational structures that are highlyfocused on control. As a result, employees concentrate on day-to-day activities with little time ormotivation to generate creative ideas. Generally, the technological improvements of these companiesarise as a result of problem-solving at the construction site. Nevertheless, the actual status quo ischanging. In fact, some Spanish public agencies are already considering innovation as an added valuein public bids; thus, large contractors are starting to systemise their innovative efforts. This meansthat small and medium-sized enterprises must modify their attitudes towards innovation in order tosustain their competitiveness. The implementation of a system that enhances systematic innovationand acquisition of knowledge may be the solution to overcome this disadvantage, as discussed in thispaper. The authors analysed the implementation of an innovation management system in a Spanishconstruction company of medium size. The system builds on a set of processes aimed to generateR&D projects that allow the contractor to document the innovation, not only for internal purposesrelated to knowledge management, but also for external ones associated with obtaining better scoresin public biddings. These processes are: (a) technological watch; (b) creativity; (c) planning andexecuting R&D projects; (d) technology transfer; and (e) protection of results. The last step is thefeedback of the entire process through the assessment of the final outcomes. The implementation ofthe R&D system is ensured within the organisation, through training of personnel, participation ofstakeholders and encouragement of the innovation culture.Keywords: contractor, innovation, management, process, R&D, system319

1. IntroductionInnovation is an essential business management tool for organisations that wish to survive. But, caninnovation be a strategy to strengthen the competitiveness of construction firms? Some would say thatinnovation is a trend, as was quality or environmental management some years ago. Even a casualobserver, unaware of the reality of the construction industry, might think that this sector is stuck in thepast and that it has little capacity to innovate. Currently construction companies have a high capacityto innovate but, unfortunately, are still far from the effort made by other industrial sectors.The construction industry produces about 10% of the Gross Domestic Product in developed countries;Spain is one of the European countries with higher output in the construction sector, along withGermany, Britain, Italy and France (Seopan, 2008). Nevertheless, the construction industry investsonly 0.27% of its turnover in R&D activities (COTEC, 2009). It should be stressed however thatalthough this percentage is very low, some Spanish institutions (large construction companies,universities and research institutions) are actively involved in major international research.Applying the commitments made in 2000 by the European Union (CICYT, 2003), the Spanishgovernment launched a special program to reduce the gap in R&D investment with other developedeconomies (BOE, 2005). Spain is one of the countries that offers the greatest tax incentives on R&Dspending for enterprises (OECD, 2006); currently, companies that invest in R&D can obtain taxincentives through the Spanish Law 4/2004 on Income Tax (BOE, 2004). Additionally, since late2006, the Spanish Ministry of Infrastructures rewards companies in the tendering process if they carryout R&D activities; this incentive can increase the final score of the tender by 25% (Pellicer et al.,2008).In spite of the aforementioned figures, it would not be fair to state that construction companies are notinnovative. These companies overcome major technological challenges around the world. Contractorsare facing extremely complex challenges everyday that are reflected in singular projects difficult toexecute, solving the most diverse technical problems effectively. The key problem is that thiscontribution to knowledge is often not sufficiently systematised and disseminated throughout thecompany. Seldom is the economic effort that these challenges pose really valued. It cannot be said,therefore, that construction firms are not innovative enough. The challenge is to standardise andsystematise innovation to make it more effective and efficient.To encourage innovation in the Spanish economy, the experimental set of standards UNE 166000 waspublished in 2002 by AENOR; in 2006 the final version was published (AENOR, 2006a & 2006b).These standards aim to help companies systematise R&D management. They consider innovation as aprocess that can be standardised in a similar way to quality or environmental management.Innovation, therefore, is a process that can be normalised using the methodology "Plan-Do-Check-Act". The opportunities for innovation arise from internal and external analyses.The implementation of a system that enhances systematic innovation and knowledge acquisition isdescribed in this paper. The authors analysed the implementation of an innovation managementsystem in a medium-sized Spanish construction company. The system is built on a set of processes320

aimed to generate innovation projects that allow the contractor to document the innovation, not onlyfor internal purposes related to knowledge management, but also for external ones associated withobtaining better scores in public biddings.This paper is structured as follows. First, a strategic analysis of the company is presented; two surveyswere developed: one focused on a group of similar contractors (external analysis), whereas the otherfocused on directive staff of the company (internal analysis). As an output of the strategic analysis, asystem for R&D management in the company is created. Thus, the innovation system is illustratedwith descriptive charts, consisting of five processes: (a) technological watch; (b) creativity; (c)planning and executing R&D projects; (d) technology transfer; and (e) protection of results. Once thesystem is designed, observations from the implementation of the system in the company under studyare enumerated.2. Strategic analysis of the case study2.1. Case studyThe internal analysis of the selected company reveals an enterprise with a workforce of over 1500employees in eight regional offices. It has long proven its experience in the civil engineering andbuilding sector, being its annual turnover around four hundred million Euros.This company has not yet taken into consideration innovation as a business strategy. For the internalanalysis of this study, a qualitative research methodology was used. Project management, in general,and its application to the construction sector in particular, is currently seen as a social behaviour(Cicmil et al., 2006), so the case study approach is suitable for its analysis (Yin, 2003). Directobservation was used as the general methodology, together with surveys and interviews, analysis ofinternal reports and technical documents over a twelve-month period. A questionnaire was alsodistributed to 20 executives of the company, as explained in the next subsection.The external perspective, by contrast, essentially focuses on determining exogenous factors affectingthe competitiveness of the company. This perspective brought to light the opportunities and threats inthe construction sector, thus defining the competitive environment with all possible risks and potentialbenefits. The external perspective of the study took into account the analysis of different sources ofinformation, such as official documents, technical and scientific journals, technical reports andwebsites, among others. A questionnaire was also distributed to more than a hundred companies in theSpanish construction industry; the results are discussed in Pellicer et al. (2008), although they will besummarised later.Presently, the strategic analysis of the company from an internal and external perspective isfundamental. The internal analysis identifies the company’s strengths and weaknesses, as well asother aspects that determine its resource profile and its abilities with regard to its competitors. On theother hand, the external point of view highlights the opportunities and threats; they are inherent to theconstruction sector within which the company competes. The results of the research were used to321

draw up a strategic analysis of the company under study using the SWOT (strengths, weaknesses,opportunities and threats) model.2.2. Internal and external analysesIn order to gather first-hand information on the subject of innovation, twenty executives (principal anddirectors of functional and regional departments) were interviewed to find out more about theirbusiness perception. Vallés (1997) pointed out the following advantages of using this type ofinterview: richness of contextualised information; flexibility and economy; a qualitative counterpointto quantitative results; accessibility to information that is difficult to observe; and feasibility ofexploitation. Table 1 summarises the main conclusions drawn from the direct interviews withexecutives; this survey is thoroughly described in Correa (2009).In order to know the current scenario of innovation management in the Spanish construction sector, asurvey was developed in 2006 taking into account a representative sample of construction companies;105 out of 120 companies responded to the questionnaire. Among the results obtained (see Pellicer etal., 2008, for details) one-third of the companies have specific departments for R&D management.However, two-thirds of the respondents revealed that the company’s personnel is given little time andfew incentives to pursue innovation; almost the same percentage affirms that companies put theirefforts in production or operation processes, without time for innovation. Another result is related tothe certification of R&D management system: only 5% of the companies hold a certificate from anexternal certification body. Companies aim to obtain certification in R&D management systems andto truly assimilate these systems within the company.Table 1: Summarised results of direct interviews with executivesFACETSConceptual frameworkStrategic frameworkOrganisational factorsProcess innovationTechnological innovation(product/service)Knowledge managementOUTPUTSInnovation is associated almost exclusively with research and, moreover, nodistinction is drawn between exploitation and innovation activities.The company does not have an innovation system; furthermore, its competitivestrategy does not seem to incorporate policies that foster innovation.The organisational structure is rigid and controlling. The company culture is notinnovative; although it is acknowledged as being important, in relation to the sizeof the firm, no physical or financial resources are allocated to such purposes.Changes take place only in the basic processes and only when major problems aredetected.Innovation is not a priority for the company. All the company’s efforts are focusedon its day-to-day activities. Nevertheless, the company does keep track of its maincompetitors (albeit in an unorganised way) and monitoring is carried out byseveral different individuals.The company’s current situation of urgency does not favour reflection andknowledge generation. Fostering creativity and generating innovative conceptsare not priorities.322

2.3. SWOT analysisThe firm under study has significant tangible and intangible resources. The tangible ones are commonto other large and medium-sized firms and include elements such as regional offices, vehicles andequipment, coating and concrete mixing plants, mobile plants and financial capital, among others. Incomparison to smaller firms, a larger company has a greater financial capacity to cover theexpenditure involved in R&D and to assume the risks inherent to such activities (Seaden et al., 2003).The firm under study has three primary intangible resources: (1) its select group of skilled staff whoare well-suited for reaching the company's objectives; (2) its know-how or years of experience in thepublic works and building sector; and (3) its being recognised throughout the country for its capacityto successfully carry out the construction projects awarded. Finally, the company has been awardedquality-assurance, environmental management as well as health and safety standards certificates.Although the company’s chief officers are aware of the competitive advantages of engaging ininnovation, they have not undertaken any actions in that direction. Consequently, investment in R&Dactivities is scarce with respect to other large contractors. More specifically, there is no specificdepartment for the research and development of new products or processes, nor to focus efforts onbenchmarking from the technological point of view. The absence of a specific R&D department alsolimits the success of the R&D activities. Another indicator of the company’s deficient innovativeculture is reflected in the few actions taken to participate in national or international organisations thatpromote R&D in the construction sector, such as the Spanish Construction Technology Platform(www.construction2030.org/ptec.php). The company does not seem willing to take risks, and thatimpedes innovation (Tatum, 1989).The company’s loss of competitiveness is its greatest threat. Such a detrimental effect could renderthe company unable to bid for contracts with a higher added value. Therefore, it is at a disadvantagein public tenders due to its scarce R&D activities compared to other medium and large contractors.The company’s lack of innovation could also make its product portfolio obsolete. The company’sreputation and prestige as a versatile, pioneering enterprise may also be affected by its laggingcompetitive performance from the technological point of view (Kangari and Miyatake, 1997).Nevertheless, the company can benefit from the tax incentives the government offers to firms thatcarry out R&D activities (BOE, 2004). Moreover, technological watch can be used to identify thenovel technology requirements essential for the future of the business. Similarly, a system focused onmanagement of R&D that helps to acquire and distribute knowledge can also reduce these threats andtransform this scenario into an excellent opportunity for success. Taking into consideration the newrules regarding procurement enforced by many Spanish public agencies, innovation is valued incompetitive bidding as a key asset (Pellicer et al., 2008). The new Spanish standards on managementof R&D projects –UNE 166001 (AENOR, 2006a)– and R&D systems –UNE 166002 (AENOR,2006b)– are the major tools used to pursue this goal.323

3. Description of the R&D management system3.1. Overall description of the systemThe standard UNE 166002 establishes the basis for the systematisation of innovation in companies(AENOR, 2006b). It also aims to integrate R&D management systems with those of quality (ISO9001), environment (ISO 14001) or health and safety (OHSAS 18001). The UNE 166002 standard isprocess-based, using the methodology “plan-do-check-act”. Regarding our case study, the companyunder analysis started the procedure of implementing the innovation system to stop the main threat ofstaying behind its traditional competitors (contractors of medium and large size) and even to exploitthe opportunity of taking some advantage over them. However, the company pursues these goals inspite of keeping its hierarchy unchanged; the firm has not set up a R&D department yet, but it is usingthe current organisational structure to perform the new tasks.The R&D management system forms part of the overall management system of the business thatincludes organisational hierarchy, planning, responsibilities, records, procedures, processes andresources. Its purpose is to develop, implement, execute, review and maintain the company’s R&Dpolicy (AENOR, 2006b). The two main goals of an innovation system are: (a) to increase thetechnological competitiveness of the company, favouring an innovative spirit and creativity; and (b)to improve internal knowledge management in the company, obtaining added value for its clients. Toachieve these goals, a methodology must be designed and its own organisational structure should beestablished.In relation to the methodology, the innovation system designed is divided into five processes: (1)technological watch; (2) creativity; (c) planning and executing R&D projects; (d) technology transfer;and (e) protection of results. This proposal complies with the Spanish standard UNE 166002(AENOR, 2006b) and it may be certified by an external body (Pellicer et al., 2008). In the rest of thissection, we will develop each one of these processes to explain the methodology implemented in thecompany for establishing a R&D management system.3.2. Process of technological watchTechnological watch is a systematic and organised effort to observe, collect, analyse, disseminate andretrieve accurate information relevant to the business environment (AENOR, 2006c). Technologicalwatch aims to detect opportunities or threats so as to anticipate changes with minimal risk in makingdecisions. Therefore, it is bound to the strategy of the company. Furthermore, the technological watchis a mechanism that facilitates brainstorming; as a consequence, the information generated may bemade available to all employees.As illustrated in Figure 1, the surveillance process involves several stages: identifying means andsources, gathering and analysing information, deciding on relevance by an appropriate evaluation,categorising and storing information in the company management system. Although the process oftechnological watch is included in the UNE 166002 (AENOR, 2006b), this process has a specificstandard (UNE 166006) for its development (AENOR, 2006c).324

Figure 1: Process of technological watchThe first phase is to collect relevant information existing in regular information sources (magazines,websites, newsletters, software, etc.), as well as specific ones (visits to exhibitions, lectures, etc.),managed by different departments of the company. This requires the identification a priori of theneeds, according to the company's strategic analysis. The search strategy and actions to perform mustalso be fully established. Each of the selected sources has a specialist in charge, in order to examinethe information assigned. When an interesting document, article or news report is discovered, itshould be included in the document management software available. The evaluation of informationmust be carried out according to the relevance, reliability, relevance and quality. Thus, the specialistresponsible for the source of information summarises the document (record of technological watch),providing search descriptors and classifying it within the system. The categorisation of information isdone through filtering and homogenisation, according to the functionality or importance. In addition,the company recognises the prevalence of certain issues as well as the existence of key factors arisingfrom the overall strategy of the company.The information contained in the database system is available to all employees and partners in orderto solve problems at construction sites or simply to generate innovative ideas applicable to thebusiness organisation.3.3. Process of creativityCreativity is the generation of ideas, by company employees, and contributes to improving theorganisation in accordance with the strategic guidelines established. The information required for thegeneration of ideas can come from the analysis of weaknesses, threats, strengths and opportunities ininnovation, or from particular problems that arise at the construction site. Hence, of all stakeholders,the employees directly involved in the execution of the works (site managers) are a main part of thesystem.The recording of ideas takes place in a database. The technical and economic feasibility of an idea andits affinity with the strategic lines previously established by the company are valued by key factors.The idea is assessed by a special committee for R&D activities, taking into account cost, schedule,resources, technical capacity and expected benefits; the contribution to meeting the company'sstrategy is also included. Depending on the company's ability to undertake projects and the quality of325

ideas, some will be chosen for further development. Therefore, the selected ideas are regarded aspreliminary R&D projects, also called briefs. The periodicity of the process depends on the timing setby the company: quarterly, annual or biannual.The R&D committee appoints a technician in charge of generating the preliminary R&D brief. If theidea is not his/hers, it is advisable to work closely with the author of the idea. The brief includesdetails regarding the person in charge, objectives, scope, design description, design characteristics,needs (resources, time and costs), basic graphic schemes, preliminary state of the art, risks assumed,and probability of success. The latter is considered as the likelihood of achieving the R&Dcertification (Pellicer et al., 2008).The R&D projects to eventually be developed by the company are selected by the upper management.Normally, the estimate of the risk assumed in each case and the likelihood of subsequent success inachieving certification under the UNE 166001 are taken into consideration. This process is depicted inFigure 2.Figure 2: Process of creativity3.4. Process of planning and executing R&D projectsThis process moves from the detailed project design to actual implementation at the construction siteor in the company, as summarised in Figure 3. When a problem-solving issue is involved, the projectis designed at the same time as works are carried out at the construction site; this case is quitefrequent, since the work at the construction site should never stop. This process is the responsibility ofthe project manager, who is usually the same person accountable for the preliminary brief.The project manager must prepare a detailed report of the planning of the R&D project prior to itsexecution. This report includes the methodology, schedule and budget. Also, it is the projectmanager’s responsibility to make progress reports of the projects if necessary. These follow-upreports are reviewed regularly by the company’s upper management. Upon completion of the project,326

the project manager must prepare a final report, specifying the objectives which were reached. Thisreport contains the following sections: executive summary, state of the art, technical developmentsproposed, description and justification of R&D activities, scheduling, organisational structure, budget,control, quality assurance, and protection of the results. Every report must include the minimalcontents to meet the requirements of the Spanish government (BOE, 2004) or certifying agencies(AENOR, 2006b) to obtain tax benefits, on the one hand, or the certification document, on the otherhand.As discussed earlier, the project implementation at the construction site is the basis of the wholeprocess. During project implementation at the construction site, the R&D project becomes a tool ofcompetitiveness for the company and, therefore, determines whether it is a failure or a success.Responsibility for the implementation of the innovation lies with the construction manager at the siteor with the department head that implements the innovation at the firm. Generally, a group is formedunder his/her leadership. As stated previously, many times there is the added difficulty of developingthe R&D design while executing the works at the construction site.Figure 3: Process of planning and executing of R&D projects3.5. Processes of technology transfer and protection of resultsTechnology transfer is the process of acquiring, transferring, sharing, licensing, accessing orpositioning innovative knowledge on the market (AENOR, 2006c); the main steps are specified inFigure 4. This set of actions is oriented to take advantage on the open market of the results of R&Dactivities. It is directly related with the commercial and social exploitation of intellectual property.Whenever the transfer of technology is feasible, risk should be assessed; if they are too high, the ideamust be abandoned. Otherwise, the type of technology transfer will be determined as one ofcooperation, transmission or delivery of services. A contract is signed, if necessary, to finalise theagreement.Protection of results aims to secure the knowledge produced. This activity is carried out throughoutthe innovation process. However, when the R&D project ends, the company has to evaluate all theexisting mechanisms to protect the results (either commercial secrets or administrative protection);Figure 5 summarises the process. The tools are diverse. Patents are technical inventions that entail327

new features, imply inventive activity and may be applied industrially. Brands or trademarks aresymbols (graphic or text) that distinguish products and services on the market. Industrial designsprotect the external appearance of a product or part of it, rather than its technical features. Copyrightsprotect original literary, artistic and scientific works (including computer applications and databases).Industrial secrets are used for information that is both confidential, thanks to efforts of the owner, andvaluable (technical know-how, formulas, ideas, etc.).Figure 4: Process of technology transferThe construction company also seeks to protect sensitive R&D information when contracting withemployees, firms or institutions. Specific agreements are developed for cooperation contracts, as wellas those for employees, to include confidentiality clauses regarding sensitive information.Figure 5: Process of protection of results3.6. Feedback and assessment of resultsThe standard UNE 166002 is designed to integrate the R&D management system with othermanagement systems already existing in the company, especially standard ISO 9001 on qualitymanagement. This characteristic eases the implementation and enables the continuous improvementof the system.The case study company is currently working to develop a database that contains the final reports forR&D projects, as well as the recommendations of the site managers. This database can be accessed byall members of the organisation. However, the knowledge management system is not yet fullydeveloped in the company.In addition, this contractor has set performance indicators for the system and each of its processes.These indicators allow for the understanding the innovative behaviour of the system, meeting theobjectives set by upper management. These indicators include: regular sources of information; recordsof technological watch that lead to ideas; accumulated ideas; projects that obtain certification oradministrative protection; other contractors certified by UNE 166002; official tenders that consider328

the evaluation of R&D projects; ideas approved as briefs (1 st selection); briefs approved as projects(2 nd selection); average cycle of innovation; and agencies, institutions or companies that maintaincooperation agreements in R&D with the company.4. Conclusions and final remarksThis paper analyses the implementation of an innovation management system in a Spanish mediumsizedcontractor. The system builds on a set of processes aimed to generate R&D projects that allowthe company to document the innovation, not only for internal purposes related to knowledgemanagement, but also for external ones associated with obtaining better scores in public biddings.Once the innovation system is designed, its implementation is ensured within the organisation. Thisinvolves the active and permanent participation of all stakeholders affected by the system. Thus, oncein operation, the system does not become a burden for the company. Its implementation has theadvantage of previous experience given by the quality, environmental, and health and safety systems,already implemented by the company. This experience demonstrates that it is difficult to makechanges that affect the behaviour of employees, in particular, and stakeholders, in general.Change involves moving the organisation from the current scenario to a new level, and keeping itthere. Consequently, the company develops a procedure to implement the system that involves threestages: (a) diffusion of the R&D system among the organisation’s personnel; (b) certification of theR&D management system applying the UNE 166002 standard; and (c) developing and promoting aninnovative culture through daily operation and exploitation of the system. These stages correspond tothose proposed previously by Lewin (1951): unfreezing; change or transition; and freezing. Theconstruction company is aware that implementing a new process poses specific problems, which mustbe considered to ensure that the organisation can achieve the expected benefits as far as possible. Atevery stage it is necessary to train staff in R&D activities and to maintain the constant incentive of theinnovative attitude.AcknowledgmentsThis research was partially funded by the Universidad Católica del Maule (project MECESUP-UCM0205), the Spanish Ministry of Infrastructure (project 2004-36), and the Universidad Politécnicade Valencia (contract UPV-20050921). The authors are grateful to Francisco Vea, Ricardo Lacort andManuel Civera for their help and support throughout the implementation of the system. The authorsalso want to thank Dr. Debra Westall for revising the text.ReferencesAENOR (2006a) UNE 166001:2006 - R&D&i management: requirements for R&D&i projects.AENOR, Madrid.AENOR (2006b) UNE 166002:2006 - R&D&i management: requirements for R&D&i managementsystems. AENOR, Madrid.329

AENOR (2006c) UNE 166006/2006 EX - R&D&i management: technological watch system.AENOR, Madrid.BOE (2004) Ley 4/2004 de impuesto sobre sociedades. Boletín Oficial del Estado, Madrid (inSpanish).BOE (2005) Convergence and employment. The Spanish national reform program. Boletín Oficial delEstado, Madrid.Cicmil S, Williams T, Thomas J, Hodgson D (2006) “Rethinking project management: researchingthe quality of projects”. International Journal of Project Management 24: 675-686.CICYT (2003) The Spanish national plan for scientific research development and technologicalinnovation for the period 2004-2007 - Summary. Ministerio de Educación y Ciencia, Madrid.Correa CL (2009) Análisis, diseño y desarrollo de un modelo de gestión de la I+D+i para empresasconstructoras, basado en la norma UNE 166002. PhD Thesis, Universidad Politécnica de Valencia,Valencia (in Spanish).COTEC (2009) Tecnología e innovación en España. COTEC, Madrid (in Spanish).Kangari R, Miyatake Y (1997) “Developing and managing innovative construction technologies inJapan”. Journal of Construction Engineering and Management 123(1): 72-78.Lewin K (1951) Field theory in social science. Harper & Row, New York.OECD (2006) Science, technology and industry: scoreboard 2005. OECD Publishing, Paris.Pellicer E, Yepes V, Correa CL (2008) “Enhancing R&D&i through standardisation and certification:the case of Spanish construction industry”. Revista Ingeniería de Construcción 23(2): 112-119.Seaden G, Goulla M, Douxtriaux J, Nash J (2003) “Strategic decisions and innovation in constructionfirms”. Construction Management and Economics 21(6): 603-612.SEOPAN (2008) Spanish construction activity report 2007. Seopan, Madrid.Tatum CB (1989) “Organizing to increase innovation in construction firms”. Journal of ConstructionEngineering and Management 115(4): 602-617.Vallés M (1997) Técnicas cualitativas de investigación social. Síntesis, Madrid (in Spanish).Yin R (2003) Case study research: design and methods. Sage Publications, London.330

Heuristic Repetitive Activity Scheduling Process forNetworking TechniquesBragadin, M.A.Alma Mater Studiorum – University of Bologna, Italy(email: marcoalvise.bragadin@unibo.it)AbstractProject scheduling is a key activity in construction process. Networking Techniques are usefulinstruments to accomplish project planning and control. But Networking Techniques develop adiscrete model of Construction Process which has instead a continuous nature. New Productiontheories like Critical Chain or Lean Construction recognize this as a major cause of constructionprocess inefficiency. The difference between model and real building process can lead to managingproblems for unexperienced planners, especially in repetitive projects like high rise buildings,housing, highways and other infrastructures, in which crews perform repetitive activities movingfrom one space unit to another. In particular networking techniques minimize construction totalduration but do not satisfy the requirement of work continuity through repetitive units of the project.To satisfy the work continuity constraint many methods have been proposed by researchers andpractitioners. Although the effectiveness of these methods, which give notable insights in repetitiveconstruction process, construction scheduling is still performed in most real cases with a commercialsoftware, working with a CPM based network like Precedence Diagramming Method (PDM). Theobjective of this paper is to present a simple, flexible and easy to implement optimization algorithmfor resource-driven scheduling for repetitive projects. The algorithm is based on a PDM networkplotted on a resource/space chart, thus identifying resource paths and unit paths in the network. Aftertraditional PDM time analysis is performed, the algorithm seeks, for every repetitive activity to beperformed on a repetitive space unit of the project, the Planned Start and the Planned Finish that arebest suitable to satisfy the work continuity requirement. In order to maintain minimum project totalduration the work continuity requirement is relaxed when encountering a network limit. Accordingwith Critical Chain Theory, time buffers are inserted at the end of every resource path, to preventdelays on project completion, due to resource unavailability. The method has been tested on a simplerepetitive project from pertinent literature. The proposed algorithm is an heuristic resource-drivenscheduling method for repetitive projects, easy to be implemented by practitioners.Keywords: repetitive project, resource-constrained scheduling, precedence diagramming method,critical chain, lean construction331

1. Introduction1.1 Precedence Diagramming Method and Repetitive ProjectsConstruction Project scheduling is often accomplished with Activity Network. The most powerfulnetworking technique now available for project planners is Precedence Diagramming Method (PDM)(Harris, 1978) which can be easily implemented with a computer software. PDM is a Critical PathMethod (CPM) networking technique, so it is a construction model in which a set of elements, calledactivities, are linked each other with logical relationships. This construction model representsbuilding process by means of time flow between the network or the sequence of the activities thatconstitutes construction phases. But at the same time it represents another flow in the network, theworkflow. Actually network planning techniques are discrete and time oriented, instead constructionprocess is a continue flow of operations. The success of network planning in term of use byconstruction planners is due to the fact that it is easily implemented by planning computer software,and that its model is well suitable to the traditional conceptualization of construction (Koskela,1992). Construction activities may be repetitive or non repetitive. Repetitive activities are foundcommonly in the construction of high – rise buildings, pipeline networks, highway and housingprojects. A repetitive activity is an activity which is part of a construction sub-process performed byspecialized resources, like for instance plastering or masonry performed by crews in a multi-storeybuilding. In fact, since construction is a continue process accomplished by resources, and thescheduling model (i.e. PDM) is discrete, experienced planners usually design an activity network inwhich construction activities are made discrete by the work assignment of a single constructiveelement, i.e. plaster for storey #1. So the continuous plastering sub-processes is modeled by means ofa repetitive activity, plastering for every storey, i.e. space unit of the building. In a repetitive activitya construction crew often repeats the same work of that activity moving from one repetitive unit toanother (El-Rayes and Moselhi, 1998). A non - repetitive activity is unique in the project and oftencoincide with the whole sub process, i.e. a central boiler installation of a facility (Halpin and Riggs,1992). This kind of project activities, i.e. non repetitive, are easily implemented in network planning,often because of specialized resource utilization. In repetitive-unit projects instead, it is importantthat repetitive activities are planned in such a way as to enable timely movement of crews from onerepetitive unit to the next, avoiding crew idle time. This is known as the “work continuity constraint”and El-Rayes and Moselhi (1998) observe that its application during project planning can provide aneffective resource utilization strategy that leads to: maximization of the benefits from the learningcurve effect for each crew; minimization of idle time of each crew; minimization of the off-onmovement of crews on a project once work as begun.1.2 Repetitive-Unit Project SchedulingAs a matter of fact the struggle of networking techniques to achieve the minimum project totalduration may cause, especially in repetitive projects in which crews are employed from one repetitiveunit to another, resource idle time in construction process. So networking techniques are consideredin literature not suitable for the planning and scheduling of a repetitive project, especially because of332

the inability to satisfy work continuity constraint, even if resource leveling is performed (Selinger,1980; Reda, 1990; Russell and Wong, 1993). The basic instrument suggested by researchers andpractitioners for the planning and scheduling of a repetitive projects are time / space diagrams, inwhich activities performed by resources are plotted as line or other geometrical shape. Researchershave proposed many scheduling methods, that can be classified as Line of Balance for Projects withdiscrete space units, like floors of high – rise building, factory buildings of an industrial plant,housing projects, and Linear Scheduling Method for continuous space projects, like highways andpipeline networks. The first class of repetitive projects is named as “discrete repetitive projects”while the second is named “continuous repetitive projects” (Yang and Ioannou 2001). Kenley andSeppänen (2010) observed that all these methods are more concerned with movement of resourcestrough locations or places, thus they introduced the Location-Based Management System (LBMS)which shifts the focus from individual discrete activities to managing the progress of repetitiveactivities as performed by crews moving through a building and completing all their work location bylocation. Selinger (1980) suggested that there is a tradeoff in scheduling repetitive projects: allowingwork interruptions, thus violating crew work continuity constraint, may reduce the total duration ofconstruction project, and accordingly, indirect cost, while may increase direct cost because of the idlecrew and the learning effects on productivity. Russel and Caselton (1988) extended the work ofSelinger in term of optimizing project duration while relaxing the work continuity constraint. Later,Russell and Wong (1993) suggested that the work continuity constraint should be satisfied but notstrictly enforced in scheduling repetitive activities. In fact they experienced that many of therestrictive assumptions made in model implementing are not really important for practicalimplementation. Real life projects don’t follow the nice, neat parallel lines of a pure flow model, orthe precision portrayed by network diagram. El-Rayes and Mosehli (1998) suggested that resource –driven scheduling accounts directly for crew work continuity and facilitate effective resourceutilization. They suggested that resource – driven scheduling of repetitive activities requires thesatisfaction of three constraint: precedence relationship, crew availability and crew work continuity.Basic concept of resource – driven scheduling of a repetitive project is to account for: a) numbers ofcrews to work simultaneously on different space units of repetitive activities; b) interruption of crewwork continuity. As a matter of fact construction scheduling is still performed, in most cases, with acommercial software, like Primavera Project Planner® or MS Project®, working with a CPM basednetwork. The objective of this paper is to present a simple, flexible and easy to implementoptimization algorthm for resource-driven scheduling with repetitive and non-repetitive activities.The algorithm is based on a PDM network plotted on a resource/space chart. After traditional CPMtime analysis is performed, the algorithm seeks the planned start and planned finish that are bestsuitable to satisfy the work continuity requirement, for every repetitive activity to be performed on arepetitive space unit of the project. The work continuity requirement is relaxed in order to maintainthe minimum project total duration achieved by CPM time analisys. If it is possible the algorithmcreates time buffers at the end of every resource path. Time buffers are needed to prevent delay onproject completion (Goldratt and Cox, 2004).333

2. New conceptualization of construction2.1 Activity view and flow view of construction processStarting from ages fifty of last century, scientist and researchers have been studying constructionprocess to improve its efficiency and effectiveness. An important branch of research is about methodsand instruments for project planning, scheduling and control. Basically the background of all thismethods and instruments is the traditional conceptualization of construction. Construction is seen as aset of activities characterized by an input and an output, with the objective of producing a certainproduct. This is the “Activity View of Construction” (Koskela, 1992). This model of constructionprocess originates from methods for contract accounting as defined in bidding contracts forcostruction. In fact building facility is divided in subsystems, set of technical compounds. Thequantity surveyor sets relationships between technical elements and cost of manpower, materials andequipment. Actually, for every technical element of the building system it is estimated the cost of theconversion activity, which transforms input in output. The bidding contract sets for the building, orthe building sub-system for sub-contract, the production output, and the prize to be paid, sum ofsingle elements prizes, corresponding to conversion activities. The traditional conceptualization ofconstruction is a model of construction which corresponds to a set of conversion activities, which area set of production sub-processes that convert input in output, each of them realized by specializedcrews and that can be analyzed and managed separately. Lean Construction is a constructionmanagement technique which has the goal of giving more value to the final client by buildingprocesses control. Management focus is on quality of product and processes improvement, waste(muda) reduction, operators responsibility and processes continuous improvement (kaizen).Construction processes are conceptualized as sum of conversion activities and flows of materials,energies, resources and information (Koskela, 1992). Building process conceptualization is nowcomplete: it is the sum of Activity View and Flow View. That is the sum of two basic elements,conversion sub-processes, sets of conversion activities that add more value to the final product, andflow sub-processes, sets of flow activities that move product from one conversion activity to another,normally without value improvement for the final client. More building process efficiency can beachieved by flow activities elimination or reduction, or efficiency improvement of conversionactivities. As a matter of fact networking planning techniques do not model construction flows,especially materials flows and crew flows. So poor planning management can lead to poor flowsmanagement, i.e. waste improvement. An experienced planner usually is well aware of flowprocesses, and keeps these flows as a back requirement of the construction plan (Yi, Lee and Choi,2002).2.2 Goldratt’s Critical ChainGoldratt’s Theory of Constraints (TOC) and its direct application to Project Management, known asCritical Chain Scheduling (Goldratt and Cox 2004, Rand 2000) has recently emerged as a newapproach to operation management. After the first period in the last decade of XX century, whereTOC implementation in project scheduling met with some resistance, TOC approach was found by334

esearchers and practitioners to be the new approach to project scheduling that correlates planningtools and human behaviour (Steyn 2000). In fact TOC is a management philosophy that considerhuman behaviour in project planning and execution. Despite that project human resourcemanagement is normally seen as a field of study quite separate from tools and techniques of projecttime management, like Precedence Diagramming Method for example, Critical Chain projectscheduling attempts to account for certain typical human behaviour patterns that affect projectperformance. Critical Chain focuses on the constraints of a project which prevent achieving its goals.Main concept of critical chain scheduling (Herroelen and Leus, 2001) is that critical chain isprotected from time overruns with buffers. So the safety associated with the critical chain activities isshifted to the end of the critical chain in the form of a project buffer, which has the aim of protectingthe project due date promised to the customer from variation in the critical chain activities. Feedingbuffers are placed whenever a non critical chain activity merge into the critical chain both to protectthe critical chain from disruptions on the activities feeding it and to allow critical chain activities tostart early in case things go well. Resource buffers are placed whenever a resource has a job on thecritical chain and the previous critical chain activity is done by a different resource. Resource buffersare usually in the form of an advance warning. The execution of the project is managed through theuse of buffer management. Since there is some predetermined part of buffer remaining unused,everything is assumed to go well, otherwise a corrective action must be taken. The execution ofactivities should be done according to roadrunner mentality: milestones are not used, thus allowing tocapitalize on early finishes of task predecessor. Actually the core concept of critical chain schedulingis the optimization of work flow through the project.3. Heuristic repetitive activity scheduling process fornetworking techniques3.1 Proposed methodConstruction planning with Precedence Diagramming (PDM) method includes three main phases:network realization, time analysis and plan optimization (Harris 1978). In the network realizationphase network logic is defined, i.e. activities and logical relationships between predecessor activitiesand successor activities. In the time analysis phase forward pass is performed, and so early start (ES)and finish (EF) for every activity are computed and the minimum total project duration is found(TPD); then backward pass is performed and so late start (LS), late finish (LF) and floats for everyactivity are computed, and the critical path is found. In this phase feasible dates for activityperformance are detected. In the schedule optimization phase construction programme is modified,searching to achieve project requirements satisfaction, and thus defining the target schedule. Projectschedule optimization may change network logic, activity duration and time constraints. To improveconstruction planning and scheduling with Precedence Diagramming Method an heuristic repetitiveactivity scheduling process is defined, with the aim of supporting an inexperienced planner indefining target plan and schedule for a repetitive project. Project planning with PrecedenceDiagramming ensures logical precedence requirement satisfaction but does not ensure resource flowtracking, nor work continuity constraint satisfaction. These two critical elements of network planning335

K1K2UNIT Kare tackled by the proposed method. Resource flow tracking is improved by network drawing.Network is plotted on a resource / space chart, with the x – axis representing resources and the y –axis representing space units of the project. Crews are grouped by work item, i.e. the repetitiveactivities of masonry, plastering etc. Multiple crews for every work item are allowed in order toperform the same repetitive activity in different space units at the same time. Activities are identifiedby a ij-k code (figure 1) where i identifies the work item, j identifies single crew and k identifies thespace unit in which the activity is performed. An activity of a work item i, performed by the samecrew j in a set of space unit k is called a repetitive activity.ES EF legend:i = work itemij-kj = crewk = space unitD = activity durationDES = early startEF = early finishCREW JWORK ITEM IFigure 1: ij-k activity legendThe proposed method assumes that crews of the same work item have the same productivity rate inevery space unit (Harris and Ioannou 1998). Plotting activity network on the resource / space chartenhances resources tracking and make possible to define resource-paths, ij columns of the chart, andunit-paths, k rows of the chart (Yi, Lee and Choi 2002, Moselhi and Hassanein 2004) (figure 2).unit pathi1j2-k2Di2j1-k2Di1j1-k1unit pathi2j1-k1resourcepathDDCREW j1 CREW j2 CREW j1WORK ITEM i1WORK ITEM i2Figure 2: Network diagram plotted on a resource – space chartThe work continuity requirement satisfaction is obtained by repetitive activity shifting. To ensurework continuity the proposed method introduce an algorithm that, after usual PrecedenceDiagramming time analysis, i.e. forward pass and backward pass, shifts the start and finish ofrepetitive activity to search for resource continuity, if made possible by network logic. In fact theoptimization algorithm does not modify total project duration (TPD) as computed by traditionalforward pass of Precedence Diagramming. The new start and finish dates are called Planned Start(PS) and Planned Finish (PF). If possible buffers (Time Buffer - TB) are placed at the end of everysub critical resource path ij to protect the critical path from time overruns.336

Idle time of crew, due to work interruption on a resource path ij, between k’ space unit and successork space unit is calculated as the subtraction of the early start of the successor repetitive activity in theunit k and the early finish of the predecessor repetitive activity in the unit k’:Idle ij (k’,k) = ESij-k - EFij-k’ (eq. 1)where: Idle ij (k’,k) is the idle time of crew ij between unit k’ and successor unit k; ESij-k is the earlystart of the activity ij-k; EFij-k’ is the early finish of the activity ij-k’; k’ is the predecessor spaceunit; k is the successor space unit.Rule 1: if, for every k’, k couple of the resource path ij the Idle ij (k’,k) value is equal to 0, or, forevery activity ij-k of the same resource path ij the total float TFij-k value is equal to 0, theresource path ij is defined critical, although sub – critical.Idle time of work on a space unit path k, between activities performed by ij’ resource and successoractivity performed by ij resource on the same unit path, is calculated as the subtraction of the earlystart of the successor repetitive activity of resource ij and the early finish of the predecessor repetitiveactivity of the resource ij’:Idle k (ij’,ij) = ESij-k – EFij’-k (eq. 2)where: Idle k (ij’,ij) is the idle time of work on space unit k between activities performed by resourceij’ and resource ij; ESij-k is the early start of the activity ij-k; EFij’-k is the early finish of the activityij’-k; ij’ is the predecessor resource path; ij is the successor resource path.Rule 2: if, for every ij’-k, ij-k couple of the space path k the Idle k (ij’,ij) value is equal to 0, or,for every activity ij-k of the same space path k the total float TF ij-k is equal to 0, the space pathk is defined critical, although sub – critical.Note that a critical space path or a critical resource path are not critical path in the original CPMsense, because they are usually defined by the idle time (eq. 1 and 2) which does not mean theabsence of total float of the activities (with the exception of the rule 1 and 2, where actually the TFijkis equal to 0) but only the continuity of performance of a chain of activities on a space path or on aresource path. The chain of critical space or critical resource activities can still have float time in theCPM sense. To highlight this difference the original CPM critical path can be called “Time CriticalPath”. If possible time buffers are placed at the end of every resource path to protect fromcontingencies the performance of activities placed on the Time Critical Path, thus preventing delayson project completion.3.2 Scheduling Optimization MethodThe proposed scheduling optimization method has two main phases, in which several steps arefollowed. The proposed algorithm of phase 2 is an heuristic method that search for project337

optimization. The project solution can be sub-optima, but it is a simple method, easy to perform byresearchers and practitioners.PHASE 1 – Path analysis1. Network logic. The PDM network is plotted on a resource – space chart, with the resourcesin the x – axis and space on the y – axis. Activities on the same k row show the work flow inthe space unit (i.e. space path), activities on the same ij column show the work flowperformed by the same crew j of a work item i (i.e. resource path).2. Traditional PDM time analysis. Forward pass and early dates detection (ES and EF),backward pass and late dates detection (LS and LF). Free float and Total float calculation,time critical path detection (TFij-k = 0).3. Resource critical path detection (eq. 1 and rule 1).PHASE 2 – Schedule optimization1. Analyze in the latest resource path ij the last activity ij-k:if ij-k is time sub-critical with FFij-k > 0 = m ≠ 0 insert a Time Buffer (TBij) between ijkand its successor, with TBij = t = m; the value of Planned Start is set to Early Start(PSij-k = ESij-k) and the value of Planned Finish is set to Early Finish (PFij-k = EFij-k).Then analyze the predecessor ij-k’ with Idle ij (k’, k) > 0 and go to step 2;if ij-k is time critical with TFij-k = 0, or does not have any free float, (i.e. FFij-k = 0), thevalue of Planned Start is set to Early Start (PSij-k = ESij-k) and the value of PlannedFinish is set to Early Finish (PFij-k = EFij-k). Then consider the predecessor ij-k’ withIdle ij (k’, k) > 0 and go to step 2. If every predecessor has Idle ij (k’, k) value equal to 0,go to the earlier resource path ij and re-start from step 1.2. On the resource path ij, for the predecessor activity ij-k’:the Free Float FFij-k’ = m is calculated;the Idle Time of crew, due to work interruption between k’ space unit and successor kspace unit (eq. 1) is calculated:Idle ij (k’,k) = ESij-k - EFij-k’ = nactivity ij-k’ is shifted of Sij-k’; where Sij-k’ = min (m, n) = s; the Planned Start and thePlanned Finish are calculated as follows:PSij-k’ = ESij-k’ + Sij-k’338

PFij-k’ = EFij-k’ + Sij-k’the shift Sij-k’ increases Idle ij (k’, k’’) between activity ij-k’ and its predecessor ij-k’’on the same resource path ij, then go to step 3;if the activity ij-k’ has TFij-k’ = FFij-k’ = 0; or Idle ij (k’, k) = 0; the value of PlannedStart is set to Early Start (PSij-k’ = ESij-k’), and the value of Planned Finish is set toEarly Finish (PFij-k’ = EFij-k’); then go to step 3.3. The ij-k’’ predecessor activity of activity ij-k’ becomes itself ij-k’ of step 2; go to step 2. Ifthere is no predecessor activity ij-k’’ on the same resource path ij go to step 1 and process theearlier resource path ij.4. Sample ApplicationThe proposed method is performed for a simple example. The example concerns a small constructionproject of refurbishment of a five storey building. Three repetitive activity are considered: concreteslab pouring (A), plastering (B) and paving (C). These repetitive activities must be performed bycrews in every space unit of the project. Each space unit is a floor of the building. Every repetitiveactivity is performed by one or more than one crew. The example project has the followingassumptions: only one crew for concrete slab pouring (A1) and for paving (C1), two crews forplastering (B1 and B2). Activity data for the example project are listed in table 1. In every space unitk network logic is due to technological links between activities, so A – concrete slab pouring – ispredecessor of B – plastering – and B is predecessor of C – paving – as shown in the activity networkplotted on a resource / space chart in figure 3. Finish to Start relationships linking repetitive activitiesperformed by the same crew in the different floors of the building trace resource flow in the project.The resource flow is set by project planner and in the example it is starting from unit 1 to unit 5.Proposed optimization method is then performed (figure 3 and 4).Table 1: Example - activity dataRepetitive Activity(i)A - ConcreteSlab PouringB - PlasteringC - PavingSpace Unit (k)Crew(j)Dur.(D)Crew(j)Dur.(D)Crew(j)Dur.(D)1 1 5 1 8 1 72 1 5 2 8 1 73 1 5 1 8 1 74 1 5 2 8 1 75 1 5 1 8 1 7339

PHASE 1 – Path analysis. The PDM network is plotted on a resource – space chart (figure 3).Forward pass is performed and early dates are detected. Time critical path is formed by ij-k activities:A1-1, B1-1, C1-1, C1-2, C1-3, C1-4, C1-5. Idle time for resource path ij (eq. 1, rule 1) are non-zeroonly: for resource path B2 (Idle B2 (2,4) = 20 – 18 = 2); for resource path B1 (Idle B1 (1,3) = 15 – 13= 2; Idle B1 (3,5) = 25 – 23 = 2). All resource path C1 is time critical, and so the resource continuityrequirement is satisfied or anyway not optimizable. Resource path A1 is critical in the resource sense(rule 1), and so the resource continuity requirement is already satisfied.PHASE 2 – Schedule optimization. At the end of resource path B2 it is inserted a time buffer equal tothe free float value. The idle working time between unit 2 and successor unit 4 is equal to the freefloat of activity B2-2, which can be shifted of 2 days thus satisfying the resource continuityrequirement for crew B2 (figure 4). At the end of resource path B1 it is inserted a time buffer equal tothe free float value. The idle working time between unit 3 and successor unit 5 is equal to the freefloat of activity B1-3, which can also be shifted of 2 days, thus satisfying the resource continuityrequirement for crew B1. The predecessor of B1-3 on the path B1 is activity B1-1, which has totalfloat equal to 0 and idle working time between unit 1 and successor unit 3 equal to 4 (Idle B1 (1,3) =17 – 13 = 4). This idle time can not be reduced because activity B1-1 is time critical. Theoptimization of resource path B1 between unit 1 and 3 would need to break at least one of the twoschedule assumptions: maintaining minimum total project duration and/or change the resourceproduction rate for activity B1-1. Anyway work continuity requirement was enhanced in the othertwo cases, for activity B1-3 and B1-5 and for resource path B2. As before mentioned, resource pathA1 is already optimized, like path C1 (figure 4).K5IJA1 B1 B2 C120 25 25 33 41 48A1-5B1-5C1-5587415 20 20 28 34 41A1-4B2-4C1-4587310 15 15 23 27 34A1-3B1-3C1-358725 10 10 18 20 27A1-2B2-2C1-258710 5 5 13 13 20A1-1B1-1C1-1587K JI1A1 2BLEGEND:TIME SUB CRITICAL TIME CRITICALES EF ES EFIJ-KIJ-K1CDDFigure 3: Example network diagram - ASAP schedule340

The proposed method has also been tested on a more complex repetitive project from pertinentliterature, showing positive results even in this application.5. ConclusionWith the aim of supporting an inexperienced planner in defining the target plan and schedule for arepetitive project, an heuristic repetitive activity scheduling process has been defined. The proposedmethod works with a CPM based network like Precedence Diagramming Method, and so can beeasily implemented by researchers and practitioners. Two critical elements of network planning aretackled: resource flow tracking and work continuity constraint. The first with network drawing on aresource – space chart, the second with repetitive activity shifting, to search for work continuity. Themethod search for project optimization with an heuristic algorithm, so the found solution can be suboptima,but of simple implementation.K5IJA1 B1 B2C1P20 P25 P25 P33 P41 P48A1-5B1-5C1-558874P15 P20 P20 P28 P34 P41A1-4B2-4C1-458673P10 P15 P17 P25 P27 P34A1-3B1-3C1-35872P5 P10 P12 P20 P20 P27A1-2B2-2C1-25871P0 P5 P5 P13 P13 P20A1-1B1-1C1-1587K JI1ALEGEND:TIME SUB CRITICAL TIME CRITICALPS PF PS PFIJ-KIJ-KD1DB2BUFFERT1CFigure 4: Example network diagram - optimized scheduleReferencesEl Rayes K., Moselhi O. (1998) Resource-driven scheduling of repetitive activities ConstructionManagement and Economics, 16, 433-446.Goldratt E. M., Cox J. (2004) The goal: a process of ongoing improvement Gower, Aldershot U.K.Halpin D. W., Riggs L. S. (1992) Planning and Analysis of Construction Operations Wiley, NewYork U.S.A.341

Harris R. B. (1978) Precedence and Arrows Networking Techniques for Construction Wiley, NewYork U.S.A.Harris R. B., Ioannou P. G. (1998) Scheduling Projects with repeating activities Journal ofConstruction Engineering and Management, vol 124(4), 269-278.Herroelen W., Leus R. (2001) On the merits and pitfalls of critical chain scheduling Journal ofOperations Management, 19(2001), 559-577.Koskela L. (1992) Application of New Production Philosophy to Construction, CIFE TechnicalReport #72, Stanford University, USA, September 1992Kenley R., Seppänen O. (2010) Location-Based Management for Construction Spon Press, U.K.Moselhi O., Hassanein A. (2004) Discussion of Network Creation and development for Repetitive-Unit Projects Journal of Construction Engineering and Management, 130(4), 613-614.Rand G. K. (2000) Critical Chain: the theory of constraints applied to project managementInternational Journal of Project Management, 18(2000), 173-177.Reda R. M. (1990) Repetitive Project Modeling Journal of Construction Engineering andManagement, 116(2), 316-330.Russell A. D., Caselton W. F. (1988) Extensions to linear scheduling optimization Journal ofConstruction Engineering and Management, 114(1), 36-52.Russell A. D., Wong W. C. M. (1993) New generation of planning structures Journal of ConstructionEngineering and Management, 119(2), 196-214.Selinger S. (1980) Construction planning for linear projects Journal of Construction DivisionAmerican Society Civil Engineers, 106(2), 195-205.Steyn H. (2000) An investigation into the fundamentals of critical chain project schedulingInternational Journal of Project Management, 19(2000), 363-369.Yang I. T., Ioannou P. G. (2001) Resource-driven scheduling for repetitive projects: a pull-systemapproach, Proceedings of the 9 th International Group for Lean Construction Conference, Singapore,6-8 August, 365-377.Yi K.J., Lee H. and Choi Y.K. (2002) Network Creation and development for Repetitive-UnitProjects Journal of Construction Engineering and Management, 128(3), 257-264.342

The Innovation Value Chain Analysis of an UrbanRegeneration ProjectOzorhon, B.The University of Salford,UK(email: b.ozorhon@salford.ac.uk)Abbott, C.The University of Salford,UK(email: c.abbott@salford.ac.uk)Aouad, G.The University of Salford,UK,(email: g.aouad@salford.ac.uk)AbstractConstruction is widely perceived as being among the less innovative sectors. Measurement andunderstanding of the dimensions and elements of construction innovation at the project level is key toimproving the innovation performance of organisations within the construction value chain sinceinnovation is co-produced and most hidden at the project level. The link between firm level processesand innovation at the project level should be explored to enable a better understanding of howdifferent firms contribute to the innovation process by developing/implementing strategies, assigningresources to create ideas and diffusing them. The Innovation Value Chain (IVC) provides a structuredmethod of analysing both firm and project level innovation. The major objective of this study is toanalyse a construction project from an IVC perspective by exploring the roles of project stakeholdersin stimulating and implementing innovation. The project analysed is an urban regeneration project inwhich the project team have used a wide variety of methods to generate ideas, convert these ideasinto new products and processes and finally diffuse these innovations. The project presents a case ofclient-driven innovation where building regulations on sustainability were taken into account indeveloping design and planning the construction process. It is a successful example of collaborativepartnership that achieved continuous improvement through a series of technical and organisationalinnovations including modern methods of construction and lean production. Based on the IVCanalysis of the project, the paper provides a summary of the key actions that enabled ideas to begenerated, converted into use and diffused more widely and provides recommendations for furtherresearch.Keywords: client-driven innovation, innovation value chain, partnering, off site manufacturing, leanconstruction.343

1. IntroductionInnovation has become a central issue for all industries and countries due to its contribution tonational economic growth, competitiveness, and higher living standards. It is a complex phenomenonwith a wide range of inputs and outputs creating diverse impacts on performance at the company,sector and national level. There are differing definitions of innovation, but there is an increasing trendto consider a wider view of innovation that reflects the many ways in which innovation occurs inpractice. In broad terms, it may be defined as the creation and adoption of new knowledge to improvethe value of products, processes, and services.The construction industry can benefit from the diverse benefits offered by innovation particularly byadoption of new methods to improve processes and organisational effectiveness. Construction is avery diverse sector and there is not one single way in which innovation occurs. The organizationalcontext of construction innovations differs significantly from a great portion of manufacturinginnovations (Slaughter, 1998) since building and construction is partly manufacturing and partlyservices industry (Blayse and Manley, 2004). Construction is often categorised as being among theless innovative sectors. However, as the Hidden Innovation report (NESTA, 2007) has shown, thisperception is perhaps undeserved. Much of the innovation remains hidden, as it is co-developed at theproject level.As Gann and Salter (2000) stated project-based firms need to manage both project and businessprocesses since the resources of the firm are embedded at both the project and the firm level; it is theintegration of these two sets of resources that enables the firm to be competitive. In addition, businessprocesses are ongoing and repetitive, whereas project processes have a tendency to be temporary andunique (Gann, 1998; Brusoni et al., 1998), therefore firms should integrate the experiences of projectsinto their continuous business processes in order to ensure the coherence of the organisation. Thesame principle is also valid for the success of innovation both at the project and firm-level.The link between firm level processes and innovation at the project level should be explored to enablea better understanding of how different firms contribute to the innovation process bydeveloping/implementing strategies, assigning resources to create ideas and diffusing them. TheInnovation Value Chain (IVC) investigates innovation in a sequential, three-phase process involvingidea generation, idea development, and the diffusion of ideas (Hansen and Birkinshaw, 2007). Thisapproach provides a structured method of analysing both firm and project level innovation. The majorobjective of this study is to analyse a construction project adopting the IVC view and thereby toexplore the roles of project stakeholders in stimulating and implementing innovation. The case studyfocuses on an urban regeneration project that presents a case of client-driven innovation. It is asuccessful example of collaborative partnership where the project team have used a wide variety ofmethods to generate ideas, convert these ideas into new products and processes and finally diffusethese innovations. The main technical and organisational innovations achieved in this project includemodern methods of construction and lean production. The paper summarizes the activities, tools, andmethods used to convert ideas into practice and diffuse them along the supply chain and transfer theexperience and knowledge gained to future projects.344

2. Innovation value chainInnovation can be observed at three different levels namely the sector, business and project level.Milbergs (2004) proposed a framework to analyse innovation at the national level, where the majorcomponents of innovation are defined as the inputs, implementation (processes/activities), outputs,and impact, as well as the contextual (institutional) factors that influence the rate and direction ofinnovative activity including the macro-economic conditions, public policy, innovation infrastructure,and national mindset. Several frameworks have been proposed to analyse innovation at the firm level.Rogers (2003) offers five stages to investigate the innovation process namely, knowledge, persuasion,decision, implementation and confirmation. Wolfe (1994) suggests ten stages including ideaconception, awareness, matching, appraisal, persuasion, adoption decision, implementation,confirmation, routinization, and infusion. Tangkar and Arditi (2000) proposed a six-phase labyrinth ofinnovation, where the flow of successful innovation comprises need, creation, invention, innovation,diffusion, and adoption. Hansen and Birkinshaw (2007) presents innovation as a sequential, threephaseprocess that involves idea generation, idea development, and the diffusion of developedconcepts that includes six critical tasks namely, internal sourcing, cross-unit sourcing, externalsourcing, selection, development, and companywide spread of the idea. The whole process is referredas the IVC. The first phase is to generate ideas that can happen inside a unit, across units in acompany, or outside the firm; the second phase is to convert or select ideas for funding anddeveloping them into products or practices; and the third is to diffuse those products and practices.The IVC offers a tailored and systematic approach to assessing firm-level innovation performance(Hansen and Birkinshaw, 2007). It is possible to apply the basis of the IVC framework and investigatethe innovation process at the project level. Roper et al. (2008) model IVC as a recursive process thathas three main links such as „knowledge sourcing‟ to assemble knowledge necessary for innovation,„knowledge transformation‟ to translate knowledge into physical innovation, and finally „knowledgeexploitation‟ to improve the enterprise performance. Adopting a similar view, this study proposes theinvestigation of IVC of different actors in the construction process at the project-level.3. Research methodologyAnalysis of innovation at the project level is often ignored in the literature mostly due to thedifficulties in monitoring different activities carried out by different parties in each stage of theproject. Management of innovation is complicated by the discontinuous nature of project-basedproduction in which, often, there are broken learning and feedback loops (Barlow, 2000). Gann(2001) suggests that project-based construction firms often struggle to learn between projects, andoften have weak internal business processes. Measurement of the dimensions and elements ofconstruction innovation at the project level is key to improving the innovation performance ofcompanies.Project-based firms need to manage technological innovation and uncertainty across organisationalboundaries, within networks of interdependent suppliers, customers and regulatory bodies (Gann andSalter, 2000). However, project-based firms are always innovating; their work is always unique,345

always delivered to bespoke designs, always achieving something new (Keegan and Turner, 2002).Study by Gann and Salter (2000) points out the need for a better conceptual understanding and newmanagement practices to link project and business processes. Although some strategies are proposedin these studies, they do not address how to track innovative activities during the lifecycle of aconstruction project.It is increasingly accepted that construction innovation encompasses a wide range of participantswithin a „product system‟ (e.g. Marceau et al., 1999). This broad view incorporates the participantsincluding governments, building materials suppliers, designers, general contractors, specialistcontractors, the labour workforce, owners, professional associations, private capital providers, endusers of public infrastructure, vendors and distributors, testing services companies, educationalinstitutions, certification bodies, and others (Blayse and Manley, 2004). The link between firm levelprocesses and innovation at the project level should be explored to observe how different firmscontribute to innovation process by developing/implementing strategies, assigning resources to createideas and diffuse them.The construction sector is viewed as a system involving clients, contractors, sub-contractors suppliers,consultants, and designers. Manufacturing firms invest far more in R&D than contractors orconsultants, and are subsequently more likely to develop product and process innovations (Gann,1997), whereas contractors tend to introduce service and organisational innovations (Carassus, 2004).Clients can act as a catalyst to foster innovation by exerting pressure on the supply chain partners toimprove overall performance and by helping them to devise strategies to cope with unforeseenchanges (Gann and Salter, 2000), by demanding high standards of work (Barlow, 2000), and byidentifying specific novel requirements for a project (Seaden and Manseau, 2001). The case studypresented in this paper is related to an urban regeneration project that has demonstrated numerousexamples of technical and organisational innovation and achieved continuous improvement through acollaborative partnership.4. Case study: An urban regeneration project4.1 Project informationThe Regeneration Project in Cheshire, UK was a unique 10 year partnering regeneration scheme thathas delivered an award winning range of over 500 units of new housing, as part of the vision for asustainable future for the area. Since the transfer of new town stock in 1989, the client has been alandlord of the estate together with an additional Housing Trust. Both Registered Social Landlords(RSLs) formed this partnership agreement with the local Borough Council, English Partnerships, andthe Housing Corporation. The contractor, the architect, consultants and the structural engineers werebrought into the partnership in late 2001 to undertake the housing regeneration phases.This project is a successful example of collaborative partnership that embraced „RethinkingConstruction‟ principles (Egan, 1998) and achieved continuous improvement through the applicationof lean construction. The Regeneration Partnership is using more than £44m of funding to completelyrevitalise this estate that was first built between 1968 and 1972. The master plan proposed a346

comprehensive programme of over 50 individual projects from the redesign of infrastructure andtransport to community facilities and modern mixed tenure housing. To date approximately 800unpopular deck access units have been demolished with a further 400 scheduled over the comingyears. These have been replaced with approximately 470 new homes, with a further 650 underconstruction or planned. The next phase of regeneration includes the redevelopment of the existinglocal centre, into a new community hub. The new development will contain a vibrant mix of shops,homes, community centre and health centre, set around a public square.4.2 The innovation value chain throughout the projectIn a complex systems industry such as construction, firms must rely on the capabilities of other firmsto produce innovations and this is achieved by the cooperation between those concerned with thedevelopment of products, processes and designs (Blayse and Manley, 2004). In this case study, threesteps of the innovation process namely, the idea generation, conversion, and diffusion are investigatedto explore the relationships between project participants in achieving innovation.a) Idea generationThe project was very notable for its use of a „client-driven innovation‟ approach to idea generation.Building regulation on social housing had a great impact on the processes and performance of thisregeneration project. The UK Government‟s initiative to create sustainable homes is specified in theCfSH (DCLG, 2006). This code requires the contractors to use innovative products in theirconstruction processes and deliver the specified sustainability performance levels. The ideasgenerated in order to comply with this code were generated by the collaborative use of partnering, aserious R&D investment, and engaging with the community.PartnershipThe partnership embraced the „Rethinking Construction‟ principles (Egan, 1998) and best practiceideas from around the UK construction and development industry. Committed leadership, a focus onthe customer, integrated teams, a quality driven agenda, and commitment to people were identified asfive drivers of change which need to set the agenda for the construction industry. The report showedradical change in construction processes could deliver real cost savings (up to 30%), eliminate wastein the delivery process, encourage innovation and learn from experience (Egan, 1998).The project team ensured that, with the partnering approach in place through the procurement route,steps were taken to establish trust and drive efficiency starting from the design process till theexecution of MMC. This partnering approach enabled design to be rationalised and input from thecontractor and the timber frame supplier taken into account in the early stages of the design process.This rationalisation led to the introduction and acceptance of standard house types and detailing.347

R&DThe redevelopment programme was in the process of delivering its fourth phase of new build housingwhen it was decided that the team needed to consider new methods. Funding conditions set by theHousing Corporation promoted the increased use of MMC in social housing particularly off sitemanufacturing (OSM) as a key potential method for promoting sustainability within the constructionindustry. The client was experienced in terms of MMC and introduced the idea of using closed timberframes to achieve environmental sustainability. The next stage was to search for the right product andassess its buildability with the contractor. Considerable time and effort was committed to ensure thatthe design was buildable and that modern construction techniques could be used.In this respect, based on client‟s research dating back to 10 years ago, timber frames were identified todeliver a number of advantages such as the pace of construction, quality of the units, decreased cost,enhanced thermal performance, and less impact to environment through lower carbon emissions. Thecontractor and the client then formed a partnership with the timber frame supplier and maintained thispartnership for years.The team had already incorporated MMC into designs, but were now to utilize „Lean Construction‟methods with the intention of further improving quality, time and costs. New product and processinnovations could only be achieved through product R&D; considerable investment on MMC and leanconstruction; and strong commitment and collaborative partnership among the supply chain. Based onmore than 2 years of R&D work, cost, knowledge and familiarity were identified as the main barriersto the adoption of MMC. The client employed consultants to aid in the development of methods andprocedures to improve site processes. The client determined to work with the contractor to eliminatethe initial cost barriers of MMC in order to reap long term savings and benefits. The funding ofconsultancy by the client and the agreement to further invest jointly with the contractor demonstratesboth partners‟ desire and willingness to engage other specialists who could help to drive out wastethrough the adoption of lean. These benefits have been brought through from phase to phase,demonstrating continuous improvement.Community engagementOne of the most important ingredients of any successful regeneration partnership is the involvementof the local community. Residents of the area have been heavily involved in the regeneration processas well as in the development of each individual scheme. Project team members have had theopportunity to establish positive working relationships with the local community, and betterunderstand the needs and wants of the residents affected by the redevelopment. The client, architectand contractor have also worked with local primary schools to involve children in the constructionprocesses as part of their curriculum. This has begun the process of embedding a sense of place andownership in the community‟s children, which has been lacking for so long.348

) Conversion of ideas into practiceA combination of open and scientific approaches was used to bring ideas into the project. Ideageneration is only useful if the ideas are then put into practice. The key decision in this regard was touse a procurement approach that enabled early contractor involvement. This ensures that ideas can betested for their buildability and building methods can be developed that are appropriate to the design.The University of Salford set up „Innovation Circles‟ to help businesses and academics work togetherin a more meaningful way and to focus individual members in small groups using an action learningmethodology (Lu et al., 2007). The „Innovation Circles‟ created by the contractor provide one methodwhereby the supply chain members are formally brought together to help put solutions into practice.Product innovation is only one component of the IVC in the construction supply chain, theresponsibility of which lies with the suppliers. However, the implementation requires joint effort bythe client, designer, contractor, suppliers, and subcontractors. The project team ensured the successfulimplementation of product innovation through a series of organisational innovations. They identifiedthat potential benefits of MMC could only be achieved through the application of lean principles thatinvolves supply chain integration and process reengineering. Contractor‟s devotion to learn about leanprinciples was appreciated by the client and they shared the cost for lean consultancy to deliver higherperformance.Modern methods of constructionTimber frame is a tried and tested structural system. It is the most environmentally friendly form ofconstruction available that conforms to MMC and OSM principles. Building Research Establishment(BRE) reported that that modern timber frame construction produces near zero carbon emissions(Reynolds and Enjily, 2005). Timber frame is also renowned for its excellence in energy efficiencyterms. As the structures are assembled from components made to manufacturing tolerances, the betterfit achieved improves air tightness and hence positively effects energy efficiency. The closed timberframes were used as the structural elements of the superstructure in the project among the many formsto choose from, including advanced and closed panel, volumetric and hybrid systems.By using MMC methods, the closed timber framed panelled units went from ground floor slab topanels in place in just twelve weeks - half the time of a similar traditional build. The wall panels andfloor cassettes were delivered to site with windows and doors already fitted in the factory. Thebenefits of MMC were evidenced in many ways; not only was the site accident free, it was dryer andcleaner for the labour force to work on. There were also benefits for local residents too, with reducedlevels of vehicle movements and noise.Lean ConstructionMMC required tighter, more reliable processes leading to the adoption of lean principles. Leanconstruction is “the continuous process of eliminating waste, meeting or exceeding all customerrequirements, focusing on the entire value stream and the pursuit of perfection in the execution of aconstructed project” (Design for Manufacture Competition, 2005). Lean construction may require349

more time in the design and planning phases, but this attention eliminates or minimizes conflicts thatcan dramatically change budgets and schedules. Supply chain management is an important supportfunction for facilitating lean construction. Partnering arrangements with suppliers are based oneffective communication of shared objectives of continuous improvement. Each member of theconstruction supply chain should be made aware of its influence on the overall project. In addition,organisations are required to change their business processes to deliver the expected benefits of leanconstruction. Standardisation of the finishing processes brought benefit to the supply chain, reducingwastage of materials on site as well as wasted operations.MMC and lean construction involve totally different operations that were threatening for the wholeindustry in the beginning. Not only did the contractor have to experience challenges to shift to newprocesses but also the subcontractors had to follow at the same pace and they had to adjust theoperations based on the site conditions, which were not always favourable. Construction in this waywas far ahead of normal schedules due to the unexpectedly quick insallations of the timber frames andthe construction team had difficulties in allocating sufficient number of staff to continue with thefinishings. It was initially difficult to control such a tight process and the intensity of the workforcewas a real issue. The major barrier and frustration for the contractor in this phase was due to theexternal factors such as the poor services; service disconnections and relocations caused major delaysin the project. Despite attempts to overcome these barriers and several meetings with the servicesprovider, the situations remained unresolved.c) Diffusion of innovationsThe successful diffusion of new innovations is the third element of the IVC that is achieved throughthe client‟s drive to become a learning and sharing organisation. Within the project, the diffusion ofinnovation throughout the supply chain is enabled through the trust created by the partneringapproach. This is underpinned by the knowledge management approach. Longer term benefits willaccrue if the supply chain remains together and works on follow on projects.Performancemeasurement should also be seen as an enabler for the diffusion of project innovations. Themonitoring regime provides the evidence of the success (or failure) of the various innovations, whichin turn supplies the supporting information needed to justify ongoing use.Knowledge management and innovation planThe use of knowledge management approaches is an effective enabler for the diffusion of innovationswithin and outside the organisations. In this regard, knowledge management is essential for ensuringthat the full project team are aware of and understand the latest techniques that are to be used on theproject.The client devoted resources from across the organisation to ensure they understand and are able toeffectively deploy new technologies and techniques as they emerge, ranging from renewable energysources through sustainable housing solutions to MMC to create high value low cost solutions for theclients. They are keen to create a true learning culture with the contractor and mechanisms to enablemore sharing knowledge and best practice.350

Taken together, the project team have used a wide variety of measures to facilitate and support thegeneration of new ideas. The contractor employed different schemes to foster innovation within theorganisation and to share its knowledge and experience through the supply chain. Their ultimateobjective is to be able to meet client needs better and be able to adapt to a changing world. The keyactions that will help them innovate both individually and collectively focus on the staff, clients,suppliers, and lean construction. These included the „Innovator of the Month‟ scheme within theirinnovation plan to help all staff become aware of the importance of innovation and have theopportunity to contribute to generation of ideas. This concept is extended beyond the organisationthrough „Innovation Circles‟ that bring together the supply chain in an open approach to sharing ideasand tackling problems.4.3 Achievements of the project teamPrior to the introduction of lean construction methodology, the partnership was already achieving areduction in waste generated through each phase compared to more traditionally built projects. It wasestimated that the use of MMC was achieving waste reductions in excess of 50%. Noise levels arealso 50% less than a traditional build. Using timber frames, the team achieved higher levels ofenvironmental sustainability; they enhanced thermal performance (with lower U values), anddecreased the impact to environment through lower carbon emmissions. Other benefits can be listedas follows:Metre square costs have reduced by 6.59%.Total unit cost has reduced by 2.81%.Timber frame costs have reduced by 16% over the last 4 phases.Overall reduction in contract weeks per unit completed of 7% against target 10% reduction insuperstructure completion time, translating into an overall contract duration time saving in weeksper unit of 5.8%.6% reduction in waste to landfill and 74% increase in waste recycled against 10% targets.The final product benefits from a higher finished quality due to standard and repeat designs;established and proven sequence; developed and improved details/materials; familiarization with thespecification; consistent management of workforce teams; reduced operations and trade visits;consistent supply chain; reduced operations and trade visits; and consistent supply chain.5. ConclusionsThe construction industry is largely project based and fragmented, so the much of the innovationremains hidden, as it is co-developed at the project level. Besides construction firms, suppliers,designers, and service organisations play a large part in innovation. In the context of this paper, theinnovation process in a case study was investigated based on IVC approach. Roles and contributions351

of project participants in driving and implementing technical and organisational innovations wereexplored in an urban regeneration project. The regeneration project has demonstrated the significanceof collaborative partnership in delivering best practice and achieving innovation. It is a good exampleof client-driven innovation where building regulations shaped the way the housing developer,contractor, and suppliers worked. The objectives set by the clients were met through theimplementation of MMC and lean principles.There are many lessons that can be learnt from this project as summarised below:Collaborative partnership between the Authority, client, architect, structural engineer, andsubcontractors was the key success factor but only because it was actively driven.Building regulations can drive both technological (product and process) and organisationalinnovations within the construction supply chain.Innovation in construction can only be achieved through understanding client requirements andcollaboration throughout the whole project lifecycle.Benefits of MMC are not short-term, strong commitment from all project participants is essentialto ensure long-term benefits and this was in turn enabled by collaborative partnership.Exploiting potential efficiency benefits requires organisational innovations such as supply chainmanagement and business process reengineering.Sustainable construction can also be affordable by adopting the lean principles and transferringthe project knowledge and key lessons to future projects.Contractor‟s sole effort to innovate does not guarantee success, support from like-minded peopleis crucial.New methods are jeopardizing for construction industry, devotion to innovate is the key to breakthe industry‟s resistance to change.Qualified labour resource is scarce, sharing knowledge and best practice along the supply chaincan improve the culture and skills of the workforce.Analysis of the IVC throughout the lifecycle of a construction project helps observe and measure theunderlying drivers and enablers related to the whole process and understand the role of differentactors and improve their capability in facilitating innovation. The case study illustrated a wide rangeof innovation from all members of the supply chain in order to meet the requirements of clients andend users. The IVC view, as a structured method of analysis, in this study was helpful in linking thefirm and project level innovation unlike the previous research on construction innovation. Thebenefits of innovation can only be realised by fully understanding the components of the wholeinnovation process that is based on knowledge acquisition, transformation, and diffusion. A deep352

understanding of these stages of innovation at the project level adopting a multi-stakeholder approachcan be considered as the main contribution of the study since it can be enriched further by detailedwork to develop context sensitive ways of recognising and measuring innovation. The findings of thiscase study and analysis of additional cases are also expected to provide guidance to analyseinnovations in other project-based industries.ReferencesBarlow, J. (2000) “Innovation and learning in complex offshore construction projects”, ResearchPolicy, 29 (7-8): 973-89.Blayse, A.M. and Manley, K. (2004) “Key influences on construction innovation”, ConstructionInnovation, 4: 143-154.Brusoni, S., Precipe, A., Salter, A. (1998) “Mapping and measuring innovation in project-basedfirms”, CoPS Working Paper, Brighton, CENTRIMrSPRU.Carassus, J. (2004) “Construction sector system, innovation and services”, CIB CongressProceedings, Toronto Canada, (available online http://jc-esh.cstb.fr/file/rub49_doc46_1.pdf [accessedon 19/11/2008])Department for Communities and Local Government (DCLG) (2006) Code of Sustainable Homes - Astep-change in sustainable home building practice, London, Department for Communities and LocalGovernment.Design for Manufacture Competition (2005) “Stage 1 Q&As answer 51” (available onlinewww.designformanufacture.info/page.aspx?pointerid=307FE1A776AD4E8D8AC46662DF7FDA56#q51 [accessed on 10/11/ 2009]).Egan, J. (1998) Rethinking construction: the report of the construction task force, London, DETR.Gann, D.M. (1997) “Should governments fund construction research?”, Building Research andInformation, 25 (5): 257-267.Gann, D.M. (1998) “New manufacturing for the 21st century”, AEGIS Conference Generating NewWealth for Australia, Sydney, 30 March, Keynote address.Gann, D.M. (2001) “Putting academic ideas into practice: technological progress and the absorptivecapacity of construction organisations”, Construction Management and Economics, 19 (3): 321-330.Gann, D.M. and Salter, A. (2000) “Innovation in project-based, service-enhanced firms: theconstruction of complex products and systems”, Research Policy, 29 (7–8): 955-972.353

Hansen, M.T. and Birkinshaw, J. (2007) “The innovation value chain”, Harvard Business Review,85(6): 121-130.Keegan, A. and Turner, J.R. (2002) “The management of innovation in project based firms”, LongRange Planning, 35: 367-388.Lu, S., Abbott, C., Jones, V. and Sexton, M. (2007) “The role of innovation circles in stimulatinginnovation in small construction firms”, Proceedings of 4th International SCRI Research Symposium,26-27 March, Lowry Theatre, Salford, UK.Marceau, J., Houghton, J., Toner, P., Manley, K, Gerasimou, E. and Cook, N. (1999) Mapping thebuilding and construction product system in Australia, Sydney, Commonwealth Department ofIndustry, Science and Resources.Milbergs, E. (2004) “Measuring innovation for national prosperity - innovation framework report”(available online http://www.ibm.com/ibm/governmentalprograms/innovframe2.pdf [accessed on10/25/08]).NESTA (National Endowment for Science, Technology and the Arts) (2007) Hidden Innovation,London, NESTA.Reynolds, T. and Enjily, V. (2005) Timber frame buildings - A guide to the construction process,Berkshire, Building Research Establishment Press.Rogers, E.M. (2003) Diffusion of Innovation, 5th edn, New York, The Free Press.Roper, S., Du, J. and Love, J.H. (2008) “Modelling the innovation value chain”, Research Policy, 37:961-977.Seaden, G. and Manseau, A. (2001) “Public policy and construction innovation”, Building Researchand Information, 29(3): 182-196.Slaughter, S.E. (1998) “Models of construction innovation”, Journal of Construction Engineering andManagement, 124(3): 226-231.Tangkar, M. and Arditi, D. (2000) “Innovation in the construction industry”, Civil EngineeringDimension, 2(2): 96-103.Wolfe, R.A. (1994) “Organizational innovation: review, critique and suggested research”, Journal ofManagement Studies, 31(3): 405.354

Supply Chain Management:A Critique of Supply Chain ArchitectureTennant, S.School of the Built Environment, Heriot-Watt University(email: S.Tennant@hw.ac.uk)Fernie, S.School of the Built Environment, Heriot-Watt University(email: S.Fernie@hw.ac.uk)AbstractThe purpose of this paper is to frame the contextual circumstances that craft the differentinterpretations of the buyer-supplier relationship in the UK construction industry. Advocates ofsupply chain management claim that business transactions, particularly those reliant on theoutsourcing of services and products will benefit significantly in terms of industry competitiveness.In theory the UK construction industry represents a near perfect model for supply chain protocol,where the commercial exchange of goods and services represent a significant proportion of theoverall project expenditure. In reality the uptake of supply chain management has been at bestcircumspect. Many reasons have been cited; the short-term nature of construction projects,adversarial contractual relationships, fragmentation of the construction industry and the opportunisticbehaviour of contractors and suppliers. For an increasing number of construction commentators theerror of construction supply chain management is founded on the acontextual nature in which supplychain management has been promoted within the construction community. Lack of success is notnecessarily a failure of supply chain management but as a result of insufficient attention being paid toindustry circumstances. Incorporation of supply chain management requires careful judgement interms of definition and practice. This paper argues for a more pluralistic understanding of supplychain management within the confines of the UK construction industry. Building on the notion of a‘horses for courses’ approach to the management of contractual relations a conceptual framework isdeveloped to aid in the process of sense making. Research evidence suggests that construction marketdynamics is a powerful determinant of supply chain architecture. As a consequence, it could beargued that the unprecedented downturn in construction activity will severely curtail business-relatedopportunities to foster learning alliances within the construction supply chain. This research paperprovides a timely critique of the challenges facing supply chain management in an uncertain andturbulent post-recession construction environment.Keywords: supply chain management, procurement, context, construction industry355

1. IntroductionSupply chain management, learning and knowledge sharing are theoretical concepts that play asignificant role within discussions concerning productivity and competitiveness in the UKconstruction sector. Over a decade ago ‘Rethinking Construction’ (Egan, 1998) made specificreference and recommendations regarding the adoption of supply chain management principles(Pryke, 2009). Its acceptance within the construction sector is not without its critics. Somecommentators believe that the unique character of the construction industry cannot be ignored whenattempting to make use of supply chain management (Green et al., 2005, Cox and Ireland, 2002).Supporters of supply chain management stress the potential to accrue project and organisationalinformation, enhance strategic relations and capture a ‘learning experience’ that can be transferredfrom project to project (Love et al., 2002, Strategic_Forum, 2002). The receptiveness of a firm’sability to adapt and culturally evolve may be expressed as ‘organisational learning’(Kyro, 2003). As aconsequence organisational familiarity with supply chain management should promote organisationallearning. However, the impact upon theory and practice of the connections between supply chainmanagement and organisational learning remains largely unexplored. This paper argues for a morepluralistic understanding of supply chain management within the confines of the UK constructionindustry. In doing so a conceptual framework is developed to aid in this process of sense making.2. The UK construction industryThe Government Department for Business Innovation and Skills (BIS) defines the UK constructionsector as; „construction materials and products; suppliers and producers; building servicesmanufacturers, providers and installers; contractors, sub-contractors, professionals, advisors andconstruction clients and those organisations that are relevant to the design, build, operation andrefurbishment of buildings‟ (BERR, 2009). The definition articulates not only the scope but also thediversity of work type and stakeholder involvement with construction activity. The constructionindustry is an important sector not only in terms of trade and commerce but also has a wider bearingon the socio-economic climate of the UK (Dti, 2002, Strategic_Forum, 2008). As the foremost clientfor the procurement of construction services and products it is worth noting that the UK Governmenthas significant interest in the commercial welfare of the sector (Dti, 2006). In buoyant economicconditions the construction industry workforce is officially estimated to be in excess of 2.1 millionemployees, approximately 10% of the UK working population and supports over 250 000construction companies (BERR, 2009). Recent market conditions for the entire construction sectorhave witnessed an unprecedented economic downturn ending a prolonged period of stability. Currentindustry forecasts predict construction output to have dropped from approximately £110 billion in2008 to £96 billion in 2009, a 12.8% decline in construction activity (Expedian, 2009b). Extrapolatingemployment figures from the statistics it could be argued that the construction sector will witness over250000 job losses in the current recession. An underlying trend shows that while construction outputhas grown steadily in the period up to 2009, the rate of growth has failed to match UK GDP growthover the previous four years indicating that the construction industry share of the UK economy as awhole is also contracting (Expedian, 2009a). Construction output, in terms of monetary value isdominated by a few very large construction companies conversely, construction output measured in356

terms of volume is carried out by a considerably larger number of small and medium (SME’s) sizedgeneral and specialist contractors (Cox and Thompson, 1997, Morton, 2002). Fragmentation ofconstruction industry structure is an important and recurring theme (Dainty et al., 2001). Acharacteristic that encourages a culture of individualism and self-promoting interests at the expense ofcollaborative, cooperative working practices (Thompson et al., 1998). In response to growing clientdissatisfaction, industry reviews have called for greater emphasis on integration, collaboration andpartnering with the supply chain (Egan, 1998, NAO, 2001, Strategic_Forum, 2002).3. Supply chain managementIn the field of management studies supply chain management has risen in prominence over the pasttwenty years (Mentzer et al., 2001). With its origins in manufacturing, supply chain management isargued to play a significant role in the supply of services and goods across industry boundaries(Vrijhoef and Koskela, 2000). With its own dedicated academic journal, supply chain management isfast becoming part of mainstream management thinking. Despite this growth in academic andprofessional acceptance there continues to be no universally accepted definition of supply chainmanagement. Cox (1997), offers a philosophical viewpoint suggesting that supply chain managementis „a way of thinking‟. The Chartered Institute of Purchasing and Supply (2009) propose twodefinitions. A strategic definition to capture the corporate intent and need for added value throughoutthe supply chain and a tactical interpretation to address the more immediate and tangible issues ofmanagement (Alder, 2009). Frustrated at the lack of exactness and the inherent potential forwidespread misunderstanding, Stock and Boyer (2009) proposed a consensus definition, compiledfrom over 170 unique literature definitions of the term(s) supply chain management, SCM and supplychain. Whilst The Council of Supply Chain Management Professionals (CSCMP) presents aprotracted, all encompassing management definition in which they finally summarise, „in essence,supply chain management integrates supply and demand management within and across companies‟(CSCMP, 2009). So the debate regarding a universal definition of supply chain management remainsunresolved. For practitioners and researchers alike who wish to sanction the supply chain concept, thelack of exactness often represents a dilemma. Too tight a definition may exclude perfectly validavenues of interest, too loose and it may become another fashion label in contemporary managementrhetoric (New, 1997). Given that terminological precision is so elusive, this paper will focus attentionon how aspects of the construction industry and corporate environment craft the differentinterpretations of the buyer-supplier relationship. This is fundamental to the wider conceptual pictureof the supply chain and how stakeholders can be managed in the UK construction industry.3.1 Supply chain management in the construction industryAdvocates of supply chain management claim that commercial transactions, particularly those relianton the outsourcing of services and products will witness gains in profitability and enhance companycompetitiveness (Egan, 1998, Briscoe and Dainty, 2005). In theory the UK construction industryrepresents a near perfect model for supply chain protocol where the commercial exchange of goodsand services in a typical construction project account for approximately 80% - 90% of the total projectconstruction cost (BERR, 2004, Holti et al., 1999). In reality the uptake of a supply chainmanagement has been at best, circumspect (Love et al., 2004, Wolstenholme, 2009). Many reasons357

have been cited, the more common include; the short-term nature of construction projects, adversarialcontractual relationships, the lack of project continuity, the fragmentation of the construction industry,the intensity of competition, the uniqueness of each project, client involvement, economic uncertainty,history and the opportunistic behaviour of contractors, sub-contractors and suppliers. For anincreasing number of construction commentators the error of construction supply chain managementis founded on the acontextual nature in which supply chain management has been promoted within theconstruction community (Green et al., 2005, Cox and Ireland, 2002). Lack of success is notnecessarily a failure of supply chain management but as a result of insufficient attention being paid tothe industry circumstances. To present a contextually rooted perspective of learning withinconstruction supply chains, a malleable working definition may be beneficial. Better able to reflect anever-changing contextual, contractual and construction landscape. For the UK construction industryincorporation of supply chain management requires careful judgement in terms of definition andpractice. This pragmatic approach accommodates the earlier assertion that there is no definitivemodel; supply chain management in construction will always be representative of its situationalfactors and thus advocates a ‘horses for courses’ approach and ‘fit-for-purpose’ relationship (Cox andThompson, 1997, Thompson et al., 1998). One of the most influential contributors to supply chain‘architecture’ is the management of the contractual relationships. The multiplicity of constructionprocurement strategies employed to administer construction relations implies that for supply chainmanagement to function, supply chain form must be representative of its contextual setting.4. A Continuum of supply chain ‘architecture’ in theconstruction industryTo aid in this process of sense making a continuum of supply chain ‘architecture’ has been proposed.Supply chain architecture represents a blue-print of interconnecting, multi-variant contextualdemands, presented in an orderly arrangement of parts to produce a spectrum of construction supplychain architecture in practice. At one end of the continuum the supply chain architecture may beexpressed as ‘open’. The working relationships are constructed around the notion of a free marketenvironment, where each firm competes for work on a project by project basis with no pre-existing orfuture agreements in place. At the other end of the supply chain continuum, the architecture of thesupply chain may be termed ‘closed’. Under those conditions a commercial ‘monopoly’ has evolved.In other words, a consortium of independent organisations has been formed, via transparentcompetition rules, to control the production and distribution of building services and goods for aspecific client over an unspecified period of time. ‘Closed’ architecture would exist where the client,main contractor, sub-contractors and suppliers act in accordance with a ‘Solidarity Agreement’. Thisbond would cascade through the supply chain tiers to create a consistent and coherent coalition ofdisparate project stakeholders - a virtual organisation. Once formed there would be little or no marketcompetition because the buyer-supplier relationship would be bound by an exclusivity arrangement.Bridging the binary model of open and closed supply chain architecture is selective / restrictive supplychain architecture. Architecture of this classification would incorporate assorted elements of bothcompetition and qualified practice; see Figure 1 - A continuum of supply chain ‘architecture’ in theUK construction industry.358

Open : Selective : Restrictive : ClosedArchitecture Architecture Architecture ArchitectureTraditional Contracting : Partnering : Framework Agreement : MonopolyFigure 1: A Continuum of Supply Chain ‘Architecture’ in the Construction Industry4.1 Open Architecture: traditional contractingTraditional contracting in the UK construction industry is the most popular procurement route in theUK construction industry (RICS, 2006). It is characterised by its one-off project nature, anoverwhelming dependence on competitive tendering procedures and the employment of JCTcontractual arrangements. Such commercial relationships have a predisposition to be confrontational,transient and polarized, typified by the clear separation of design and construction. Professionalstereotypes predominate, epitomized by the clear demarcation of duties, strong cultural allegiancesand the propensity for contractual compliance over working relationship (Thompson et al., 1998).Formal communication between the two parties, the design team and the construction team istypically conducted via the Architect, i.e. Project Administrator. Industry performance linked withthis approach to procurement has come in for some harsh criticism, repeatedly censured as wasteful,adversarial, fragmented and dysfunctional. (Latham, 1994, Holti et al., 1999, Egan, 1998, Love et al.,2002). Regardless of its perceived failings traditional contracting is still the preferred option on alarge number of construction contracts, (Saad et al., 2002, RICS, 2006, Akintoye and Main, 2007)raising awkward and unanswered questions regarding the relevance of recent Government discourse.Its continued use suggests that whilst disliked in some quarter it still has a considerable contributionto make in the acquisition of construction services and goods. Traditional contracting is evidently aptfor many project scenarios. In terms of supply chain architecture, traditional contracting may be bestfacilitated by open supply chain architecture. In response to numerous Government initiatives over thepast twenty years non-traditional, alternative procurement methods have gained in popularity.4.2 Selective architecture: partneringPublication of ‘Constructing the Team’ (Latham, 1994), placed considerable emphasis on therequirement for industry practitioners to move away from traditional contracting routes and theadversarial relationships that has bedevilled the industry. The report cited a pressing need to develop acollaborative, working ‘alliance’ between clients and suppliers. Latham (1994) was also careful topoint out that whilst partnering arrangements where suitable for longer-term projects, partners mustinitially be sought via a transparent tendering procedure covering a pre-specified period of time.Partnering has also been alluded to provide a conducive setting for all parties to develop continuousimprovement practices (Love et al., 2002, Thurairajah et al., 2006). Partnering, reminiscent of supplychain management (see CIPS, 2009) has also been defined in terms of a distinctive ‘project’ and‘strategic’ orientation. Project partnering involves the client and main contractor working together on359

a single project, strategic partnering extends the relationship over a number of projects (NAO, 2001).It has also been argued that the formation of a partnership, in particular a strategic relationshipbetween customer and supplier can achieve competitive advantage in the market environment (Chenget al., 2000, NAO, 2001). Somewhat understandably, the parallel interests in construction partneringand construction supply chain management coupled with a lack of definition and terminologicalmisguidance has often resulted in the two expressions being frequently used synonymously (Fernieand Thorpe, 2007). In terms of construction procurement, a partnering arrangement may be bestfacilitated by selective supply chain architecture.4.3 Restricted architecture: framework agreementsFramework Agreements are not contracts in themselves but ‘frame’ the terms and conditions ofsubsequent awards. Thus reducing cost and time factors associated with conventional tenderingprotocol (Morledge et al., 2006). British Airport Authorities (BAA) initially developed the concept ofthe framework agreement in 1993-1994 and embarked on a ‘Framework Programme’ to workcooperatively with a number of preferred suppliers over a five year period. Similarly a number ofretail clients also began to adopt framework-like procedures. The second generation of BAAFramework Agreements, set up in 2002 extended the potential private sector partnerships for up to tenyears (Potts, 2009). Public sector Framework Agreements typically ‘partner’ over a tenure period offour years with the option of an additional two years under exceptional circumstances (commonlyreferred to as 4 + 2). This is strictly governed by European procurement rules (OGC, 2008). It isimportant to note that each framework may differ slightly to accommodate the distinctivenessassociated with individual project needs. For example, where a framework has been set-up withseveral preferred and capable suppliers a mini-competition may be performed at the call-off stage(OGC, 2008). Over the past decade Framework Agreements have witnessed considerable clientsupport especially for high-risk, high-spend construction programmes such as schools, hospitals,roads and other significant public capital expenditure programmes (Constructing_Excellence, 2005).A literature review of public capital spending programmes employing Framework principles hasvalued construction activity to run in to thousands of millions of pounds each year. In terms ofprocurement, Framework Agreements may be best facilitated by restrictive supply chain architecture.4.4 Closed architecture: monopolyThe initial perception of a business-related monopoly is largely negative although not altogether aliento the construction industry. Defined as „the exclusive possession or control of the supply of acommodity or service‟ (AskOxford.com, 2009). Supply chain ‘monopoly’ in this context represents autopian model of supply chain management in the UK construction industry. The supply chainconfiguration is fixed without time, once selected each participant has exclusivity within their specifictier of the buyer – supplier franchise. Relationships are permanent; co-operation is underpinned by avested interest in client satisfaction as well as inter-organisational success, tendering and procurementcosts are all but eliminated. Supply chain monopolies as a hypothesis address many of the ills thathave plagued the construction industry. It proffers cohesion, security, continuity, trust, co-operationand an ideal platform on which to capture and disseminate knowledge from lessons learnt. Creatingsupply chain relationships bounded by the values of exclusivity and solidarity elevates the fiercely360

competitive client / contractor / supplier landscape towards an inter-supply chain competition (Tan,2001). In other words, „supply chains compete, not companies‟ (Christopher and Juttner, 2000). Itshould be noted that EU/UK legislation may challenge controlled competitive practices, for example,pressurising suppliers not to trade with industry competitors (OFT, 2007). In terms of procurementroute, supply chain monopolies within this context remain hypothetical.5. DiscussionIt is evident from the literature review that construction supply chain management cannot be allthings, to all companies, all of the time (Ireland, 2004). Whilst procurement strategies govern thecontractual relations of the supply chain classification, contextual factors dictate preference.Discussion reflects on the environmental conditions and cultural disposition of the UK constructionindustry, drawing particular attention to irregular workloads, project timescales, market dynamics andindustry competitiveness. The temporary nature of project work-loads coupled with erratic consumerbehaviour has ingrained an underlying management philosophy for achieving short-term gains at theprobable expense of other longer-lasting benefits (Green and May, 2005). Lack of work-load certaintydiminishes the opportunity to develop business strategies that extend beyond the interim.Relationships that represent the supply chain are extremely transient. For example, second and thirdtier subcontractor and suppliers may only have a fleeting involvement with the project, theirindividual contribution to project success is crucial but their presence as a percentage of the overallconstruction programme is minimal. As a victim of their ‘transitory’ circumstances, manyconstruction contractors employ an overtly opportunistic outlook. Seizing work whenever andwherever it becomes available makes good financial sense and feeds an all-important positive cashflowcriteria. Opportunistic behaviour is symptomatic of a company that perceives its businessinterests to be vulnerable (Ngowi and Pienaar, 2005). It could be argued that in a constructionindustry nurtured on the dogma of ‘survival of the fittest’ (Green et al., 2008), opportunistic behaviouris a sagacious business strategy. Project timescale will also influence the attitude and spirit of all theparticipants involved.Much has been written about the working relationships that pervade and persist in the constructionsector, much of it unfavourable. Three key factors inter-play; competition, vulnerability andopportunistic behaviour (Ngowi and Pienaar, 2005). Addressing these issues within the managementof the supply chain has the potential to temper the overtly confrontational default position of projectmembers. A client–contractor alliance reduces vulnerability for the supplier and secures provision ofproducts and services for the buyer creating a more stable project and business environment on whichto build a working relationship. The challenge for construction industry stakeholders is how tocultivate a collaborative / co-operative relationship that supports a programme of continuous value formoney improvement in a project-based industry that by its very nature is discontinuous. The markedgrowth in non-traditional procurement arrangements would appear to be a consequence ofgovernment discourse coupled with a confident market environment. The fluctuating nature ofconstruction supply and demand is a powerful determinant of supply chain architecture. The highlycontract-specific characteristics of the construction market will sway where influence and powerresides within the buyer-supplier relationship (Cox and Ireland, 2002). In a buoyant economicenvironment demand for services and products is likely to outstrip supply, inflating consumer costs.361

In the event of an economic downturn, the supply of goods and services is likely to be in excess ofdemand, giving the client purchasing power. This has far-reaching consequences for supply chainmanagement and typology of approach. In an economic downturn where competition is fierce,margins are cut and company survival is vulnerable, i.e. model for opportunistic behaviour, the clientmay favour an overtly competitive standpoint with less emphasis on collaborative supply chainmanagement, (Green et al., 2005). Confident that in a contracting construction market traditionalprocurement and open supply chain architecture offer superior business opportunities. Reviewing thecurrent economic data, market leverage arguably resides with the procurer. Only time will tell if theyuse their consumer power responsibly or regress to type (Wolstenholme, 2009). Otherwise, “if there isno meaning full way to balance demand and supply in the construction industry, the death ofpartnering could be imminent” (Oyegoke et al., 2009). Competitiveness – popularised as anexpression of intent in the 1980’s, see Michael Porter – Competitive Strategy (1980) and CompetitiveAdvantage (1985), has become a fundamental tenet of business parlance, (Flanagan et al., 2007). Thetopic of intra-supply chain co-operation and industry competitiveness introduces a curious dilemma.Government support for the free market is somewhat tempered by its endorsement of lasting,collaborative, trusting and closer working relationships. ‘Competition is good’ has been the guidingmantra for UK public policy since the election of Margaret Thatcher’s Conservative Government in1979 (Green et al., 2008). The enterprise culture was born and according to Green et al (2008) has hada ‘lasting effect on the structure of the UK construction sector, and the managerial rhetoric that ismobilised in the cause of improvement‟. The potential discord for supply chain stakeholders is thebelief that operating in a free market encourages competition, increases operational efficiencies,stimulates innovation and lowers costs. As championed by the Government Office of Fair Trading,‘Markets work well for consumers when there is vigorous competition between firms that trade fairly.Being pro-consumer therefore goes hand-in-hand with being pro-market‟ (OFT, 2001). Pro-consumerconfidence in ‘competition is good’ is to some extent contested by recent Government discourse thatadvocate partnering, framework agreements, strategic alliances and other forms of collaborative unionas they also promise operational efficiencies and cost benefits to the consumer (Egan, 1998). SirMichael Latham alluded to this tension of competition versus accord in his report ‘Constructing theTeam’. Proclaiming that „some main contractors have developed long term relationships…that iswelcome, quickly stating „they should not become cosy‟ (Latham, 1994). Given the contradictorynature of competitive relations, value for money and current government discourse it is likely that in aWestern capitalist driven economy the resolution probably resides with the persuasive appeal of freemarket forces. As a consequence, it could be argued that the unprecedented downturn in constructionactivity will severely curtail business-related opportunities to foster learning alliances within theconstruction supply chain.6. ConclusionThe essence of supply chain management is to recognise the buyer-supplier interdependency andthereby improve the supply chain configuration (Vrijhoef and Koskela, 2000). In stark contrast withother commentaries, this paper is not advocating a ‘construction best practice’ approach to supplychain management. The initial challenge is to chart the situational factors that fashion the wideranginginterpretations of supply chain management in construction. Establishing a benchmark ofcommon understanding is a pivotal step in the evolution of a pragmatic and coherent supply chain362

learning agenda, otherwise future innovation and development may be futile (Cox, 1999). Aligningthe continuum of supply chain architecture with a ‘horses-for-courses’ analogy as advocated by Coxand Thompson (1997) serves as a ‘dichotomous contrast’ for the various forms of supply chainmanagement configurations. Characterising supply chain management in a variety of architecturalguises endorses the notion that a one-size fits all imitation is unlikely to be feasible let alonesuccessful. Symptomatic of the ‘hazy’ definition, supply chain management in the UK constructionindustry is continuously renegotiated within highly localised contexts, (Green and May, 2003).Developing a supply chain learning agenda therefore has numerous challenges notwithstanding themyriad of interpretations. That said, exciting research opportunities do exist within the managementof knowledge and organisational learning spectrum to develop learning chains that span the buyersupplierrelationship (Maqsood and Finegan, 2009). After fifteen years of prosperity and sustainedgrowth the construction industry is in the midst of a difficult economic correction that will testconstruction practices new and old. This research paper provides a timely impetus to explore thescope and challenges for supply chain management in an uncertain and turbulent constructionenvironment.ReferencesAKINTOYE, A. & MAIN, J. (2007) Collaborative relationships in construction: the UK contractors'perception. Engineering, Construction and Architectural Management, 14, 597 - 617.ALDER, H. (2009) Supply Chain Management and Networks. IN SUPPLY, C. I. O. P. A. (Ed.).London.ASKOXFORD.COM (2009) Compact Oxford English Dictionary. Oxford Dictionaries.BERR (2004) Supply Chain Management. London, Constructing Excellence.BERR (2009) Construction. London.BRISCOE, G. & DAINTY, A. (2005) Construction supply chain integration: an elusive goal? SupplyChain Management: An International Journal, 10, 319 - 326.CHENG, E. W. L., HENG, L. & LOVE, P. E. D. (2000) Establishment of Critical Success Factors forConstruction Partnering. ASCE Journal of Management and Engineering, 16, 84 - 92.CHRISTOPHER, M. & JUTTNER, U. (2000) Developing strategic partnerships in the supply chain: apractitioner perspective. European Journal of Purchasing & Supply Management, 6, 117 - 127.CONSTRUCTING_EXCELLENCE (2005) Why use a framework agreement? , ConstructingExcellence in the Built Environment.COX, A. (1997) Business Success, Boston, UK, Earlsgate Press.363

COX, A. (1999) A research agenda for supply chain and business management thinking. SupplyChain Management: An International Journal, 4, 209 - 211.COX, A. & IRELAND, P. (2002) Managing construction supply chains: the common sense approach.Engineering, Construction and Architectural Management, 9, 409 - 418.COX, A. & THOMPSON, I. (1997) 'Fit for purpose' contractual relations: determining a theoreticalframework for construction projects. European Journal of Purchasing & Supply Management, 3, 127- 135.CSCMP (2009) CSCMP Supply Chain Management Definitions. Council of Supply ChainManagement Professionals.DAINTY, A. R. J., BRISCOE, G. H. & MILLETT, S. J. (2001) Subcontractor perspectives on supplychain alliances. Construction Management and Economics, 19, 841 - 848.DTI (2002) Rethinking Construction Innovation and Research: A Review of Government R & DPolicies and Practices. London, HMSO.DTI (2006) Review of Sustainable Construction 2006. London, HMSO.EGAN, J. (1998) Rethinking Construction. DETR.EXPEDIAN (2009a) Construction Forecasts: A report by the forecasting committee for theconstruction industry. Summer 2009.EXPEDIAN (2009b) Construction Forecasts: Construction forecasting and research. Autumn 2009.FERNIE, S. & THORPE, A. (2007) Exploring change in construction: supply chain mangement.Engineering, Construction and Architectural Management, 14, 319 - 333.FLANAGAN, R., LU, W., SHEN, L. & JEWELL, C. (2007) Competitiveness in construction: acritical review of research. Construction Management and Economics, 25, 989 - 1000.GREEN, S. D., FERNIE, S. & WELLER, S. (2005) Making sense of supply chain management: acomparative study of aerospace and construction. Construction Management and Economics, 23, 579- 593.GREEN, S. D., HARTY, C., ELMUALIM, A. A., LARSEN, G. D. & KAO, C.-C. (2008) On thediscourse of construction competitiveness. Building Research & Information, 36.GREEN, S. D. & MAY, S. C. (2003) Re-engineering construction: going against the grain. BuildingResearch & Information, 31, 97 - 106.364

GREEN, S. D. & MAY, S. C. (2005) Lean construction: arenas of enactment, models of diffusion andthe meaning of 'leanness'. Building Research & Information, 33, 498 - 511.HOLTI, R., NICOLINI, D. & SMALLEY, M. (1999) "Building Down Barriers" Prime ContractorHandbook of Supply Chain Management: Sections 1 & 2. IN BERR (Ed.). London, CIRIA.IRELAND, P. (2004) Managing appropriately in construction power regimes: understanding theimpact of regularity in the project environment. Supply Chain Management: An International Journal,9, 372 - 382.KYRO, P. (2003) Revising the concept and forms of benchmarking. Benchmarking: An InternationalJournal, 10, 210 - 225.LATHAM, M. (1994) Constructing the Team, The final report of the Government / Industry review ofprocurement and contractual arrangements in the UK construction industry. London, HMSO.LOVE, P., E.D., IRANI, Z., CHENG, E. & LI, H. (2002) A model for supporting inter-organizationalrelations in the supply chain. Engineering, Construction and Architectural Management, 9, 2 - 15.LOVE, P., E.D., IRANI, Z. & EDWARDS, D. J. (2004) A seamless supply chain management modelfor construction. Supply Chain Management: An International Journal, 9, 43 - 56.MAQSOOD, T. & FINEGAN, A. D. (2009) A knowledge management approach to innovation andlearning in the construction industry. International Journal of Managing Projects in Business, 2, 297 -307.MENTZER, J. T., DEWITT, W., KEEBLER, J. S., MIN, S., NIX, N. W., SMITH, C. D. &ZACHARIA, Z. G. (2001) Defining Supply Chain Management. Journal of Business Logistics, 22, 1 -25.MORLEDGE, R., SMITH, A. & KASHIWAGI, D. T. (2006) Building Procurement, Oxford, RICSResearch & Blackwell Publishing.MORTON, R. (2002) Construction UK Introduction to the industry, Oxford, Blackwell Publishing.NAO (2001) Modernising Construction. London, HMSO.NEW, S. J. (1997) The scope of supply chain management research. Supply Chain Management, 2, 15- 22.NGOWI, A. B. & PIENAAR, E. (2005) Trust factor in construction alliances. Building Research &Information, 33, 267 - 278.OFT (2001) Foreword. London, HMSO.365

OFT (2007) Completing competition assessments in Impact Assessments: Guidelines for policymakers. London, HMSO.OGC (2008) Framework Agreements: OGC Guidance on Framework Agreements in the ProcurementRegulations. London, OGC.OYEGOKE, A. S., DICKINSON, M. M. A., MCDERMOTT, P. & ROWLINSON, S. (2009)Construction project procurement routes: an in-depth critique. International Journal of ManagingProjects in Business, 2, 338 - 354.POTTS, K. (2009) From Heathrow Express to Heathrow Terminal 5: BAA's Development of SupplyChain Management. IN PRYKE, S. (Ed.) Construction Supply Chain Management Concepts andCase Studies. Oxford, Wiley-Blackwell.PRYKE, S. (Ed.) (2009) Construction Supply Chain Management Concepts and Case Studies,Oxford, Wiley-Blackwell.RICS (2006) Contracts in Use: A survey of building contracts in use during 2004. London, RICS.SAAD, M., JONES, M. & JAMES, P. (2002) A review of the progress towards the adoption of supplychain management (SCM) relationships in construction. European Journal of Purchasing & SupplyManagement, 8, 173 - 183.STOCK, J. R. & BOYER, S. L. (2009) Developing a consensus definition of supply chainmanagement. International Journal of Physical Distribution & Logistics Management, 39, 690 - 711.STRATEGIC_FORUM (2002) Accelerating Change. London, Rethinking Construction.STRATEGIC_FORUM (2008) Construction Commitments. London, HMSO.TAN, K. C. (2001) A framework of supply chain management literature. European Journal ofPurchasing & Supply Management, 7, 39 - 48.THOMPSON, I., COX, A. & ANDERSON, L. (1998) Contracting strategies for the projectenvironment. European Journal of Purchasing & Supply Management, 4, 31 - 41.THURAIRAJAH, N., HAIGH, R. & AMARATUNGA, R. D. G. (2006) Cultural Transformation inConstruction Partnering Projects. IN SIVYER, E. (Ed.) Proceedings of the Annual ResearchConference of the Royal Institution of Chartered Surveyors. London, RICS.VRIJHOEF, R. & KOSKELA, L. (2000) The four roles of supply chain management in construction.European Journal of Purchasing & Supply Management, 6, 169 - 178.366

WOLSTENHOLME, A. (2009) Never waste a good crisis: A review of Progress since RethinkingConstruction and Thoughts for Our Future. London, Constructing Excellence in the BuiltEnvironment.367

Nurturing of a Virtual Construction ManagementServices Company and its System Contractor NetworkKiiras, J.Construction Management and Economics, Aalto University School of Science and Technology(email: juhani.kiiras@tkk.fi)Alsakini, W.Construction Management and Economics, Aalto University School of Science and Technology(email: walsakin@abo.fi)Huovinen, P.Strategic Management in Construction, Aalto University School of Science and Technology(email: pekka.huovinen@tkk.fi)AbstractThe background involves the research program on managing virtual companies in construction in theunit of Construction Management and Economics at the Aalto University School of Science andTechnology. The novel concept of an ideal virtual construction management services company(VCMSC) has been designed. The integrated management system of a VCMSC consists of sevensubsystems for managing (i) client relationships, (ii) offering and bidding, (iii) design andengineering, (iv) networked procurement, (v) construction planning, execution, and control, (vi)commissioning and after sales services, and (vii) network nurturing. Thereof, the sub-systems (ii) …(vi) correspond to the well-known areas in construction project management. Instead, clientrelationships and network nurturing are incorporated into the management system as its two newsubsystems. In turn, the purpose of this paper is to design a subsystem of the nurturing of a VCMSC‟snetwork of special system contractors. The nature of this paper is that of a qualitative concept design.The design of a sub-system of the management of the nurturing relies in part on the selectedtheoretical bases for managing and nurturing virtual companies as networks. The four elements of thesuggested subsystem of the network nurturing management are as follows. (i) A structural scopeincludes the idea of virtualization, goal setting, networked processes, tasks, and members. (ii) Atoolbox for nurturing a multi-member network includes the key enabling management models andinformation systems, expertise development programs, virtual workshops, etc. (iii) Each contractorneeds a collaborative and competitive rationale for its membership, i.e. a VCMSC should providepositive net benefits in the short and long term. (iv) A network nurturing strategy ensures thecompetitiveness and performance of a virtual, competitive network as well as the availability ofhighly effective competencies for managing and nurturing a VCMSC and actually realizing buildingprojects. Some conclusions are put forth concerning the dynamics of networking in building, theconditions, the roles of each contractor in network nurturing management, a chief nurturing officer,and the evolution of ICT-based solutions.Keywords: building, construction management, global markets, network management, virtualorganizations368

1. IntroductionThe external background involves the generic and contextual planes of contracting in building. Ingeneral contract forms, owners (clients) receive fixed prices, fixed schedules, and limitedpossibilities to make changes during construction stages. Owners‟ designers finalize all designs,drawings, and specifications, on the basis of which competitive bidding events are arranged. In turn,general contractors arrange competitive bidding among second-tier subcontractors, and so on. Allthese competition stages are based on the cheapest products that meet owners‟ requirements. Allavailable suitable products and good operational performance cannot be obtained through these lowbid chains. Any changes in designs involve negotiations between owners and contractors concerningcosts and schedules. Thus, owners are left with all low bid problems such as weak quality, chainedprice competition, decisions made prematurely, low flexibility for design changes, and expensive,materialized changes. Alternatively, the adoption of construction management (CM) contractforms allows for flexible selection procedures as well as incentives for contractors and suppliers tooffer their most advanced, realistic solutions and to assume life-cycle servicing responsibilities, i.e.for better buildings and integrated overall performance (Kiiras and Kruus 2005).The internal background involves the research program on managing virtual companies inconstruction in the unit of Construction Management and Economics at the Aalto University Schoolof Science and Technology. Why do we investigate companies on the virtual plane? This is sobecause most applied writings focus on managing virtually individual construction projects, teams,etc. (e.g. Adams and Adams 1997), despite of an abundance of generic concepts on virtualmanagement of firms (e.g. Franke 2001). The goal of our research program is to design an idealmodel of managing of a construction company. The key criteria for the design of a viable modelinvolve (a) a flat, virtual, and key competence-based core (unit), (b) a co-opting, virtual network, and(c) an ICT-based, integrated management system (or sub-model). In turn, practicing managers can usethis model to diagnose and to benchmark the degrees of virtualization in the case of their owncompanies, respectively, and thus to choose the lines of future development.So far, the novel concept of a virtual construction management services company (VCMSC) hasbeen designed (Alsakini et al. 2005, 2006a-b, 2008a-c). The main contributions can be briefed asfollows. An ideal VCMSC is defined as a dynamic network of collaborating entities that reconfigurearound an organizational core or a leading member whenever a CM servicing opportunity arises. Thisleading CM member guides a virtual network on a short term and long term basis, members aregeographically dispersed, and each member specializes in those parts of a value chain with which itachieves a maximal added value. A VCMSC is a purposeful system composed of a set of interrelatedelements, i.e. activities, members, and resources (Alsakini et al. 2008b).As a member of a virtual network, a special system contractor (SSC) is defined to be a contractorwith in-house competencies for the design, manufacturing, delivery, installation, and life-cycleservicing of its focal building system. According to the principles of the open building, a building isdivided into the five categories of building systems, i.e. base building systems (support, shell, core),permanent space systems (space areas and components), technical building services systems, flexible369

space systems, and exterior area systems. Many suppliers and subcontractors can adopt this new,enlarged role with incentives for system development, innovations, and new delivery packages(Salmikivi 2005). In the context of the Finnish building sector, special system contracting has beendeveloped to advance the adoption of extended building contracts with the detailed design andengineering, manufacturing, delivery, and installation of building systems (e.g. structural buildingframes), modules (e.g. rooms), building products (e.g. windows), and functional elements (e.g. indoorclimate). In addition, a VCMSC exploits external suppliers with their standard building products,construction materials, and life-cycle services (Alsakini et al. 2008b).The integrated management system of a VCMSC consists of the seven subsystems for managing (i)project owner (or client) relationships (PORMS), (ii) project offering and bidding (POBMS), (iii)project design and engineering (PDEMS), (iv) networked procurement, (v) construction planning,execution, and control (CPECMS), (vi) commissioning and after sales services (CASSMS), and (vii)network nurturing (NNMS). Thereof, the sub-systems (ii) … (vi) correspond to the well-known areasin construction project management (Alsakini et al. 2008c). Instead, client relationships and networknurturing are incorporated into the management system as its two new subsystems (see Figure 2). Inparticular, network management and nurturing is an emergent research area. For example, thecurrent references on dual partnering (e.g. Cheng and Heng 2004) do not grasp success factorsembedded in competitive networking.In turn, the purpose of this paper is to design a subsystem of the nurturing of a VCMSC‟s network ofspecial system contractors in more detail. The nature of this paper is that of a qualitative conceptdesign. The design of a sub-system of the management of the nurturing relies in part on the selectedtheoretical bases for managing and nurturing virtual companies as networks (Section 2). Theoutcome, i.e. the network nurturing management system (NNMS) consists of four elements, i.e.(i) a structural scope includes the idea of virtualization, goal setting, networked processes, tasks,knowledge modules, etc., (ii) a toolbox for nurturing a multi-member network with e.g. managementmodels and information systems, (iii) a rationale for each specialized contractor‟s membership also inthe longer term, and (iv) a network nurturing strategy for a leading member (Section 3). Someconclusions are put forth concerning the dynamics of networking in building, the conditions, the rolesof each contractor in network nurturing management, a chief nurturing officer, and the evolution ofICT-based solutions (Section 4).2. Selected theoretical bases for managing and nurturingvirtual networks2.1 Virtualization and networking of organizations and companiesThe virtualization is herein seen as the key underlying trend in the relevant generic literature. Avirtual organization (VO) is defined as an entity that is capable of dealing with complexity anduncertainty through cooperation among members in a network that is managed like a singleorganization (Saabeel et al. 2002). Organizations cannot anymore alone exploit the windows of future370

opportunities in private sectors and public sectors alike across the globe. Thus, VOs are being formedand each member possesses different, but compatible knowledge, skills, and resources for exploitingsuch windows (Coulson and Kantamnen 2003). In turn, a virtual company (VC) is a temporary,loosely coupled network of legally independent companies that combine their individual corecompetencies to exploit a specific business opportunity by optimizing a value adding businessprocess (Bauer and Kösgezi 2003). A VC is also a purposeful system composed of interrelated actorsand other elements (Saabeel et al. 2002). It resembles a dynamic network that facilitates theconfiguration of core competencies that, in theory, results in an optimal value creation process. Thegoal is to create and to nurture flexibility for meeting changing market conditions. Thus, companiesare focusing on internal core competencies, extending (outsourced) value chains, and integratingmany external core competencies of other companies.2.2 Management of virtual companies as networksNetworking is the organizational form of the information age. Network organizations signify a formof collaboration designed to facilitate economic and social exchange between members. Individualeconomic actors are likely to sacrifice some of their own preferences in the pursuit of collective goals(Franke 2001, Fleisch and Österle 2000). The modeling of VCs as networks takes place along theselected key dimensions. For example, Scholz‟s (2000) model consists of (a) core differentiation, i.e.strategic orientation towards core competencies, (b) soft integration, i.e. the task of integration ofmodularized production throughout a value-adding process by “soft” mechanisms (a co-destiny,shared vision and goals, fairness, and trust), and (c) virtual realization, i.e. the extent to whichinformation and communication technology (ICT) is used to coordinate modularized production. Thismodel depicts various degrees and types of virtualization by moving companies in a 3-dimensionalspace. None of solutions along one dimension is alone ideal for restructuring companies and adaptingthem to new situations. Indeed, a leap towards a VC implies the integrated movements along all ofthree dimensions.The management of a developing network can be enabled by the following five processes: (i) toplan a network strategy, (ii) to design a network structure, (iii) to select members of a network, (iv) tomanage a network on a day-to-day basis, and (v) to change a network based on a continuousevaluation of network efficiency (de Man 2004). Mutual trust between the partners and the extensiveuse of ICTs guarantee the coordination of modularized production. VCs reshape themselves ascustomer requirements change or environments evolve. Contributing companies sustain theirmemberships in a network as long as they can add value. Members are disengaged when theircompetencies are no longer needed. The effective sourcing of resources includes the reconfigurationof critical capabilities assembled through different relationships within business networks. Thismeans that specific requirements are posed on the capabilities and resources of companies that takepart in VCs. In turn, the exploitation of ICTs facilitates both the sourcing of standard modules and theoutsourcing of key or supporting and business processes (Venkatraman and Henderson 1998).371

3. Design of a novel nurturing management systemThe subsystem of the management of the nurturing of a VCMSC and its network of SSCs is designedas four elements, i.e. a structural scope (subsection 3.1), a toolbox (3.2), a rationale for each of SSCsvis-à-vis a network membership (3.3), and a network nurturing strategy for a leading member (3.4)3.1 Structural scopeA NNMS enables a leading member both to develop the competencies of a VCMSC‟s network and torenew its membership. i.e. to seek new SSCs. Project by project, a leading member may choose a coreteam based on a fit-for-purpose strategy, i.e. the required expertise and competencies are determinedand the necessary functional areas are specified for each targeted project (Alsakini et al. 2006b). Ascope of a NNMS includes the idea of virtualization, goal setting, and networked processes, tasks,knowledge modules, etc. A VCMSC exhibits the preferred characteristics along the three dimensionsthat cover the managerial aspects (management systems), structural aspects (networking andcollaboration), and functional aspects (functional outsourcing and work). In practice, a particularcompany can manage its targeted degree of virtuality gradually along each of the three dimensionswhich integrate the characteristics of collaborating entities and relationships (Alsakini et al. 2008b).Along the structural dimension, an ideal VCMSC is as follows (Kiiras and Huovinen 2004). (i) Aflat and virtual organization comprises ownership, top management, bidding and project managers.Only these existential functions are sustained within the core. Middle level management is removedor outsourced. Site managers, engineers, and teams are encouraged to establish their own practices asentrepreneurs. (ii) Basic functions like design, engineering, financing, administration, and costestimation are outsourced so that no bureaucratic structures and overheads remain. (iii) A leadingmember collaborates with a competitive network of SSCs, designers, and staff pool (Figure 1).Possible subcontractiongwithout networkingManycompetingSSCs bysystemMaterialsEquipmentLaborSpecial SysytemsContractorSpecial SysytemsContractorWorkContractorLeading member(Core)Main ProductSupplierPossible partneringwith main supplierSpecial SysytemsContractorSpecial SysytemsContractorMaterialsEquipmentLaborFigure 1: Competitive network of SSCs and other project stakeholders around the core of a VCMSC(Alsakini 2008b)372

A delivery system of a VCMSC is based on a competitive network. Collaboration is enhancedbetween a leading member and networked SSCs, designers, and a staff pool (Alsakini et al. 2006a). Acompetitive network of SSCs is needed to ensure product flexibility, design changes flexibility, shortdelivery times, and the concurrency of design, procurement, and construction works on site. For eachsystem, part, or trade, two or more SSCs and their modularized systems are connected in order toensure competition for better performance. Together, SSCs provide complete buildings and performmuch of the management work accomplished by general contractors and client representatives. Theconcept of a VCMSC as a whole minimizes trade interfaces and decreases communication failures(Alsakini et al. 2006b).3.2 ToolboxA toolbox for nurturing a VCMSC and its multi-member network includes the enabling models, thekey information systems, expertise development programs, communication means, etc. Along theprocess dimension, a VCMSC is equipped with the two main models, i.e. the networked projectmanagement model (i.e. the seven subsystems) and the 3-part building construction informationmodel (BCIM).The BCIM enables the dynamic, effective processes and high performance of a VCMSC as follows(Alsakini et al. 2008c). (1) A building product sub-model (BPM) targets a finished building as a setof interdependent design objects, i.e. spaces (space model), building elements, and product structuresor receipts (building products or construction materials), at minimum. Each building-specific datamodel is scalable. More and more detailed documents are uploaded into the model during theconsecutive stages of a building design process. Visualization is enabled with information aboutspaces, infill, surfaces, textures, and materials. Generic building element structures (BES) are stored,updated, and reused via the BES library of a VCMSC. A building product model should be updatedbased on design changes incorporated in a building D&E management system. A building productmodel is installed on the VCMSC‟s server early in the project. This server is accessible to all actorsof a project. All revised and more detailed designs by designers and SSCs are added as the layersover the original design. The validation of the design including checks for consistency and clashes isachieved at the same time resulting in a consistent product model. In turn, this product sub-model is abasis to produce a resource and cost sub-model by providing information needed for deciding upon awork breakdown structure (WBS), preparing a list of bid packages to be tendered by SSCs, andprocuring bills of quantities and cost estimates from expert consultants.(2) A building project resource and cost sub-model (BPRCM) targets a building project as a set ofinterdependent resource objects, i.e. the amounts of building products (retrieved from a buildingproduct model) and resource structures or receipts, with current prices, planned to be exploited forthe constructing and installation of these building products. This resource and cost model involvessystem-specific sub-models that are interchangeable among internally competing SSCs. Genericbuilding project activities with their resource structures and prices (RSP) are stored, updated, andreused via the RSP library. In turn, this resource and cost sub-model is a basis to produce a processsub-model to provide information for the procurement, construction tasks, and site activities with373

their interdependencies, durations, and costs. Compatible software for CM activities enables SSCs toincorporate their detailed activity plans, where each activity is presented in a rolling window, into thereal-time master plan of a leading member during construction for control purposes.(3) A building construction process sub-model (BCPM) targets a building project as a set ofinterdependent activity objects, i.e. the frequencies of project activities or tasks that are coupled withtheir resource structures (retrieved from a resource and cost model) and durations calculated byresources. This process sub-model involves system-specific sub-process models that are interchangeableamong internally competing SSCs. Generic building project activities, their planningrules, and interdependencies (APP) are stored, updated, and reused via the APP library of a VCMSC.ClientDesignersPORMSCASSMSPDEMSPOBMSProductModelResource &Cost ModelITITSpecialSystemContractorsSSCsStaff PoolNNMSNPPMSProcess ModelNetwork systemCPECMSProject SystemFigure 2: Integrated, 7-subsystem management of a VCMSC based on a 3-part building construct-ioninformation model (BCIM); for the abbreviations, see 1. Introduction (Alsakini et al. 2008c)The performance of a VCMSC‟s 7-subsystem management system and the 3-part model is based onsoftware integration. Thus, the IS/IT strategy of a VCMSC involves (1) the use of Internet as thebase for networked communication, (2) the integration of compatible software/applications by allmembers (including also designers) of a competitive network, (3) the training of project participantsto use such software/applications, and (4) the sustaining of the operability of the systems and the upkeepingof model libraries (Alsakini et al. 2006a).An integrated information system (IIS) enables virtual knowledge management, i.e. SSCs becomea source of expert knowledge and they offer competitive sub-solutions for those offerings with whicha VCMSC competes in targeted (inter)national building arenas. An exchange mechanism within aVCMSC‟s internal environment is based on simple file exchange, i.e. point-to-point informationexchange. Information is stored in one warehouse that is accessed by those who provide and seekrelevant information. Links between enterprise systems, i.e. company specific system/repositories,transfer and receive information packages on a periodic basis or based on requests to/from a specificproject server (Alsakini et al. 2008a, 2008c).374

In addition, the IIS provides a leading member with information for partner search. Directoriesinclude information about the preferred companies, their profiles (e.g. competencies, skills,performance history, and in-house resources). The profiled information is related to the current andpast SSCs as well as their past project performance. New company profiles are selected and compiledbased on generic company, system, and service catalogs (Alsakini et al. 2008c).3.3 Rationale for a specialized contractor vis-à-vis membershipEach SSC needs a collaborative and competitive rationale for its membership, i.e. a VCMSCshould provide positive net benefits in the short and long term. Both leading members and SSCs maycompile such a rationale, respectively, from among the following key elements.(a) Critical success factors of a VCMSC and its network include a shared purpose, a shared vision,trusting relationships, willingness to share risks, and mutual benefits derived from a VCMSC‟sexistence.(b) Virtual project management (PM) supports each SSC. In other words, an interested SSC ismotivated under the networked PM principles. For each project, one project manager is assigned tocarry PM responsibilities. During overall design phases, a project manager acts as a consultant andleads a design team together with client representatives, an architect, various engineers, andconsultants. During bid or proposal preparation phases, a project manager heads the buying ofestimation services and the allocation of SSC procurement packages via a competitive network.When a particular bid is won, a project manager leads the detailed design and engineering of thechosen SSCs, makes a master schedule, mobilizes a site organization from a staff pool, and managesthe construction phase with the help of detailed activity plans and schedules prepared by the SCCs.The latter have larger responsibilities in design, planning, and control, too (Alsakini et al. 2006b).(c) The non-discrimination of any types of technologies, systems, or materials is a starting point(and assumption). When competition is based on design solutions, material choices, and productionefficiency, a SSC model does not discriminate construction techniques and materials. Competitionexpands from production know-how to system know-how and from details to a total solution. Incompeting with solutions, it is possible for SSCs to come up with more innovations and develop theirproduction. Internal competition includes also system and technical solutions (Salmikivi 2005).(d) The high degrees of freedom in tailoring compatible systems are enabled throughmodularization, project by project. On a basis of the completeness of a design, an invitation for SSCtenders is divided from a level where only the production plans of the system are missing into a levelwhere only needs and requirements are described. According to this high freedom degree of thedesign, each SSC is competing at the widest based on its system and the technical solutions. Inaddition, aesthetical, functional and technical requirements as well as selection criteria are presentedin calls for SSC tenders. Each SSC‟s tender design must be at the level of a directive design to proveconformance with specifications, the quality of a system, and the requirements of regulations.375

Furthermore, the integration possibilities of related systems are secured. In each of SSC-specificagreements, designs are developed into the level of final designs (Salmikivi 2005).3.4 Network nurturing strategy for a leading memberA network nurturing strategy ensures the availability of highly competitive competencies forrealizing building projects. The extent and speed of the creation and nurturing of a competitive virtualnetwork will vary markedly among companies. Typically, a leading member makes its decisionsbased on the availability of new competent SSCs, the foreseen higher degrees of trust-based relations,and the effective use of ICT applications needed to enable the virtualization process to proceed faster.At any point in time, the current degree of virtualization can be measured along the competitivenetworking dimension, by the competitive and collaborative characteristics and their role within aVCMSC as a whole. A leading member focuses on enhancing CM expertise, virtual processes, and itsstaff pool (Alsakini et al. 2008b).SSCs are motivated for achieving sustainable-like advantages over a series of projects. A leadingmember desires to work closely with networked SSCs as well as to scan and to ensure that the bestexpertise is available from among designers and within a staff pool for future projects (Figure 3).DesignersTOP MGMTALL PotentialSSCsSSC filesStaff pool filesStaff PoolFigure 3: Network nurturing management system (NNMS) of a VCMSC (Alsakini et al. 2008c)Networked SSCs are motivated to add value-for-client money through their system knowledge andmodularized expertise (Alsakini et al. 2008b). A member-specific selection process includes thefour aspects as follows, i.e. (i) to draw up a partner profile which lists the desired characteristics ofSSCs such as their strategies, competencies, market positions, technological strengths, and companycultures, (ii) to track a potential member‟s prior record of networking and partnering, e.g. potentialconflicts of interests or synergic effects may be revealed, and (iii) to plan alternative realistic roles376

and positions (versus other SSCs) in relation to the core of a VCMSC, and (iv) to check the image,reputation and references of each potential SSC.In addition, a leading member needs to clarify how the know-how of both designers and supplierscan be taken into the best use as complementary elements to an effective network of SSCs. Inparticular, with the simultaneous analysis of design processes in CM projects and the testing inprospective SSC cases, the instructions for using the SSC model will be developed. The tasks andresponsibilities of project actors during the various stages are specified in detail (Salmikivi 2005).4. ConclusionsSome conclusions are put forth concerning the dynamics of networking in building, conditions, theroles of each SSC in network nurturing management, a chief nurturing officer, and the evolution ofICT-based solutions as follows. Life-cycle dynamics within a VCMSC may involve a 3-stageprocess of formation, operation, and termination. A leading CM member is envisioning how thevirtual structures of its VCMSC come about and how the management practices evolve. A VCMSCcan adjust itself to changes in the environment and renew its mission by designing new CM servicesfor higher customer value, adopting innovative CM service processes, and managing the nextgeneration‟s virtual operations within an IT enabled network (Alsakini et al. 2008b). In the samevein, each of SSCs may consider the entry, renewal or termination of its membership in one orseveral virtual networked entities.The enabling and preventing conditions include building markets, stakeholders, competing singlefirms and networks, leading members, special system contractors, ICT, etc. In particular, keypioneering owners (clients) will play decisive roles vis-à-vis the choices of building investmentstrategies, procurement strategies, and contracting forms, respectively. Namely, there will be (more)room for the expansion of VCMSCs only to the extents to which owners perceive and allow this tohappen, i.e. that virtually networked CM contracting is the best option in each of multiple contexts inglobal, international, and local building markets.The roles of each SSC in network nurturing management may vary markedly in the future. In themiddle, core members are being motivated to develop their system solutions and competencies. Coremembers play also key roles as part of the overall performance of the focal VCMSCs. In the outerlayers, routine members are being encouraged to specialize in and to ensure high-quality performancein various project-specific settings.Chief nurturing officers are needed to manage the nurturing of the competitiveness andperformance of future VCMSCs. Thus, the leading members of VCMSCs are encouraged to establishsuch new positions. In part, some nurturing tasks can be (kept) outsourced, VCMSCs will rely onhuman resources and competency development professionals and their services.In turn, the evolution of ICT-based solutions will be one of dual forces vis-à-vis the development ofnew edges in competitiveness within VCMSCs across targeted building markets and contexts. The377

upside involves the „as planned‟ pioneering and timely availability of ICT-based solutions. Thedownside implies also failures, postponements, ineffective pilot solutions, etc.Finally, it seems that the degrees of virtualization in real construction companies, across variousnational contexts, are still very low (or non-existent). For example, we haven‟t yet identified anypair(s) of Finland-based companies that could have been benchmarked as a starting point for futureprogress, respectively. On the other hand, this non-existence may indicate that managing firmsvirtually belongs still to the plane of emergence, i.e. virtual management practices are becoming morewidely exploitable only sometimes beyond the year 2015 or so.ReferencesAdams J R and Adams l L (1997) “The virtual project: Managing tomorrow‟s team today”. PMNetwork, (1): 37-41.Alsakini W, Kiiras J and Huovinen P (2005) “Management system for a virtual constructionmanagement services company (VCMSC)”. Kähkönen K and Sexton M (eds.) Proceedings of the11th Joint CIB International Symposium on Combining Forces – Advancing Facilities Managementand Construction through Innovation, 13-16 June 2005, Helsinki, Finland, VTT, RIL, and CIB: 167-179.Alsakini W, Kiiras J and Huovinen P (2006a) “IS/IT strategy of a virtual construction managementservices company”. Rivard D, Melhem H and Miresco E (eds.) Proceedings of Joint InternationalConference on Computing and Decision Making in Civil and Building Engineering, 14-16 June 2006,Montreal, Canada, Universite du Quebec et al.Alsakini W, Kiiras J and Salmikivi T P (2006b) “Enlarged role of specialty system contractors in afull virtual (digitalized) supply network”. Rivard D, Melhem H and Miresco E (eds.) Proceedings ofJoint International Conference on Computing and Decision Making in Civil and BuildingEngineering, 14-16 June 2006, Montreal, Canada, Universite du Quebec et al.Alsakini W, Kiiras J and Huovinen P (2008a) “An integrated information system of virtualconstruction management services company”. Proceedings of Joint CIB Conference W102Information and Knowledge Management in Building and W096 Architectural Management, 3-4 June2008, Helsinki, Finland, VUA, RIL and CIB.Alsakini W, Kiiras J and Huovinen P (2008b) “Competitive virtuality among virtual constructionmanagement services companies”. Putnik G D and Cunha M M (eds.) Encyclopedia of networked andvirtual organizations. Hershey, PA, IGI Global, 1843-1850.Alsakini W, Kiiras J and Huovinen P (2008c) “Management of a virtual construction managementcompany”. Putnik G D and Cunha M M (eds.) Encyclopedia of networked and virtual organizations.Hershey, PA, IGI Global: 856-867.378

Bauer R and Köszegi S (2003) “Measuring the degree of virtualization”. The electronic Journal ofOrganizational Virtualiness, eJOV 5(2): 26-46.Cheng E W L and Heng L (2004) “Development of a practical model of partnering for constructionprojects”. Journal of Construction Engineering and Management, 130(6): 790-798.Coulson K R and Kantamnen P S (2003) Virtual corporations: The promise and perils. DC Press.(available online www.dcpress.com/jmb/ virtual.html [accessed on 11/2003]).Fleisch E and Österle H (2000) “A process-oriented approach to business networking”. Theelectronic Journal of Organizational Virtualiness, eJOV 2(2): 1-20.Franke U J (2001) “The concept of virtual organizations and its implications on changingmarket conditions”. The electronic Journal of Organizational Virtualiness, eJOV 3(4): 43-64.Kiiras J and Huovinen P (2004) “The virtual project management (PM) services company – in thecase of construction markets in Finland. Proceedings of the CIB World Building Congress on Buildingfor the Future. Toronto, NRC and CIB.Kiiras J and Kruus M (2005) “Advanced design management as part of construction management(CM)”. Kazi A S (ed.) Systemic innovation in the management of construction projects andprocesses; Proceedings of the 11 th Joint CIB W55, W65 Symposium on Combining Forces, AdvancingFM and Construction through Innovation, 13-16 June 2005, Helsinki, VTT, RIL, and CIB: 272-283.de Man A-P (2004) The network economy - Strategy, structure and management. Edward ElgarPublishing.Saabeel W, Verduijn T M, Hagdorn L and Kumar K (2002) “A model of virtual organization: Astructure and process perspective. The electronic Journal of Organizational Virtualiness, eJOV 4(1):1-16.Salmikivi T (2005) “Advancing building through special systems contracting (SSC) in the case ofFinland”. Proceedings of the 11 th Joint CIB W55, W65 Symposium on Combining Forces, AdvancingFM and Construction through Innovation, 13-16 June 2005, Helsinki, VTT, RIL, and CIB.Scholz C (2000) “The virtual corporation: Empirical evidences to a three dimensional model”.Proceedings of Academy of Management 2000 Conference. Toronto, Canada.Venkatraman N and Henderson C (1998) “Real strategies for virtual organizing”. Sloan ManagementReview 40(1): 33-48.379

Implementation of Mobile ICT Tools in ReengineeringProject in Slovenian Construction CompanySuman, N.Faculty of Civil Engineering, University of Maribor(email: natasa.suman@uni-mb.si)Sorsak, M.Faculty of Civil Engineering, University of Maribor(email: marko.sorsak@uni-mb.si)AbstractIn our paper, we are using the Business Process Reengineering (BPR) concept together with theimplementation of potentials of mobile information and communication technology (ICT) to interpretthe ability for better managing and performing processes in construction companies. Through ourintensive examination of reengineering initiative in construction, we find that relatively low emphasiswas placed on the opportunity to use information and communication technology more progressivelythroughout the construction processes. Hence, we developed a methodological concept„Reengineering of the construction process based mobile on ICT tools‟ and taste it in a concreteconstruction company in Slovenia. The efficiency of reengineering project realization is defined fromthe viewpoint of the three tested implementation projects that were based on implementation of ICTtools. Implementation projects exposure of the five elements that affect adoption of ICT tools andBPR concept. Purposed elements enable evaluation of the attained results of company reorganizationand the relevance of purposed concept. Difficulties and milestones of the reengineering project, theimportance of management and coordination of work are also stressed.Keywords: business process reengineering (BPR), information and communication technology (ICT),construction practice380

1. IntroductionWe live at a time when changes occur faster than ever before. Modern construction companies thushave to realize that demands for modernization of business processes and more efficient organizationof work are needed. Hence, there has been a trend to systematically introduce one of the managementmethods for company re-engineering such as Business Process Re-engineering (BPR), ISO 9000,Total Quality Management (TQM), the 20 Keys Method, benchmarking, etc. Among the existentmethods in this paper the Business Process Re-engineering (Hammer and Champy, 1993) was chosenbecause it offers most opportunities for a radical re-engineering, and assures tangible positive resultsin shortest time.Over the years, there has been an initiative to formulate a concept for implementing basic BPRconcept in construction. Courtney and Winch (2002) examined the strategic study on “re-engineeringconstruction” and introduced the concept of re-valuing construction. Among the founders of“Revaluing Construction” were Kosekla (2003) that deals with issues of the necessity for structuralchanges; Ballard and Howell (2003) that impose the efficacy of lean production ideas; Barlow et al.(2003) with their discussion on customization and pre-assembling and Barrett (2007) with thepublication of “Revaluing Construction: a holistic model”.Actually, efficiency of reengineering will significantly depend on the choice of adequate informationand communication technology (ICT). Its opportunities are utilizing modern and better technology tohelp planning process automation especially for improving the information flow in a company. Overthe last decade some attempts have been made to examine the factors affecting ICT and mobile ICTadoption for improving performance in construction industry (Love and Irani, 2004; Nitithamyongand Skibniewski, 2004; Zain et al., 2005). Hardly any research projects relate to improving traditionaloperational and business performance within mobile ICT. In our literature research we found out thatBowden et al. (2006) bring the vision of construction process improvement through the use of mobileICT support. Next Stewart (2007) was in his survey analysed opportunities for reengineeringtraditional processes by implementation of innovative ICT.In this paper we discusses the process of implementing ICT tools as basis for adopting businessprocess reengineering concept for better managing and performing business and operation processesin Slovenian Construction Company.2. Applied methods for managing processes innovativelyIn order to manage business and operation processes in construction companies, we purposedmethodological concept that captures the BPR philosophy (technology 1) as well as potentials ofmobile ICT as technical background (technology 2).381

2.1 Technology 1: Business process reengineering (BPR)Business process reengineering (BPR) is the method that stands out as the integral method of businessoperation re-engineering. In practice, BPR is often understood as a general term for substantial,revolutionary improvement of business operation. Its fundamental task is to design the optimalprocess design activity, and the implementation of the change in all its complex technological, human,and organizational dimensions (Davenport, 1993). BPR method within its radical nature meansdecisive drastic modifications of the key company processes.When decision about implementation of BPR concept into the company and about its competitivenessin practice is under consideration, the management should used the answers to three questions, thatwill appointed the root of the company‟s problems:1. In which current processes are we facing most problems? Purpose for determining the constantcause of difficulties in business or working operations and researched the characteristics of coreprocesses.2. Which processes are the most significant to the costumers? Estimate of what processes needed tobe re-engineered and in what order in terms of significance to the customers.3. Which processes are easiest to successfully re-engineer in shortest time? Consider the scope ofthe company‟s re-engineering and estimate what simultaneously influenced all organizationalunits of the company. Also for examine of the qualifications and potentials of the employeeproject team and the owner‟s dedication and support.2.2 Technology 2: Mobile ICT – technical backgroundFor redesign and better managing processes we found out the employment of mobile ICT potentials asan appropriate solution. According to studies of mobile ICT in construction (Magdic et al. 2004;Chassiakos and Sakellaropoulos 2008) we can conclude, that mobile ICT offers the possibility for reestablishingcommunication environment in construction processes. Rebolj et al. (2008) report thatmobile ICT are the technical tools for the purpose of establishing dynamic communicationenvironment which would allow for dynamic mutual connections between project actors and speed upinterconnection of spatially distributed project participants.In terms of functionality of dynamic communication environment, its potentials enable mobileinteractive personal communication which ensures that one has the right (necessary) information atthe right time in the right place instantly. Consequently, the implementation of mobile ICTcomponents influences the extension of communication system, and thus a flexible management ofworking process, adapted to each person, is made possible. The concept at the same time encouragesconsidering knowledge and abilities of individuals. The dynamic communication that was set up aswell as its advantages can play an important role in reshaping the traditional business processes inconstruction industry.382

3. Reengineering of the construction process based mobile onICT toolsIn order to manage business change in construction companies, we developed a methodologicalconcept „Reengineering of the construction process based mobile on ICT tools‟ as tool that will sumup this two things: general managerial approach to Business Process Reengineering (BPR) as well aspotentials of mobile ICT especially for the purpose of establishing a dynamic communicationenvironment. In our purposed concept we don‟t exposure other reengineering tools e.g. motivation,competences, trust, organization, ect. Fig. 1 shows the model of purposed concept that will serve asthe basis for an efficient implementation and with the goal of ensuring faster and more efficientconstruction processes.Figure 1: Reengineering of the construction process based mobile on ICT tools (Suman et al., 2009)3.1 Reengineering project realizationRealization of reengineering project will be presented on the example of implementation of purposedmethodological concept for reengineering process in Construction Company “A”. The need fororganizational and business reengineering arose from problems in the core realization processes ashigh cost of business operation, low productivity levels, and lack of interpersonal projectcommunication. Thus at the beginning of the reengineering project the determination that thereengineering project presents the method for better capturing operation processes and thus reducingcosts of work, material and capital were set up.The reengineering of a company is always a great pretension organizational - sociological project andtherefore extensive in view of its subject and implementation. In Construction Company “A” it lastfor 18 months and it was broken down into the following three interconnected implementationprojects (phases): (1) analysis of activities, (2) analysis of processes and (3) implementation of MobileICT project.383

3.1.1 Implementation ProjectsFirst implementation project (phase) was analysis of activities that enclosed structuring of allcompany‟s activity and information analysis. Analysis of activities inside of all production andservice processes of different departments was conducted on the basis of collected data. By criticallyevaluating an existent processes made from the department managers and construction projectmanagers measures for a rationalized and more efficient work were proposed. The first project alsoincludes the analysis about existent information flow within collecting and categorizing business andproject documentation of processes activities.Second implementation project (phase) was analysis of processes. The analysis of processes wouldfacilitate the identification of key processes in the company, transform the processes withindetermination of their optimal pursuance and appoint the new organizational structure of thecompany. During process transformation three basic processes were identified: operation, productionand market-oriented process. These resulted in process rationalization hence; savings were made inthe number of steps, necessary for the implementation of a particular process. The normativestandards for the quality of a product were raised, number of delays and unanticipated events on sitereduced. We also significantly enhanced the quality of the preparation on building and buildingworking processes. Finally, considering the results of process analysis and existing organizationalstructure, a proposal for setting up a new process-based structure was done.Third implementation project (phase) was Implementation of Mobile ICT that arose after the finishingof the second project and from the demands for proper information and communication support. Thecompany‟s management decided to implement project management portal based on mobile ICTcomponents which represents a unique combination of construction project management conceptswith the goal of monitoring schedule and project cost. These would be reflected in the reduced time ofproject completion, reduced time of problem solving at unanticipated events, enhancing the quality ofbuildings as well as increasing the project profitability.3.1.2 Elements that affect adoption of BPRThe reengineering of the construction process model based mobile on ICT tools was the basis fortesting how appropriate it was to apply BPR rules and simultaneously implement mobile ICT. In caseof Company “A”, the effects of applying BPR to key processes and implementing mobile ICTsimultaneously to support those processes was analysed. The evaluation was achieved according tofive selected elements as follows: company‟s organization (OC), communications (CO), process workorganization (WO), resource management (RM) and project coordination (PC). Table 1 presents fiveelements that impact on improving operational and business processes through fourteen most relevantperspectives.384

Table 1: Five elements that enable evaluation of the relevance of reengineering projectTypeElement descriptionCompany’s organization (OC)OC1OC2OC3Communications (CO)CO1CO2CO3CO4CO5Process work organization (WO)WO1WO2Resource management (RM)RM1RM2Project coordination (PC)PC1PC2Coordination and communication flows to other departmentsConstruction manager is autonomous as responsibleReporting and feedback are appropriate and fit the objectivesReceived assignments are clear and appropriateInformation flow between project participants is formalDocuments are proper and wholeInformation/data processing are in time and latestInformation/data are processed automaticControl over budget and time is regularProject teams are set up out of different departmental workersResources needed are delivered on time at the right placeOutput form/Incoming to warehouse are checkedLots of time is spent on working on unanticipated eventsLots of time is lost due to delays waiting for resources/introductions/inspectionIn company “A” we made the surveys consists on parts that follow each other in a certain time-line.Fist part was conducted at the time before realization of reengineering project and the second afterintroducing all phases of reengineering. The best survey results were on the perspectives that dealwith improvements such as processing information/documents, processing progress claims andresource control and on the perspectives that deal with increasing the information and communicationflow.3.2 Some realizations on the reengineering projectDifficulties and milestones of the reengineering project, the importance of management andcoordination of work are also stressed.We knew already during the preliminary phase of the reengineering project that we would come upagainst many critical points, representing the milestones of the project in terms of success or failure.Introducing change as a rule stimulates disapproval of the personnel, usually trigger off feelings of385

uncertainty and generates further disagreements among the above-mentioned key protagonists of there-engineering. Further we based our understanding on the fact that at the initiation of the BPR projectit is crucially important to modify the unwritten principles of company business operations, where thekey role is played by the owners, management and the employees.The attainment of short-term argued results of re-engineering, indisputably significantly contributedto the success of the reengineering project. The first priority was on constantly bringing theemployees up to date on the effects of their involvement in process teams. Another priority was onintroducing adequate management and information knowledge for the needs of a new way of actionthrough which ammore efficient approach was achieved in processes. The next priority was onmanaging complex interactivity between different (mostly spatially divided) participants. Consideringpriorities could definitely improves the strategic competitiveness of the company.4. ConclusionOur contribution presents a reengineering project based on implementing of ICT tools for increasingefficiency of performing of construction processes and elements that enable evaluation of therelevance of the purposed reengineering project in Slovenian Construction Company. The proposedconcept of reengineering was justifiably selected with two methodological technologies: businessprocess reengineering (BPR) and mobile information and communication technology (ICT) astechnical background. The first technology offered radically transforming of the key businessprocesses and thus changing the traditional organizational structure. In our purposed concept we wereoriented on mobile ICT implementation that was represented as the second technology. Within theconcept of dynamic communication work productivity should be increased in most of theorganizational units and offers opportunity for significantly improving communication betweenspatially divided project participants. On the case of implementation of the proposed reengineeringconcept in Construction Company “A” we present a case of a successfully implemented reengineeringproject.AcknowledgementThis research was part financed by the European Union, European Social Fund.ReferencesHammer M, Champy J (1993) Reengineering the Corporation – A Manifesto for Business Revolution,New York, Harper Collins.Courtney R, Winch M (2003) "Re-engineering construction: the role of research and implementation."Build. Res. Inf. 31 (2): 172-179.Kosekla L (2003) "Is structural change the primary solution to the problems of construction?" Build.Res. Inf. 31 (2): 85-97.386

Ballard G, Howell G (2003) "Lean project management." Build. Res. Inf. 31 (2): 119-134.Barlow J, Childerhouse P, Gann D, Hong-Minh S, Naim,N, Ozaki R (2003) "Choice and delivery inhousebuilding: lessons from Japan for UK housebuilders." Build. Res. Inf. 31 (2): 134-146.Barrett P (2007) "Revaluing Construction: a holistic model." Build. Res. Inf. 35 (3): 268-286.Bowden S, Dorr A, Thorpe T, Anumba C (2006) "Mobile ICT support for construction processimprovement." Autom. Constr. 15 (5): 664–676.Love P E D, Irani Z (2004) "An exploratory study of information technology evaluation and benefitsmanagement practices of SMEs in the construction industry." Inf. Manage. (Netherlands) 42 (1): 227–242.Stewart R A (2007) "IT enhanced project information management in construction: Pathways toimproved performance and strategic competitiveness." Autom. Constr. 16 (4): 511–517.Nitithamyong P, Skibniewski M J (2004) "Web-based construction project management systems: howto make them successful?" Autom. Constr. 13 (4): 491–506.Zain M, Rose R C, Abdullah I, Masrom M (2005) "The relationship between information technologyacceptance and organizational agility in Malaysia." Inf. Manage. (Netherlands) 42 (6): 829–839.Davenport T (1993) Process Innovation: Reengineering work through information technology,Boston, Harvard Business School Press.Magdic A, Rebolj D, Suman N (2004) "Effective control of unanticipated on-site events: A pragmatic,human-oriented problem solving approach." ITcon 9 (Special Issue): 409-418.Chassiakos A P, Sakellaropoulos S P (2008) "A web-based system for managing constructioninformation." Adv. Eng. Software 39 (11): 865-876.Rebolj D, Magdic A, Podbreznik P, Psunder M (2008) "Automated construction activity monitoringsystem" Adv. Eng. Inf. 22 (4): 493-503.Suman N, Ursic D, Psunder M, Veselinovic D (2009) “Mobile Information and CommunicationTechnology and Management of Business Changes in Construction Companies in Slovenia.” Syst.pract. action res. 22 (5): 397-411.387

Beyond the Design Fix - New Industrialisation inContractor’s Supplier RelationshipsKoch, C.Institute for Business and Technology Århus Universitet(email: christian@hih.au.dk)Frödell, M.Construction Management, Chalmers University of Technology(email: Mikael.Frodell@chalmers.se)Josephson, P. E.Construction Management, Chalmers University of Technology(email: Per-Erik.Josephson@chalmers.se)Kähkonen, K.Building and Transport, VTT(email: kalle.kahkonen@vtt.fi)AbstractIn striving for increased efficiency in service delivery the AEC-sector is currently attempting tointroduce industrialisation, mainly in the form of design and production concepts such as massconfigurated “systems” such as bungalows. There is thus a tendency to focus steps in direction of“new industrialisation” at design efforts for limited areas of mainstream construction. Mainstreamconstruction seem however to move a lot slower in this direction, having to appreciate the complexityof the delivery and only using sub-systems deliveries in restricted areas. This paper therefore aims atanalysing the needed transformation of supply deliveries, when attempting gradually to move in asystems delivery direction. Theoretically the paper is based on a multidisciplinary approachunderstanding supply relations, purchasing and management as negotiated and emergent. Based on afour country study funded by the Erabuild program, this paper presents 3 cases of long termtransformation of contractor- supplier relations as general contractors outsource and commenceprofessionalising purchasing moving it from project purchasing into strategic purchasing. It issuggested that “new industrialisation” is a long term transformation rather than a quick design fix,appreciating the vulnerabilities of delivery relations and coordination issues. Especially using defectsand quality issues as “litmus” for the well functioning of the supply chain. Implications for futurerelationship management and supplier transformation is given.Keywords: industrialisation, supply chain, governance, systems delivery388

1. Introduction“New industrialization” in construction usually translates into using manufacturing productionmethods and principles and by obtaining innovation through new industrial processes, and tools aswell as ways of meeting users requirements, this project argue that three basic elements need to bealigned on the road toward new industrialization: a supply of subsystems and components, a designenabling mass customization and a production mixing systems assembly with other site production.New industrialization is often only understood as developing modular products. Here it is understoodas attempts of creating a stronger and further integration of building products and processes, whichwill involve increasing the degree of subsystems deliveries and a transformation of supply. Also quitesome focus in the trend of industrialized construction has been on design (Mikkelsen et al 2005). Herewe argue however that advances in design need to be merged and balanced with new concept ofsupply and production planning and execution. And our specific focus is on the supply side. There aretwo main reasons for this choice of focus. The first reason is that the major part of the cost ofconstruction is consumed by suppliers to the main contractor, including traditionally sub-contractors,manufacturers of material and other organizations taking care of transporting material and equipment.The second reason considers the fact that most business-to-business-relations are found in the supplyside. There is a major challenge to organize and manage all these relations in an effective way toreduce waste of various types in order to reduce costs. Our contention is moreover that the technicalsolutions for modular prefabrication and mass customization is in principle accessible whereas themanagement and organization of the three elements, supply, design and production need to besubstantially developed in order to realize the technical and economical potential. The sketchedsituation is a reality for the major contractors within Denmark, Finland, France and Sweden, whichhave begun to develop global supply chains as part of a more industrialized construction, this includeSkanska, NCC, Peab, Bouygues, Eiffage, Vinci, SPIE Construction and others.The aim is to develop a better understanding of the challenges in new industrialized supply, focusingon four areas in order to contribute to improvement of quality, reduce costs and develop interfirmrelations in supply: (a) management, governance and organization of integrated supply, (b) potentialsand barriers for system concepts in the supply chain, (c) handling of non conformance and failure, and(d) bringing construction beyond present contracting. This paper therefore aims at analysing theneeded transformation of supply deliveries, when attempting gradually to move in a systems deliverydirection. Theoretically the paper is based on a multidisciplinary approach understanding supplyrelations, purchasing and management as negotiated and emergent. Based on a project funded by theErabuild program, this paper presents three selected cases of long term transformation of Europeancontractor-supplier relations. Two cases focus on general contractors outsourcing, commencingprofessionalising purchasing moving from project into strategic purchasing. One case is focusing on alarge contractor conglomerate developing a subsystem and making it into a business area.389

2. TheoryStudies of supply-buyer interactions, purchasing etc have over time originated from and adopted anumber of different research paradigms and professions, including engineering design, informationsystems, marketing, operation management, organization theory, purchasing, strategic managementand systems theory (New &Westbrook 2004). “New industrialism” has obtained status as andevelopment agenda for the construction industry, maybe more so in some countries than in others. InDenmark the agenda have attracted public funding and industry for quite some time.2.1 Governance as overarching and comprehensive conceptIn the analysis below governance is defined as broadly coordination, steering and control mechanismsencompassing both structural and processual elements. “Supply” uses governance as an overarchingterm for the specific orchestration ofPurchasing orientation, strategy and practicesSupplier relations, networksStrategy and leadership of main playerOrganisation and management of main playerSubsystems deliveriesQuality and defects managementDuring our development of this project we have identified characteristic governance forms that wewill refer to: networks, strategic sourcing, project purchasing, systems integration. Those typesusually represent several or all elements from the above list. The main player could in principle beplaced a number of places in the network. Empirically the supply project encompasses examples ofcontractors, clients and a craft contractor as examples of main players. Most scholars ascribeWilliamson's (1975, 1990) groundbreaking work on transaction economics as seminal for theunderstanding of governance, but it is equally well established that governance today has become amessy, umbrella-like term (Peters and Pierre, 2000). As the governance discourse develops, it haswidened its focus both in understanding of mechanisms and in coverage of business activities.Mechanisms have been widened from abstract structures (market hierarchy and networks) to muchmore action oriented understandings. Governance is often viewed as a newer form of managing, usedto underline indirect forms of control, self-organisation and other soft and network-like elements ofgovernance instruments (OECD, 2004). In corporate governance, there has also been focus on issuesof transparency and accountability. The theoretical edge of governance is to highlight that framingoperations in specific ways, would lead to improved performance. The development of governancehas thus relaxed its original structural orientation. We maintain openness toward governance formsand thus span over structure and agency. Here we define governance as broadly coordination, steering390

and control mechanisms encompassing both structural and processual elements (Pietroforte, 1997;Turnbull 1997). The application of governance to supply chains and networks are fairly recent(Wathne and Heide 2004; Jain and Dubey, 2005). We argue that supply chains might consist of anumber of companies and cooperation between companies of a short and long term character.Establishing cooperation projects in delivering complex products is one example of such governancearrangements in supply, delivery contracts as part of an SCM effort another, innovation networks athird etc. (Pryke, 2004). Often they in reality encompass “merely” dyads of two companies, but it canextend to chains and to networks. These observations lead to understanding governance in supply asprecarious constellations of corporate governance and cross company governance arrangements suchas contracts, cooperations and practices (Winch, 2001). Trust between company representatives mightbe profound (de Treville, 2006), but would more often be present in various forms includingcooperation at an arm's length. The tight and agile integration of key intra- and inter-organizationalbusiness processes in supply becomes increasingly important. This integration can to a certain extentbe exercised by creating classical hierarchies, integrating companies in corporate groups and undercommon management through mergers and acquisitions. However, there is an increasing recognition,drawing on the understanding of complementarity and core competency, that alliancing andnetworking are an attractive business strategy. Such project and strategic alliances create the need ofdeveloping new governance mechanisms (Miller and Hobbs, 2005). We thus argue that governancemechanisms and practices have tended to move away from the original transaction cost focus ondirect processes (see Tangpong et al., 2005). Since governance tends to drift away from directsoperations, this potentially create tension between the two. Since supply is a cross company activity inmost cases even might encompass a number of companies (as in our cases below), the societal aspectof governance, termed metagovernance by political scientists (Van Heffen, 2000), plays a role.“Metagovernance” denotes the regulatory environments of mechanisms and processes that enable orconstrain the supply chain and quality issues (Peters& Pierre 2000).2.2 Project and the supply chainThe full implication of shifting customer demands is an engineer- and build-to-order strategy, and incomplex products, this is often organised by project. This again implies supply chains, which inprinciple is configured project by project. According to client demands, smaller or larger part of theoffered product will have to be sourced by new sub-suppliers. Moreover location and other factorswill lead to special conditions unique for the single project. This conceptualization is in contrast withmost supply chain literature, which assumes that the structures of the supply chain are stable (London2008; Holweg and Pil, 2004; New and Westbrook, 2004; Mentzner, 2004). Although already Forrester(1958) in his seminal article on supply chain dynamics would demand a focus on five flows(information, materials , money, manpower and capital equipment) most SCM- writings adopt a morelimited understanding of supply chains, more or less entirely devoted to the flow of materials (London2008). Construction value flows are distributed roughly as 60% of construction costs are materials(measured against a buildings total cost), whereas labour on the building site is around 20%,production equipment around 10% and design is around 10%. The importance of the knowledgestream related to its role as value-adder vis-a-vis the other streams. Behind these figures areconsiderable profits for material supply units (manufacturers, retailers, distributors), Hyll (2005) thusanalyses a supply chain for radiators and finds a price augmentation of 272% from manufacturer to391

client. In the present work we focus on two flows; knowledge and materials. In construction researchthese two flows are frequently described as independent (Hyll 2005 and many others). In a knowledgeand service economy however, material manufacturers are design partners and design and productionneed to be relatively integrated. In other words the two streams are increasingly intertwined.Moreover the construction delivery processes can be described as multi-channeled, since there areoften multiple suppliers in both the knowledge and materials flow. The understanding of “projectconfiguration” shouldn’t be overemphasised since considerable parts of the materials supply chain inconstruction exhibit rather traditional forecast based production and extensive stocks of materials atretailers as a main strategy of flexibility and responsiveness (Hyll 2005). Moreover retailers aresuccessful in attaching contractors to them through price and discount agreements. Thomassen (2004)describes the strategic supplier-relationships as “islands of stability”. All of this implies that to eachproject there will often be a certain degree of traditional deliveries and a certain degree of projectspecificdeliveries, suggesting that the supply chain can be described as partially stable, partiallyproject specific. As an important counter strategy to project delivery supply chains a host ofcompanies across sectors, but also within construction, have strived at using supply chainmanagement (SCM) strategies in order to lever the stability. Bhote (1989) describe how SCM canimprove results by reducing the number of supplier and by creating partnerships for long termrelationships, escaping adversarial relations.2.3 Purchasing and supply chainThe review below starts with the internal firm changes of strategy, organisation and management ofpurchasing and supply chain activities and then goes on with the interfirm relations. Purchasingliterature would identify three strategic roles for purchasing; rationalisation, development andstructural (Gadde & Håkansson 2001). As products and processes have become increasingly complexand dynamic the need for stronger relationship with suppliers have proliferated. This has led to anincreasing proliferation of business strategies encompassing changes in purchasing and supply chainmanagement (Krajic 1983, Bhote 1989, Morgan 1999). This has also been the case for constructioncompanies (London 2008, Pryke 2008). More recently it has been proposed to use the notion“purchasing orientation” to frame these strategy, and practice positions (Lindgreen et al 2009). Suchstrategic reorientations have been followed by redesigning the organization of purchasing andsuppliers relations. Gadde and Håkansson (2001) described that purchasing develops from includingordering, negotiating and sourcing into a much broader set of activities under the frame of supplychain management. They similarly describe two main organisational models the central and decentral.A highly centralized purchasing organization can develop internal specialization to different suppliermarkets, but tend to lose contact with production units,which have the experiences with the supplies.The decentralized purchasing on the other hand experience difficulties to coordinate across units andhave the same external overview (Gadde & Håkansson 2001). Crucially they note that (ibid p 114):“The combination of central and decentral is sometimes recommended to be that strategic purchasesare handled centrally, while operational purchases may be handled locally. However we argue that insome situations this is not the most appropriate approach. In many cases standardized components andMRO-supplies are suitable candidates for centralized purchasing, because of the economics of scale.392

…Strategic component and systems often require decentralization because purchasing needinvolvement of technicians and engineers”For Gadde & Håkansson there is not any pregiven organization for a purchasing and supply strategy.In construction the classical purchasing orientation can be labeled project purchasing as the authorityis placed with project management (Winch 2001 a.o.). Here we define a system as composed byseveral technically distinct elements assembled into a fully operatable unit carrying out atransformation on well-defined input and providing well-defined outputs (Anderson 2004). Theinterest for mass customisation leads to mobilising the supply of subsystems. In principle and from atechnical point of view sub systems should be delivered at highest possible aggregation level. Themore complex a subsystem delivery can be, the simpler a supply situation (fewer suppliers and fewerinterface issues etc). However a supply is not to be understood as merely a technical issue. Rather it isa heterogenous set of concerns and actors encompassing cost, power, risks etc. Vordijk et al (2005)assumes in their discussion that product variations can be “swallowed” by a modular design and bythe attached supply chain. A modular supply chain delivers sub-assemblies (modules) which aredelegated to specific module suppliers. The understanding is that a product variation in a modulararchitecture has only a limited impact on production and assembly processes. Modular supply,production and assembly thus allows a firm to differentiate its product to a high degree by combininga limited number of standard parts. The problem pertains however that the construction supply chainproduct is highly quantitatively complex and even to a certain extend qualitatively. This means thatvariations go beyond what subsystems can deliver. Vordijk uses Fines three types of modularity andcombines it with other refining concepts such as independence (Wolters et al. 2002) degree ofstandardization (Ullrich 1995). Wolters (2002) thus proposed to look at distinctiveness of components(the house is developed as an integral part or as a combination of distinct modules), coupling betweenmodules (tight or loose), clarity between functions and components, and the degree of interfacestandardization. Ulrich (1995) proposes to analyze the degree of standardization by grouping into slotmodularity, bus modularity, sectional modularity, and component-sharing modularity. Vordijk et alprovides one example of a company producing production facilities, stores and offices. Althoughvarious elements of modularity are introduced in product design and in processes the effect on thesupply chain management seems to be that there are a number of recurrent subsuppliers. Suchgovernance enables coordination and more, but the case does not show any features of strategicsourcing or supply modularity. The three case studies provided whereof two are on single familyhouses reveal difficulties using the otherwise apparently instrumental concepts introduced; where liesfor example the precise line between slot modularity and sectional modularity?3. MethodThe study behind this paper includes studies of four European enterprise cases of long termtransformation of contractor- supplier relations. Local research teams have studied one case each. Thefirst case considers purchasing behavior and supplier relations at Skanska Sweden, documented inFrödell (2009). The second case considers developing strategic purchasing at NCC Danmark,supplemented with development of a subsystem, an installation shaft. The case study has been carriedout by Chris Ellegaard and Christian Koch. The third case considers developing a system componentat YIT Finland. The case study has been carried out by Kalle Kähkonen and colleagues. We consider393

these cases and companies as spearheading in their effort in rationalising the supply chain and usingsub systems. They are thus chosen as non typical. The methods involve desk study, interviews(purchasing, project management, suppliers representatives), group discussions and nationalworkshops. The paper delimits itself from discussing the construction sector specificies in eachcountry. Moreover even if the chases cover most of the supply chain, we do not discuss the retailerand the building component manufacturers, neither the clients in this paper.4. CasesThe following section presents three cases of long term transformation of contractor-supplierrelations. Two cases focus on general contractors outsourcing and commence professionalisingpurchasing moving it from project purchasing into strategic purchasing. One case focuses on a largecontractor conglomerate developing a subsystem and making it into a business area.4.1 Case 1: Constraints for establishing long-term supplier relationsSkanska Sweden is a major contractor in the Swedish construction industry with a turnover of SEK30.3 billion in 2008 employing 12,000 people. Skanska Sweden, which is the focus of Case 1, is oneof nine business units of Skanska AB. Within Skanska Sweden, purchasing has played an increasinglyimportant role during the last 5 years. In the autumn of 2004 a development project was initiated fromthe management with the mission to form a proposal for the transformation of purchasing withinSkanska Sweden. The aim of this initiative was to fully utilise the potential benefits Skanska Swedencould gain from being one of Sweden’s major internationally active companies. The purchasingtransformation began in 2006 and during the following two years the purchasing department withinSkanska Sweden grew from 30 to approximately 120 employees. Both internally and externallyrecruited people were appointed to the new positions and the background of the appointed rangedfrom management consultancy, manufacturing, construction to newly graduated students. The firstgoal of the purchasing transformation was to strive towards increasing the total percentage ofcoordinated purchases. Based on e.g. strategic importance, purchasing volume and the suppliermarket, Skanska Sweden divides its purchasing into project specific purchases and coordinatedpurchases referring to project specific purchases where sourcing is conducted for each individualproject. Coordinated purchases on the other hand are built on framework agreements betweensuppliers and Skanska Sweden, implying that no souring is necessary for the specific project, whichrather need to call off the materials and services. With the ambition to reach 50% coordinatedpurchasing in 2008, the actual result amounted to 35%. This is nevertheless a clear increase comparedto 2004’s figure of 20%. With this clear indication on increased usage of framework agreement it iseasy to believe that the transition towards more long-term supplier relations with selected suppliers isa smooth process, generally accepted by the organisation. This is not all true. One of the constraints ofestablishing these long-term relations refer to the contractor’s organisation which is highlydecentralised resulting in that even if the purchasing department signs the framework agreements withsuppliers, the actual decision of supplier is made by the project management. Emphasising the powerof the order and the subordinate status of the framework agreement, a strategic purchaser clarified:“The framework agreements may be good for our suppliers but in the end it is the actual order thatmatters, that is when they can secure their money at the bank. A non-binding agreement is more a394

case of nice to have.” A result of the situation is that the framework agreements are mainly used whenare considered the most favourable from a project perspective, diminishing the potential holistic –firm perspective – gains and long-term orientation integrated in the framework agreement. The loyaltyto the current agreements is, however, considered high within the case organisation. Nevertheless,many of the suppliers were already widely used through the organisation even before the agreementswere signed, which unambiguously has led to a high loyalty to the agreements. Consequently, it isquestionable if the high loyalty would remain if a supplier were changed in favour of a new one; orwould the projects still buy from the former supplier? This advisory choice of supplier might obstructthe implementation of sub system deliveries since there is no established way of directing purchasesto a preferred supplier within the organisation.4.2 Case 2: Subsystems delivery at NCC DenmarkThe use of subsystems and the supply and purchasing of subsystems from specialized manufacturershas been commonplace for more than ten years in NCC Denmark. However, several initiatives havebeen taken recently to enhance the degree of usage. Below are discussed three initiatives. Oneinitiative is the development of classical sub systems delivery. NCC Denmark has throughout theperiod 1999- 2009 used suppliers of well embedded subsystems. These encompasses precast concreteelement production and assembly (core building and staircases), roof cassettes, kitchens, elevators,and bathroom modules. Four of these have been covered by long term purchasing agreements (precastconcrete, kitchens, elevators and bathroom modules). NCC Denmark has even been shareholder of acompany manufacturing bathroom modules and has engaged in precast concrete fabrication. Anotherinitiative was the ambitious Komplett initiative. Komplett was an ambitious attempt from corporateNCC in Sweden to develop low-cost apartment building manufactured in a factory. The project waslaunched in 2003 and went public in 2006, where NCC announced a production plan (Ingeniøren2006). By November 2007 the initiative was stopped and NCC acknowledged to have lost 500 mioSkr. (Ingeniøren 2007). A third initiative is the emerging experience with a product developmentproject on an installation shaft. The installation shaft project was slowly commencing as early as2004, and was “stabilized” as product for sale in the autumn 2009. In 2006 the project was establishedas a project promoted by “Byggeriets Innovation”, a development initiative funded by Realdania.Byggeriets Innovation offered a fifty fifty funding at 5 mio DKR. Allowing the total development costto arrive at 10 mio DKR. Main project parties was 3 managers, 7 employees from NCC, 2 RHarchitects, 3 Consultants from Valcon Innovation and 2 Process consultants from Byggerietsinnovation. The project was aiming developing a subsystem for installation shafts in multi storageapartment buildings as a mass customization solution. Byggeriets innovation was using a particularprocess method for their projects, which won’t be further elaborated here. The selection of theinstallation shaft as object of the study was grounded in an understanding that nobody really caredabout the design of the installation shaft, which means that changing this component would meet lessresistance. The project parties asserted that, at least from an architect’s point of view this was aninvisible, technical element merely delaying the creative process, but also the engineers, it turned out,found this element of building design less interesting. An early analyses of twenty existing shafts,carried out by NCC in their project portfolio, showed a high degree of repetition in the design of theinstallation shafts. External parties (Valcon Innovation) helped identify the structure of the artefacts,its “morphology”. Two basic variants with differing length were designed. The project created several395

prototypes, including one full scale. A hearing on this physical prototype was carried out April 2008,a test at a building site, an elderly home, was carried out December 2008- April 2009. For long it wasplanned to develop a webbased configurator, to underpin the idea of a modular and configurable shaftas also done with the present IT-based Product Variant Master and 3D – model. Where the installationshaft was a demonstrated success at the test site, the configurator became embedded internally inNCC engineering department for HVAC design. It can be noted that whereas the physical shaftperformed convincingly at the test site, the test building had been designed by architects andengineers long before the testing of the shaft came on the agenda. NCC decided to embed the sellingof the shaft in the HVAC department subsequently to the testing. In the autumn of 2009, NCC havebeen able to sell 1000 pieces, but the design part is left to NCC and has not been adopted byarchitects. A constraint that the configurable product was designed for apartment buildings, a marketthat virtually disappeared as the shaft was designed and tested. The design of this prefabricated unitcompiling 300 work operations and 10-12 crafts and thereby reduce the number of suppliers or at leasttheir tasks. The development and selling is notably not embedded within purchasing but elsewhere inthe company and with an alliance with external parties. Nevertheless the products have clearadvantages in terms of purchasing as it is simplifying the components purchasing apart from enablingprocess implication on site. NCC-s purchasing did not participate in the project, neither did anypossible representative for a future manufacturer for the shaft. Post test announcements in June 2009hints however at that the shaft is to be produced abroad. The installation shaft thus seems to havecome a stand alone type of subsystem. The very ambitious Komplett system was organized in aseparate unit from the remainder of NCC (and placed in Sweden). The classical five sub systems onthe other hand have led to reorganization of the supply chain, since they are governed by long termagreement and have led to simplications in the supply. Also organizationally they are integrated andused throughout the project portfolio. This demonstrates that it should be possible to integratesubsystem delivery in the supply chain.4.3 Case 3: Integrated building service element - LuxCoolLuxCool is an integrated building services element developed by YIT Building Services in Finland(www.yitgroup.com ). The main motivation for it development was to have mass-customised standardproduct that would benefit from simple and straightforward assembly procedures resulting inimproved quality with considerable cost savings. LuxCool is an entity combining lighting, ventilation,heating and cooling. Also the controls of these systems are located in the element. In an office spaceelectricity and data cables can be brought to the workspaces through the element, so with LuxCoolthere is no need to install additional cable trunking or floor mounting boxes. Also security systemsand automation solutions such as sprinklers or motion sensors for automatic lighting can be installedto the element. LuxCool integrates all the building services needed in a space into a centralisedelement. The elements are prefabricated and brought to the building site ready to be installed. Thatstreamlines the building and assembly of the HVAC equipment and the process requires less expertisein installation at building site compared with the traditional systems. A certain level of “plug andplay” was aimed at in the design of the LuxCool product. The element was designed to be compactand cost efficient. Additionally the ecological aspects have been addressed regarding manufacturingand logistics of elements. The energy consumption of the element manufacturing has been reckonedand it is been monitored constantly during its usage. Furthermore the material consumption has been396

optimized to result in minimal waste and the transportation shields are recyclable. The case projectexamined is the extension of the YIT headquarters in Helsinki. This project was the first one whereLuxCool elements were used in large scale; practically 600 LuxCool elements were delivered andinstalled in this office building project that was completed in December 2008. In general, this newsystems supply product raised huge interest in all parties involved, or even close by. As a startingpoint everyone was enthusiastic. The YIT corporation was expecting to see appearance of someproblems during the course of the new product manufacturing and supplies. An additional logisticmanager was hired to take care of the fluent manufacturing and supplying of LuxCool elements.However, the final outcome was still a surprise.The reported specific problems in the case study werecategorised into 6 categories according to their nature and origin. Nevertheless, the majority of thedefect categories portray the world of the systems supplies where leading viewpoints are packageddeliveries, their integration, careful timeliness and the different involved partners. The difference isclear compared with the traditional construction oriented much more on tasks dealing with basicbuilding components and raw materials. Improper or lacking partner coordination can be named as asuper category that seems to be able to sum up the causes of most identified problems. In the systemssupply arrangements the details are critical and the roles of partners are different than in traditionalconstruction. Thus the priorities for managers differ and the traditional practices won’t producesatisfying results. This can result in lack of cost control as identified in earlier industrial cases.5. Discussion and conclusionsThe cases involve relatively long time spans of slow change. It is therefore suggested that “newindustrialisation” is a long term transformation rather than a quick design fix, appreciating thevulnerabilities of delivery relations and coordination issues. Also involving a range of playersincluding clients, general contractors, engineers, architects, trade contractors, retailers andmanufacturers. Especially using defects and quality issues as “litmus” for the well functioning of thesupply chain. Implications for future relationship management and supplier transformation is given.Integrated systems supply solutions require new kind of managerial solutions where partnercoordination is in the centre. Several activities having finally direct impacts on site are originallytaking place in different locations that are partners’ facilities. At some point orchestration andsynchronisation of partners were the words to describe the key managerial challenges. The casesexhibit a juxtaposed set of governance forms, especially hierarchy, network and subsystems delivery.As a side reflection it can be noted that two cases also indirectly involves rather strong disintegrationof specialised unites. With respect to hierarchy and networks, it is thus remarkable that both centralpurchasing and is related hierarchical impact as well as the strengthened network relationships withsuppliers proliferates in the two first cases. Even if centralisation occurs the overall organisation is“mixed” in a continuum between fully decentralised (building project as “king”) to fully centralised(hierarchy). In balancing these organisations combined competences construction/ businessdevelopment seems to be important. Pure purchasing professionals encounter problems operating in acontractor’s culture, whereas professionals with a mixed construction, business consultancybackground have much chances mediating between project purchasing and central purchasing. Thefirst and the third case show successful experiences with subsystems supply, integrated in thecontractors product delivery and their supply chain management (and purchasing). The first andsecond however at time shows two examples of disintegration of industrialised products as NCC with397

Komplett and Skanska with Boklok both chose to locate and organise these systems concepts indisjunct organisation. Skanska even over a long period and in several countries. NCC for a shorterperiod. Amongst the complexities encountered are the following six: Contractors organisationalstructure (decentral, different ways of working and managing the projects), Contractors longterm/shortterm perspective (Internal management; incentives, measuring (purchasing strategy ends upbeing reducing cost per year), Organisation maturity (a few suppliers represent a lot of the supplyvolume), The business deal (uneven power balance contractor weak), Contractors do not know whatto purchase, and market changes. Our results thus shows that industrialisation – understood as moresystematic purchasing and supply chain management have proliferated in at prolonged process in twoof the cases whereas the third case and elements from the second shows slow and small steps towardssub system delivery. Even if industry has moved beyond the design fix, there still is a long way to go.ReferencesAnderson D.M (2004) Build-to-Order & Mass Customization, CIM Press. www.build-to-orderconsulting.com/books.htm).Bhote, K.R. (1989) Strategic Supply Management, Amacom, New York.Davies A. & Hobday, M. (2005) The Business of Projects Cambridge University Press.Cambridge.Fine, C.H. (2000) Clockspeed-based strategies for supply chain design, Production and OperationsManagement, Vol. 9 No. 3, pp. 213-21.Frödell, M. (2009): Contractor-Supplier Relations in a Large Contractor Organisation. Thesis for thedegree of Licentiate of Eng., Dep. of Civil & Environm. Eng., Chalmers Univ. of Techn. Gothenburg.Gadde L.E. & Håkansson H. (2001): Supply Network Strategies. Wiley. Chichester.Gadde, L.E. and Jellbo, O. (2002) System sourcing – opportunities and problems, European Journalof Purchasing & Supply Management, Vol. 8 No. 1, pp. 43-52.Hamel G. (2000) Leading the Revolution. Harvard Business School Press. HarvardHyll, H. (2005) Logistical Principles in Construction Supply Chains, Thesis for the degree ofLicentiate in Engineering, Lund University.Holweg, M. & Pil, F.K. (2004) The Second Century: Reconnecting Customer and Value Chainthrough Build-to-Order. London: MIT Press.Jain K. & Dubey A. (2005) Supply Chain Collaboration: A Governance Perspective, Supply ChainForum 6 (2).Kraljic, P. (1983) Purchasing must become supply management, Harvard Bus. Review,61 (5),109-17.398

Lindgreen A., Balazs Revezs and M. Glynn (2009) Purchasing Orientation. Business and industrialMarketing, Vol 24. No ¾ pp. 148-154.London K.A (2008): Construction Supply Chain Economics . Taylor & Francis. LondonMentzer, J.T. (2004) Essentials of Supply Chain Management. Sage publications.Miller, R. & Hobb, B. (2005) Governance Regimes for Large Complex Projects. Project ManagementJournal, 36(3): 42-50.New S., R. & Westbrook (Eds.) (2004) Understanding Supply Chains: Concepts, Critiques andFutures, Oxford University Press, New York, 2004Peters, B.G. and Pierre, J. (2000) Governance, Politics and the State, Basingstoke: Macmillan.Pietroforte, R. (1997) Communication and Governance in the building process. ConstructionManagement and Economics, 15: 71-82.Pryke, S.D. (2004) Analysing construction project coalitions: exploring the application of socialnetwork analysis. Construction Management and Economics, 22: 787-797.Pryke, S.D. [ed.] (2008) Construction Supply Chain Management. Wiley- Blackwell, Oxford.Seaden G. , M. Guolla, J. Doutriaux (2002) Strategic decisions and innovation in construction firms.Construction Management and Economics 21 pp 603-612.Treville, A. (2005) Trust and Collaboration in the Supply Chain. Supply Chain Forum 6(2): 3-5.Turnbull, S. (1997) Corporate Governance. Its Scope, Concerns and Theories. Corporate Governance–An International Review, 5(4).Voordijk H., B. Meijboom, J. de Haan (2006) Modularity in supply chains: a multiple case study inthe construction industry. Internat. Journal of Operations & Product. Mangmt.. 26 (6), 600 – 618.Wathne, K.H. & Heide, J.B. (2004) Relationship Governance in a Supply Chain Network. Journal ofMarketing, 68(1): 73-89.Winch, G. (2001) Governing the project process: a conceptual framework. Construction Managementand Economics, 19: 799-808.Williamson, O.E. (1975) Market and Hierarchies: Analysis and Antitrust Implications. New York:The Free Press.Williamson O.E. (ed.) (1990) Organization Theory. New York: Oxford University Press.399

Wolters, M.J. (2002) The Business of Modularity and the Modularity of Business, Erasmus ResearchInstitute of Management, RotterdamWorren N., K. Moore, P. Cardona (2002) Modularity, Strategic Flexibility, and Firm Performance: AStudy of the Home Appliance Industry. Strategic Management Journal, 23 (12). 1123-1140.Wouter F. & P. Matthyssens (2009) Insights into the process of changing sourcing Strategies.Business and industrial Marketing, Vol 24. No3-4 pp. 245-255.400

Qualifications in Croatian Construction Industry: TheNew FrameworkLazic, M.University of Zagreb(email: mlazic@grad.hr)Ceric, A.University of Zagreb(email: anita@grad.hr)AbstractPre-college construction workforce in Croatia is divided into six educational attainment levels: basicschool education, unskilled, semi–skilled, skilled, highly–skilled, and secondary school education.Workforce is educated in schools, according to regular school programmes, or on courses foradditional training. The absence of a uniform qualification framework has caused differentassessment of core skills and qualifications in vocational schools and courses, which has led to ajungle of vocational qualifications, often not supported by appropriate knowledge. Based on theEuropean Qualification Framework (EQF), the Croatian Qualifications Framework (CROQF) isdesigned to provide nationally recognised standards and qualifications based on knowledge, skills andcompetences. CROQF will provide qualifications according to gained learning outcomes, whichrequires a reform in education. Implementation of CROQF also requires translation of existingqualifications according to new standards. These issues are considered with a purpose of defining thecurrent qualification system, benefits of CROQF, as well as identifying potential implementationproblems. The development of curricula of CROQF should be completed by the Committee for theDevelopment of CROQF in 2012.Keywords: skills, vocational qualification, construction industry.401

1. IntroductionOne of the goals of the EU Lisbon Agreement is the harmonization of vocational qualifications withinthe EU. The European Qualification Framework (EQF) is a common European reference frameworkwhich links qualifications systems to one another across European countries (EC, 2008). It has twomain goals: to promote mobility of workers between countries and to stimulate lifelong learning. TheCroatian Qualification Framework (CROQF) is constructed according to EQF guidelines. The reasonfor developing CROQF is recognition of diplomas and qualifications of Vocational Education andTraining (VET) in the EU. Following the trends in European education, by implementing CROQF,Croatia improves both the competitiveness and mobility of Croatian workforce in the internationalmarket. In addition, CROQF in Croatia will create a transparent uniform system of existingqualifications, gained according to Croatian and former Yugoslav systems, with qualificationsaccording to European norms.One of the major challenges confronting the reform of skill formation in the construction industry isits high degree of fragmentation (Buchanan and Sullivan, 1996). In general, the construction industryis made up of a large number of units of various sizes and of different skills (Agapiou et al., 1998). Inaddition to these common problems, the number of construction companies in Croatia has increasedfrom 819 to 9,063 in the last two decades, which suggests rapid structural change following the breakupof former Yugoslavia (Croatian Chamber of Commerce, 2007).According to the Central Bureau of Statistics (2008), pre-college construction workforce in Croatia isdivided into six educational attainment levels: basic school education, unskilled, semi–skilled, skilled,and highly-skilled, and secondary school education. Systemic post-socialist transition following warsin the former Yugoslavia caused a stagnation of the educational systems in South Eastern Europe(SEE), which resulted in a decisive lack of investment in human resources and a complete disinterestin education policy (Stability Pact for SEE, 2006). Besides, taking into account the rapid restructuringof the Croatian construction industry, vocational schools have not had enough time to adjust to thechanges and produce sufficient quantity of qualified workforce.The absence of a uniform qualification framework has caused different assessment of core skills andqualifications in vocational schools and seminars. Therefore, qualifications gained in one companymay not be recognised in another. The result of this is a chaos of construction qualifications, often notsupported by appropriate knowledge. Also, some workers are over-qualified for the kind of work theyperform. On top of this, it is difficult to foresee the occupational skills required by the constructionindustry itself.402

2. History and Current State of Vocational Training in CroatianConstructionThe educational system of Croatia consists of formal, non-formal, and informal education. Accordingto Trades and Crafts Act (2009), formal education presumes economic activities of authorisedinstitution which are performed according to approved programmes with a purpose of gainingknowledge, skills, and competences for personal, social, and professional needs, on the basis of whicha public certificate is issued. Non-formal education is related to organised learning activities with apurpose of gaining and improving knowledge, skills, and competences for personal, social, andprofessional needs, upon which a public certificate is not issued. It is carried out in institutions foradult learning, professional associations, education centres, etc. Informal education comprisesactivities in which a person receives knowledge and skills from everyday working experience. It mayoccur without a person being aware of it.The mechanisms for construction skills training in Croatia are complex and often confusing, withseveral institutions involved in delivering and certifying skills. The current system of vocationaleducation and training is defined by a large number of laws: Act on Secondary Education, Trades andCrafts Act, Adult Education Act, Act on the Recognition of Foreign Educational Qualifications andProfessional and Academic Titles Act. The system of informal education in construction is under theauthority of many institutions: Croatian Employers Association, Construction Employers Associationof Croatia, Construction Trade Union, and construction schools.Twenty years since the disintegration of former Yugoslavia, construction workforce in Croatia todayhas qualifications gained according to both Yugoslav and Croatian educational programmes.According to the Agency for Vocational Education and Training (2008), the existing programmes ofvocational education in Croatia are similar to those in former Yugoslavia. The vocational education ofconstruction workforce in Yugoslavia, to which students enrolled after finishing basic schooleducation, was performed in construction technical schools, construction craft schools, technicalschools for building site managers, and professional seminars. In particular:Construction technical schools took four years. These schools had two departments: buildingconstruction and civil engineering construction. The first two years were in common.Education ended with a final exam and students could continue their education in a higherconstruction school, as well as an architectural or civil engineering faculty.Construction craft schools were three-year schools in which a student could choose amongseveral construction professions: brick-layer, carpenter, concrete worker, steel-bender,stonemason, roofer, insulation installer, asphalt worker, machine handler, stove maker, tileslabber, floor and wall tiler, and chimney sweeper.Technical schools for building site managers were provided for those workers who alreadyhad a qualification for some of construction professions, and they were then trained for ahigher qualification. Those were evening schools that lasted for three years and had two403

degrees. After finishing the first degree a student gained the title of craftsman, and afterfinishing the second the title of foreman.The workers were additionally educated for specific higher qualification constructionprofessions on two different types of seminars: those organised by construction companies fortheir workers, which provided an internal qualification, and which was valid only inside thecompany, while it might not have been valid in another company; and seminars organised byrelevant state institutions that was valid across the country.The current system of vocational education in Croatia consists of regular programmes in technicalschools, schools for professions in the industry and trades and crafts, educational programmes for lessdemanding professions in a technical occupational area, and additional seminars:Technical schools lasting four years. Similar to the previous sytem, these schools have twodepartments: building construction and civil engineering construction. The first two years arein common. Education ends with a final exam and students can continue their education in ahigher construction school, as well as an architectural or civil engineering faculty.Schools for professions in the industry, trades and crafts lasting for three years and endingwith a final or apprenticeship examination.Educational programmes lasting for two years for less demanding professions in a technicaloccupational area.Seminars. As in the Yugoslav school system, seminars are organised by both constructioncompanies, which provide an internal qualification, and by relevant state institutions, whichprovide an external qualification.3. Existing Qualifications in CroatiaConstruction workers in Croatia have qualifications from all the schools previously mentionedaccording to both Croatian and Yugoslav programmes. The existing qualifications involve manydiscrepancies. According to the Croatian Central Bureau of Statistics (2008), construction workforcewith pre-college education falls into six levels of educational attainment: basic school education,unskilled, semi-skilled, skilled, highly-skilled, and secondary school education. Each level ofprofessional attainment can be ascertained by the appropriate official document - diploma orcertificate. However, the problem is that there is no formal document which explains the differencesbetween these levels, so a qualification in one company is not necessarily the same qualification inanother company. Basic school education, according to the Central Bureau of Statistics (2008), is thelowest degree of education that consists of eight grades of primary school. A worker with such adegree is qualified to do simple manual work. But an unskilled worker also has only the basic schooleducation and can perform only simple tasks (Peulic, 2002).404

By craft school standards, semi–skilled workers are those who, after finishing basic school education,have additional training of 150 hours, after which they have to pass an exam. The work that they willperform includes less complicated assignments. Skilled workers gain their qualifications afterfinishing three years of schooling for craft professions (according to programmes mentioned above),or, by craft school standards, skilled workers are those who finish additional training of 150 hoursafter finishing basic school education. The Croatian Chamber of Trades and Crafts divides skilledworkers into three groups, depending on the level of complexity of work and working experience.Highly-skilled qualification is gained after finishing three years of schooling and passing craftsmanexamination. As in the case of skilled workers, the Croatian Chamber of Trades and Crafts divideshighly skilled workers into three groups, depending on complexity of work and work experience.Secondary school qualification is gained after finishing a four-year construction school. Afterwardsstudents can continue their education at the university level.In 2008, 145,309 people were employed in construction, which represents 9.4 % of the total labourforce in Croatia (Central Bureau of Statistics, 2008). Table 1 gives an overview of their qualificationsfrom 2003 to 2008. In 2008, once again, the qualifications of no less than 49,773 people wereunknown. They were employed in crafts, trades and free-lance activities in construction, but are notaccounted for in terms of qualifications. This demonstrates some of the problems with the statisticalinformation available at present.405

Table1: An overview of qualifications in Croatian construction industry 2003- 2008 (Croatian Central Bureau of Statistics (2008)YearBasicschooleducationUnskilledSemiskilledSkilledHighlyskilledSecondaryschooleducationNon –universitydegreeUniversityandpostgraduatedegreePersonsemployed inconstructionbyeducationalattainment 1Personsemployed inconstructionin crafts,trades andfree- lanceactivitiesTotalnumber ofemployedpersons inconstruction 2TotalnumberofemployedpersonsinCroatia2003 3234 11043 4383 18821 3664 22956 3230 3947 71278 35234 106512 13185552004 3440 12334 4836 19163 3583 25405 3472 4186 76419 38723 115142 13477342005 3727 12014 4713 19278 3488 26071 3535 4429 77255 41413 118668 13578292006 3559 12713 6841 20042 3471 28633 3759 4689 83707 45216 128923 14071562007 3948 13927 5364 20366 2962 32298 4019 4857 87741 49531 137272 14594522008 4505 15023 5571 21181 2870 36783 4315 5288 95536 49773 145309 15032481 Total number of persons employed in construction with basic school education, unskilled, semi-.skilled, skilled, highly-skilled, with secondary school, nonuniversityschool, and university and postgraduate degree2 Total number of persons employed in construction by educational attainment and persons in crafts and trades and free lances406

4. The New Croatian Qualification FrameworkCROQF is designed in accordance with EQF. EQF may be described as a “competence framework”,which provides general descriptors for particular learning outcomes, themselves understood asindependent of any pedagogical processes or curricular assumption involved in their acquisition byany individual (EC, 2008). Learning outcomes are based on three factors: knowledge, skills, andcompetences. All qualifications are described in terms of a single set of criteria, ranked on a singlehierarchy of levels, classified in terms of a single set of occupational fields, described in terms oflearning outcomes (that are expressed independently of the site, institution and form of curriculum),defined in terms of elements (sometimes referred to as units or unit standards) and ascribed a volumein terms of credit expressed as notional learning hours (Young, 2005).CROQF is compatible with the qualifications framework for higher education developed under theBologna Process. CROQF’s goals are to improve the quality of the entire system of education, aswell as to develop transparency, recognition of qualifications, credit transfer systems and qualityassurance. CROQF should help the employers to engage qualified workforce. It should also increasethe mobility of workforce, as it recognises both foreign educational qualifications in Croatia andCroatian qualifications in other European countries.Just as EQF, CROQF has eight levels, but additional sub-levels have also been set up. Sub-levels areintroduced to describe the existing qualifications. Levels describe what a learner knows, understandsand is able to do, as well as the learning outcomes. Table 2 (see Appendix) presents the qualificationsgained through current educational programmes, described in the previous section, together with thenew CROQF levels. Each CROQF level comprises certain types of knowledge, skills andcompetences, and each level is followed by the qualification gained through the current system. As anexample, below we will focus on knowledge only. Levels and current qualifications, provided in theappendix, are related as follows:Level 1 includes basic general knowledge. This is the level a student gains after finishingbasic education. This level matches the current unskilled qualification.Level 2 means that a student possesses basic factual knowledge of a field of work or study.Level 2 corresponds to the previous semi – skilled qualification. As previously mentioned,semi–skilled qualification is gained after finishing some additional training for conductingsimple tasks.Level 3 includes knowledge of facts, principles, processes, and general concepts in the fieldof work or study. According to current educational programmes, this qualification is gainedby finishing programmes lasting for two years for less demanding professions. Level 3corresponds to current skilled qualification. This qualification was previously gained byfinishing three year craft school. By craft school standards, this qualification may be gainedby finishing a training lasting for 150 hours after finishing basic school education.407

Level 4 includes factual and theoretical knowledge in broad contexts within a field of work orstudy. It is divided in two sub-levels:4.1. level, which is gained after three year school programme and a final exam. Level 4.1.is similar to previous skilled qualification, the same as Level 3.4.2. level is gained after four years of education in a technical school. After finishing atechnical school, a student may continue education at university level. Level 4.2. is similarto the previous secondary school qualification.Level 5 includes comprehensive, specialised, factual, and theoretical knowledge within a fieldof work or study and an awareness of the boundaries of that knowledge. It is also divided intwo sub-levels:5.1. After finishing post-secondary school programme and specialisation lasting for oneyear with a craftsman examination, which corresponds to highly-skilled qualification.5.2. After finishing professional studies which bring to a student more than 120 and lessthan 180 ECTS (European Credit Transfer and Accumulation System) points. Thisqualification relates to a title of a specialist, that is highly-skilled and additionaleducation.Level 6 relates to a higher qualification. It corresponds to the current non-university collegedegree, gained after finishing non-university training and professional studies which bring toa student from 180 to 240 ECTS points. According to CROQF level 6 implies highlyspecialised knowledge which includes critical understanding of theory and principles.Level 7 includes highly specialised knowledge, some of which is at the forefront ofknowledge in a field of work or study, as the basis for original thinking and/or research. It isdivided in two sub–levels:7.1. After finishing university and specialised professional university studies which bringto a student at least 300 ECTS points, which corresponds to the previous university degree.7.2. After finishing post-diploma specialist university studies which bring a student from60 to 120 ECTS points, which corresponds to the current title of master.Level 8 includes knowledge at the most advanced frontier of a field of work or study and atthe interface between fields. It matches current doctoral qualification.408

5. Challenges of the New FrameworkCROQF applies to all types of education and training from basic school education to academic,professional and vocational education. The system shifts the focus from the traditional approach,which emphasises learning inputs, such as the length of a learning experience or type of institution.Now it is oriented towards learning outcomes. Learning outcomes are described in terms ofknowledge, skills, and competences.Several ambiguities threaten CROQF. First, definitions of knowledge, skills and competences are notthe same in all countries. According to Clarke and Winch (2006), if the criteria have differentmeanings in different countries, then it will be hard to make them work in the way intended. Croatianvocational education is closer to the continental system, exemplified by Germany, than to the Anglo-Saxon system (Ceric et al, 2009). In the former case, the emphasis is placed on diplomas andcertificates, wheres it is placed on performance in the latter case.Second, EQF is orientated toward learning outcomes and does not take into account duration oftraining, training venue (schools, companies, universities, educational institutions) and form oftraining (“dual” vocational training, learning in workplace, university studies, non-formal, informaltraining etc.). The main problem of the qualification system in Croatia is that there are differenteducation programmes which provide the same qualification for different knowledge, skills andcompetences. Though learning outcomes in CROQF will be assessed according to what a learnerknows, understands and what he or she is able to do, there is a danger that CROQF will make thequalification even more blurred.Third, according to Lowther (2004), the curriculum of vocational education in Croatia is too focusedon subject-specific skills, competences, and attitudes, and needs a broad theoretical and practicalfoundation that provides a flexible, adaptable education. This indicates that CROQF implementationand validation of informal training will not improve the quality of vocational training. It will only easegaining a qualification.6. ConclusionsThe aim of vocational education, in accordance with European efforts, is to produce professionsrequired by the market and professional promotion with a purpose of quality improvement (Belajdzic,2008). In Croatia, as in the countries of the European Union, most people are educated in schools forvocational education and training. This is the reason why the vocational education plays a key role indeveloping human resources with the aim of achieving economic growth, employment, and realisationof other social goals (Ministry of Science, Education and Sports, 2008).Current vocational education in Croatia has been taken over from former Yugoslavia. A qualificationmay be gained after finishing regular school programme or after finishing additional vocationaltraining in some of the relevant institutions. Regular educational programmes for constructionprofessions can be found in technical schools (lasting four years), schools for professions in industry,409

trades and crafts (lasting three years), and educational programmes (lasting two years). All theseprogrammes differ in duration, in their approach to learning, and evaluation of student’s knowledge,so that the same qualification does not guarantee the same level of work skills or competences. EQFacts as a translation device to make national qualifications more readable across Europe, promotingworkers' and learners' mobility between countries and facilitating their lifelong learning (EC, 2008).CROQF is a Croatian qualification framework, based on European qualification framework.The implementation of CROQF should make Croatian qualifications more transparent. Following theEuropean directions, qualifications will be assigned according to knowledge, skills, and competencesacquired by students. This implies revision of existing qualifications and abolition of inadequateprogrammes. Reforming the Croatian qualification system is essential, but it will be a challenging taskfor CROQF. Similar to other European countries, several implementation problems may be expected.These are related to definitions of skills, knowledge, and competences, but also to assessment oflearning outcomes and validation of informal training. The development of curricula of CROQFshould be completed by the Committee for the Development of CROQF in 2012.ReferencesAgapiou A, Flanagan R, Norman G and Notman D (1998) “The changing role of builders merchantsin the construction supply chain”. Construction Management and Economics 16: 351- 361.Agency for Vocational Education and Training (2008) Polazne osnove Hrvatskog kvalifikacijskogokvira, (available online: http://www.aso.hr/UserDocImages/dokumenti/Polazne%osnove%20HKOhr.pdf[accessed on 21/11/2009])Belajdzic Lj (2008) “Propisi o građenju u vezi s Bolonjskim procesom i strukovnim obrazovanjem“,Sabor Hrvatskih graditelja, 6-8 November 2008, Cavtat, Croatia.Buchanan J and Sullivan G (1996) Skills Formation in the Construction Industry - Lessons from somerecent innovations, (available online: http://www.wrc.simply.com.au/documents/WP45.pdf [accessedon 09/11/2009])Ceric A, Antic M, and Lazic M (2009) “Changes in Qualification Structure of Labour in Constructionin Croatia (1978 – 2008)“, Proceedings of CIB World Building Congress “Construction FacingWorldwide Challenges”, 27-30 September 2009, Dubrovnik, Croatia.Central Bureau of Statistics (2008) Statistical Yearbook 2008, (available online:http://www.dzs.hr/default_e.htm [accessed on 16/11/2009])Clarke L and Winch C (2006) “A European skills framework? – But what are skills? Anglo-Saxonversus German concepts”. Journal of Education and Work 19 (3): 255-269.Croatian Chamber of Commerce (2007) Croatian Construction Industry Report, (available online:http://www.hgk.hr/ [accessed on 29/11/2009])410

European Communities (EC) (2008) The European Qualification Framework, (available online:http://ec.europa.eu/education/lifelong-learning-policy/doc44_en.htm [accessed on 27/11/2009])Government of The Republic of Croatia (2009) Trades and Crafts Act, (available online:http://narodne-novine.nn.hr/clanci/sluzbeni/2009_03_30_652.html [accessed on 22/11/2009])Lowther J (2004) The Quality of Croatia’s Formal Education System, (available online:http://www.ijf.hr/eng/competitiveness/lowther.pdf [accessed on 20/11/2009])Ministrry of Science, Education and Sports (2008) Strategija razvoja sustava strukovnog obrazovanjau Republici Hrvatskoj 2008–2013, (available online:http://www.aso.hr/UserDocsImages/dokumenti/Strategija%20razvoja%20strukovnog%20obrazovanja%20u%20RH.pdf [accessed on 20/11/2009])Peulic Dj (2002) Konstruktivni elementi zgrada, Zagreb, Croatia knjiga.Stability Pact for South Eastern Europe (2006) Vocational Education and Training (VET) – Reformsand challenges in South Eastern Europe (SEE), (available online:http://www.stabilitypact.org/education/VET%20in%20SEE%20Recommendation%20paper%20061201.pdf [accessed on 27/11/2009])Young M (2008) “Towards a European qualifications framework: some cautionary observations”.Journal of European Industrial Training 32(2/3): 128-137.411

Appendix: Table 1: Qualifications according to CROQF and according to current vocational system(EC, 2008; Government of the Republic of Croatia, 2009)NQFlevel1234.1..4.2.Knowledge Skills CompetencesBasic generalknowledgeBasic factualknowledge of afield of work orstudyKnowledge offacts, principles,processes andgeneral concepts,in a field of workor studyFactual andtheoreticalknowledge inbroad contextswithin a field ofwork or studyBasic skillsrequired to carryout simple tasksBasic cognitiveand practicalskills needed tocarry out tasksand to solveroutine problemsusing simplerules and toolsCognitive andpractical skillsrequired toaccomplish tasksand solveproblems byselecting andapplying basicmethods, tools,materials andinformationA range ofcognitive andpractical skillsrequired togeneratesolutions tospecific problemsin a field of workor studyCompletion andresponsibility forperforming simple tasksCompletion andresponsibility forperforming simple tasksunder supervision withsome autonomyResponsibility forcompletion of tasks inwork or study. Adapt ownbehaviour tocircumstances in solvingproblems.Exercise selfmanagementwithin theguidelines of work orstudy contexts that areusually predictable.Supervise the routinework of others, takingsome responsibility forthe evaluation of work orstudy activities.FormaleducationBasic schooleducationBasic schooleducation +additional lesscomplicatedassignmentsEducationalprogrammeslasting for twoyears forgaining lowerprofessionalqualificationsSchools forprofessions inthe industry andtrades andcrafts, lastingfor three years,with a finalexamTechnicalschools lastingfour years withstate examQualificationaccording tocurrent systemUnskilledSemi-skilledSkilledSkilledSecondary schoolqualification5.1.Comprehensive,specialised, factualand theoreticalknowledge within afield of work orstudy and anawareness of theboundaries of thatknowledgeA comprehensiverange ofcognitive andpractical skillsrequired todevelop creativesolutions toabstract problemsExercise managementand supervisionin contexts of work orstudyactivities where there isunpredictablechange. Review anddevelop performance ofself and othersAfter finishingpost-secondaryschoolprogramme andspecialisationlasting for oneyear with acraftsmanexaminationHighly-skilled412

5.2..After finishingprofessionalstudies whichbrings to astudent morethan 120 andless than 180ECTS pointsHighly-skilled67.1.7.2.8Advancedknowledge of afield ofwork or study,involving a criticalunderstanding oftheories andprinciplesHighly specialisedknowledge, someof which is at theforefront ofknowledgein a field of workor study, asthe basis fororiginal thinkingand/or researchcritical awarenessof knowledgeissues in a fieldand at the interfacebetween differentfieldKnowledge at themost advancedfrontier of a fieldof work or studyand at the interfacebetween fieldsAdvanced skills,demonstratingmastery andinnovation,required tosolve complexandunpredictableproblems in aspecialised fieldofwork or studySpecialisedproblem-solvingskillsrequired inresearch and/orinnovationin order todevelop newknowledge andprocedures andtointegrateknowledge fromdifferentfieldsThe mostadvanced andspecialised skillsand techniques,includingsynthesis andevaluation,solving criticalproblems inresearch and/orinnovation and toextend andredefine existingknowledge orprofessionalpracticeManage complextechnical orprofessional activities,responsibility for decisionmakingin unpredictable work orstudy contexts.Take responsibility formanagingprofessional developmentof individualsand groupsManage and transformwork orstudy contexts that arecomplex,unpredictable andrequire newstrategic approaches.Responsibility forcontributingto professionalknowledge andpractice and/or forreviewing thestrategic performance ofteamsSubstantial authority,innovation, autonomy,scholarly andprofessional integrity andsustained commitment tothe development of newideas or processes atthe forefront of work orstudy contextsincluding researchAfter finishingprediplomatraining andprofessionalstudies whichbring to astudent from180 to 240ECTS points.After finishinguniversity andspecialisedprofessionaluniversitystudies whichbring to astudent at least300 ECTSpointsAfter finishingpost-diplomaspecialistuniversitystudies whichbring a studentfrom 60 to 120ECTS pointsDoctorateNon-UniversitydegreeUniversity degreeMasterDoctor413

Barriers to Integration and Attitudes towards CulturalDiversity in the Construction IndustryPhua, F.T.T.School of Construction Management and Engineering,University of Reading, UK(email: florencephua@gmail.com)Loosemore, M.Faculty of the Built Environment,University of New South Wales, Australia(email: m.loosemore@unsw.edu.au)Dunn, K.University of Western Sydney, Australia(email: k.dunn@uws.edu.au)Ozguc, U.(email: ozguc.umut@gmail.com)AbstractA survey of 1155 construction operatives and 180 supervisors on Australian construction sitesindicate that despite positive attitudes among operatives and supervisors towards a multiculturalwork environment, there are numerous barriers to integration for some ethnic groups. Culturaldiversity is taken for granted by supervisors and the problems associated with it are accepted as aninevitable part of daily life on sites. A perverse logic that cultural diversity management isdiscriminatory towards Australian workers also exists and reflects a strong egalitarian and selfregulatingculture. We conclude that it is important to create business incentives for constructioncompanies to be actively involved in the implementation of cultural diversity strategies. This willensure that current and future influxes of foreign workers into the construction industry can besustained in a safe, productive, efficient and harmonious way.Keywords: construction, cultural diversity, management, safety, racism, discrimination.414

1. IntroductionIn Australia, around 20 per cent of all workers in construction industry are overseas born and half ofthese are from non-English speaking counties (DIAC, 2009). It is increasingly recognised that aculturally diverse workforce can be an asset in today’s highly competitive and globalized businessenvironment. For example, a number of studies in Australia and overseas have demonstrated thateffective management of diversity can have a positive affect on work productivity, problem-solving,creativity and innovation and ultimately competitive advantage (Cox and Blake, 1991; Hoecklin,1994). Diversity can also be a catalyst for dynamic workplace cultures and provide linguisticresources to access overseas markets. However, some recent international literature also suggests thatthere are certain aspects of cultural diversity that can have negative implications for organisations.For example, if not managed properly, ethnic diversity can have a negative impact on the efficiencyand productivity due to increased workplace conflict, low morale, high labour turnover, lower qualitywork, absenteeism, stress-related illnesses and a poor corporate image (Hay, 1996; Steele and Sodhi,2006). Research in construction in numerous countries has also pointed to the difficulties experiencedin effectively managing this diversity (Ofori, 1994; Loosemore and Muslmani, 1999; Debrah andOfori, 2001; Loosemore and Lee, 2002; Loosemore and Chau, 2002; Gale and Davidson (eds.), 2006;Dainty et al. (eds.), 2007). One of the most significant consequences of mismanaging diversity in theconstruction industry is the increased safety risks on construction sites. Tere is a considerable amountof research which indicates that construction workers of non-English speaking background (NESB)are exposed to significantly greater safety risks than other workers and can also expose other workersaround them to higher safety risks because of their poor training and, inability to understand basicinstructions and warning signs etc (Loosemore and Lee, 2002; Trajkovski and Loosemore, 2005;Loosemore and Andonakis, 2006). Another recognised and related problem on Australianconstruction sites is workplace discrimination. For example, Loosemore and Chau (2002) found that40 per cent of Asian-Australian operatives had experienced discrimination on construction sites.Nicholas et al. (2001) outline the links between the experience of racism and lower individualproductivity within workplaces through reduced worker interaction and morale and it is estimatedthat 70% of workers exposed to racism would as a consequence take time off work.In managing these challenges, Dunn and other cross-cultural researchers have found that capturingthe potential benefits of cultural diversity in the workforce is complex and challenging (Dunn andMcDonald, 2001; Pedersen et al., 2005). For this reason, many firms neglect to address the issue, atrend that appears to be a characteristic of firms in the Australian construction industry wherediversity management is not a high priority for many companies (Loosemore et al., 2003; Shen et al.,2009). It is therefore not surprising that the construction industry has struggled to integrate differentcultural groups into a harmonious and productive workplace, despite having a long history ofemploying migrant workers (Shen et al., 2009). The aim of this paper is to explore the attitudinalreasons behind this deficiency.415

2. MethodWe undertook a survey of operatives and managers on large metropolitan construction sites inSydney, Australia which were characterised by large multicultural workforces. The survey wasadministered in two stages. The first stage focussed on site operatives and was administered betweenMay and December 2008 on twenty-nine construction sites in the Sydney metropolitan area as well asin the offices of the Construction, Forestry, Mining and Energy Union (CFMEU). The second stagefocussed on supervisors and was conducted between May and August 2009 on sixteen constructionsites in the same geographical area.Specifically, the questionnaire survey with site operatives aimed to assess the extent and nature ofinteraction between workers of different ethnic backgrounds, respondents’ feelings about culturaldiversity and other cultural groups, and experiences of intolerance and equality of treatment onconstruction sites. Many operatives were from a lower educational background and had poor Englishlanguage skills (particularly Chinese and Koreans). So where necessary we translated questions usingan interpreter (most subcontractors have a “gatekeeper” who translates for the rest of the group).During the survey sessions which were administered in tea and smoking breaks on site, respondentswere also permitted to openly discuss the questions which provided further insights into the issuesbeing investigated.Participation in the survey was entirely voluntary and a total of 1233 questionnaires were collected.However 78 questionnaires were not included in the sample as they were returned incompleteresulting in a total sample of 1155.The second stage of this research aimed to explore supervisors’ perceptions of cultural diversity onconstruction sites and to explore the strategies they used to manage diversity. The survey withsupervisors also sought to compare supervisors’ perceptions with operatives’ experiences on sites.The survey was administered by hand during weekly subcontractors meetings where all managers,supervisors, foremen and engineers could be found at the same time. Nine respondents returned thecompleted questionnaire via email. The total length of the questionnaire was seven pages and tookabout 20 minutes to complete. Participation in the survey was entirely voluntary and a total of 204questionnaires were collected. Only three supervisors refused to participate in the survey.3. Discussion of results3.1 Cross cultural interactionsDespite high level of support for cultural diversity among supervisors (97%) and operatives (88%),almost 31% of operatives reported that they did not make an effort to interact with workers fromdifferent ethnic background. More importantly, 32% of operatives and 23% of supervisors believedthat different groups should stay away from each other on construction sites. The majority ofmanagers believed that there were sufficient opportunities for workers to mix with different ethnic416

groups (95.6 per cent). Nevertheless, 64% of the operatives reported that they would like to see moreopportunities to mix with people from other ethnic groups while at work. Both supervisors andoperatives appear to see diversity is an unavoidable fact of life on construction sites and considerinteraction with other cultural groups more a necessity to get work done than a voluntary choice. Thecontradictory views on cultural diversity could be explained through wide-spread communicationproblems and conflict among operatives. Supervisors perceive that diversity increases conflict onsites and decreases communication. We also found evidence in discussions with respondents that thedominant social and political discourses within the wider society also play a role in shapingintergroup relations. For example, the long standing rhetoric of “they steal our jobs” often found inthe Australian media also emerged as the most explicit manifestation of intolerance towards Asian-Australians found on construction sites. There is also a common belief among workers that Asian-Australians bring with them sub-standard working practices and thereby dramatically reduce safetystandards, wages and professional quality in the industry. In this way they are seen as threats to socialand economic fabric of the construction industry. Similarly, reported tensions between Anglo-Australians and Lebanese-Australian and Australian- Muslims seem to reflect recent Islamaphobicdiscourses within broader media and society circulated on construction sites. So it appears that thesource of racism towards different cultural groups is motivated by different issues – economic in thecase of Asian-Australians and Cultural in the case of Lebanese-Australian and Australian- Muslims.3.2 Equal opportunityRespondents of both groups believed that there was generally equality of opportunity in theconstruction industry (76% supervisors and 66% operatives). Supervisors and operatives concernsrelating to any perceived inequality were quite different. For operatives, the strongest level ofconcern was unequal involvement in decision-making on site, whereas for supervisors it was unequalaccess for operatives to higher paying jobs and managerial positions. Written comments ofsupervisors suggest that where there was inequality of treatment it was not seen as an outcome ofstructural discrimination, rather, it was seen as a consequence of varied levels of individualcompetency. There was also a common belief among supervisors that operatives experiencediscrimination mostly because of their limited English skills.3.3 RacismLike operatives, there was a common belief among managers that operatives experiencediscrimination mostly because of their limited English skills. The main form of racism reported byboth operatives and supervisors in our survey was ethnicity-based and disparaging humour and namecallingin the workplace. 90% of supervisors reported that there were instances of derogative jokesbetween operatives, and 80% reported offensive name calling. This corresponded with operatives’experiences of jokes and name calling. The problem with ethnicity-based humour is that it intensifiescurrent stereotypes by strengthening in-group identity and de-values out-groups which can in turnresult in the exclusion of out-groups from social and work activities (Phua, 2004). On the other hand,humour can also be a form of social glue and can help accumulate bridging capital and serve anti-417

acist purposes by making light of difference and bringing it to the surface rather than suppressing it.In this way it can reduce conflicts between different ethnic groups. Our field observations suggestthat in some circumstances jokes represent a manifestation of friendship between workers fromdifferent ethnic groups. In those cases, the problem is not so much about making jokes, but the lack ofthem.3.4 Managing cultural diversitySupervisors were mostly of the view that cultural diversity did not have any adverse impact on staffmotivation, stress level and interpersonal relations. However 25% felt diversity increased levels ofstress, 31% said diversity worsened levels of conflict, and 40% said it decreased levels ofcommunication. Communication problems caused by language barriers were listed by supervisors asthe major challenge associated with cultural diversity. Supervisors’ comments reveal that the greatestchallenges are experienced with Asian-Australians and with trades which are mostly dominated byworkers of certain non-English speaking backgrounds (NESB) such as Serbian/Croatian-Australianswho are specialised in carpentry and Asian-Australians who are mostly Gyprockers and tilers.However, most supervisors have limited information on the number of non-English speakers workingon their site which makes it difficult to manage this problem. Specifically, supervisors find it difficultto know whether NESB workers can speak or understand English as they may have limitedinteractions with them on a one-to-one basis. Around 34% of the managers indicated that thesecommunication problems decreased safety standards. Safety issues were listed as the most significantnegative impact from ethnic diversity. Communication problems also pose a significant challenge“during” incidents magnifying the potentially negative impact of language on safety. Like operatives,there was a wide-spread belief among managers that the Asian-Australians were the most problematicgroup. While European workers were seen a positive influence on safety standards because of thehigh standards they bring, Asian-Australian workers were perceived to do the opposite by importingan inferior safety culture from their origin countries. If Asian-Australian workers are broadlyperceived to present a safety risk to those around them, then they are likely to be stereotyped in anegative way and be subject to other forms of discrimination as suggested Loosemore and Chua(2001) who identified them as the most at risk group on Australian construction sites.In dealing with the above communication problems, managers rely on multilingual supervisors,workers and alternative language signs, although the use of these strategies is ad hoc at best. Manymanagers indicated that they could not communicate with the NESB subcontracted workers withoutthe presence of interpreters. This was especially a challenge for daily work, training and inductionsessions. The supervisors of subcontracted workers were the main interpreters used incommunications. Multilingual video-recordings are also used in inductions on some sites; howeverinductions only provide basic information about safety. Site pressures, a highly competitive workenvironment and a sense of acceptance that NESB operatives are well known to walk onto site withan inadequate understanding of safety risks seem to limit efforts to manage this problem moreproactively.418

While the majority of supervisors indicated that responsibility for managing cultural diversitybelonged to site managers, many felt that supervisors and project managers were also responsible.Human resource (HR) managers, managing directors and CEOs were reported as the least responsiblepeople for diversity management. A considerable proportion of respondents indicated that they didnot know who was responsible for diversity management in their companies. This reflects a tendencyto give total power to the project manager for all functions including human resources (HR). Ourfindings show that equal opportunity, gender and sexual, and racial harassment policies were themost widely understood. 90% of respondents reported that equal opportunity policies wereimplemented in their companies. Affirmative action and Aboriginal employment policies wereamong those which were the least understood and diversity policies were reported as the leastimplemented of all policy types. While more than half of the respondents reported the existence of acultural diversity policy, 28% indicated that they did not know whether it was implemented in theircompanies. Subcontractors were less aware of ethnic diversity policy at company level. However at apersonal level supervisors of subcontractors were more likely to develop and implement their ownindividual strategies than the supervisors of contractors. This suggests that while subcontractor firmsmay not have an official diversity policy, at personal level there is an informal commitment toimplementing a diversity strategy. The low level of awareness about affirmative action and ethnicdiversity policy can perhaps be explained by a lack of training for supervisors in this area. 75% of thesupervisors reported that they did not receive any training that aimed to reduce stereotyping and raiseawareness of ethnic issues and ways of managing them effectively. Worryingly, diversity trainingwas even less common among the supervisors of subcontractors where the main interface with NESBoperatives occurs.In managing cultural diversity, organizing social events were reported as the most common form ofstrategy used by the respondents (see Table 1). Training for site workers that aimed to reducestereotyping and multilingual induction processes was the second most common practice, althoughmore research is needed on how effective this process is in bringing about lasting attitudinal andbehavioural change. Multilingual inductions were common in most companies. Many usedmultilingual video tapes for inductions (mostly in Mandarin, Portuguese, Korean and Spanish),although the effectiveness of such one-way induction processes is questionable. For this reasoninductions were sometimes translated by bilingual supervisors, although this is certainly notemployed on all sites. Surprisingly, only 11% of the respondents reported multilingual jobdescriptions and specifications. Indeed, even on sites, there were limited examples of signage beingwritten in several languages. It is surprising that while language problems were well-known bymanagement as an issue, attempts to overcome the problem remain very limited within theconstruction industry. It is also important to note that 9% of the managers attempted to evaluate theEnglish proficiency of new employees from non-English speaking background. Most of the firms thatparticipated in this project had English tests for the job applicants; however those tests were mostlyfor engineers or employees other than site operatives where the majority of problems seem to lie.419

Table 1: Existing ethnic diversity strategiesOrganizing social events (such as social gatherings in pubs) 30.1Training for site workers that aims to reduce stereotyping and raise awarenessof ethnic issues25.7Multilingual induction processes 25.7Assisting and encouraging non-English speaking background workers toimprove their EnglishInvolving workers from non-English speaking background in management 19.1Multilingual provision of information about occupation health and safety 1824Workshops for site teams on topics such as interethnic communication,team-building, conflict resolution and ethnic diversity awarenessProvision of interpreters for workers of non-English speaking backgroundduring training sessions and inductionsFlexible working schemes to accommodate ethnic and religious beliefs andworships1817.513.7Multilingual job descriptions and specifications 11.5Evaluation of English proficiency of new employees from non-English speakingbackgroundIncorporation of ethnic and ethnic awareness into overall management strategyCareer development programmes (eg management skills courses) for ethnicgroups that are under-represented in managementMentoring programs between English and non-English speakers 7.1Celebrations of ethnic and religious festivals and events 5.5Setting up links with local ethnic groups 4.44. ConclusionThe key findings of this paper are that the vast majority of workers and supervisors are comfortablewith cultural diversity. While the majority of respondents believed that there was equality ofopportunity in the construction industry, there was evidence of racist acts and experiences, mostprominently manifested as offensive graffiti and joke telling which could negatively impact uponworker well-being. Asian-Australians were seen as especially subjected to these forms of inequality,including uneven access to higher paying jobs. Communication problems caused by language barriersstand out as major challenges on construction sites particularly for Asian-Australian operatives.There was also recognition among operatives and supervisors that language barriers presented greatersafety risks on construction sites. Despite this perceived link to safety, cultural diversity wasperceived to be significantly less important than OHS policies. It appears that the cultural diversity ofthe industry is taken for granted by supervisors and it appears as if the problems associated with it areaccepted as an inevitable part of daily life on sites. While our research did not aim to investigate theimpact cultural diversity strategies on work productivity, our findings suggest that it is important to9.37.17.1420

create business case incentives for construction companies to be actively involved in theimplementation of cultural diversity strategies which ensures that current and future influxes offoreign workers into the construction industry can be sustained in a safe, productive, efficient andharmonious way.ReferencesCox, T.H. and Blake, S. (1991), “Managing cultural diversity: implications for organizationalcompetitiveness”, Academy of Management Executive, Vol: 5 No: 3, pp. 45-56.Dainty, A., Green, S., Bagilhole, B. (eds.) (2007), People and Culture in Construction A Reader,Taylor & Francis, Oxon.Debrah, Y.A. and Ofori, G. (2001), “The state, skills formation and productivity enhancement in theconstruction industry: the case of Singapore”, International Journal of Human Resource Management,Vol.12 No.2, pp.184-202.DIAC (Department of Immigration and Citizenship) (2009), Population Flows: Immigration Aspects– 2007-2008, DIAC, February, Canberra.Dunn, K.M. and McDonald, A. (2001), “The geography of racisms in NSW: A theoretical explorationand some preliminary findings”, Australian Geographer, Vol. 32 No.1, pp. 29-44.Gale, A. W. and Davidson, M. J. (eds.) (2006) ,Managing Diversity and Equality in ConstructionInitiatives and practice, Taylor &Francis, Oxon.Hay, C. (1996), Managing cultural diversity: Opportunities for enhancing the competitive advantageof Australian Business, AGS, Canberra.Loosemore, M. and Muslmani, H.S. Al. (1999), “Construction project management in the PersianGulf: inter-cultural communication”, International Journal of Project Management, Vol. 17 No.2, pp.95-100.Loosemore, M. and Chau, D.W. (2002), “Racial discrimination towards Asian operatives in theAustralian construction industry”, Construction management and Economics, Vol. 20, pp. 91-102.Loosemore, M. and Lee, P. (2002), “An investigation into communication problems with ethnicminorities in the construction industry”, International Journal of project Management, Vol. 20 No. 3,pp. 517 – 524.Loosemore, M., Dainty, A. and Lingard, H. (2003), Human resource management in constructionprojects - strategic and operational aspects, Taylor and Francis Ltd, London.421

Loosemore, M. and Andonakis, N.(2006), “Subcontractor barriers to effective OHS compliance in theAustralian Construction Industry”, in Fang D. P., Choudry, R.M. and Hinze, J. W.(eds.), GlobalUnity for safety and health in construction proceedings of the CIB W99 International conference,Tsinghua University, Beijing, pp.61-68.Nicholas, S. and Sammartino, A. (2001), “Capturing the diversity dividend, Views on CEOs onDiversity Management in the Australian Workplace, The programme for the practice of diversitymanagement”, The Australian Centre for International Business, 2001, available at:Ofori, G. (1994) ,Foreign construction workers in Singapore, International labour Organization,International labour Office, Geneva.Pedersen, A.,Walker, I.and Wise, M. (2005) ,“Talk does not cook rice”: Beyond anti-racism rhetoricto strategies for social action”, Australian Psychologist, March, Vol. 40 No.1, pp. 20-30.Phua, F. (2004), “The antecedent of cooperative behaviour among project team members: analternative perspective on an old issue”, Construction Management and Economics, Vol. 22, pp. 1033- 1045.Shen, J, Chanda, A. and D’Netto, B. (2009), “Managing diversity through human resourcemanagement: an international perspective and conceptual framework”, The International Journal ofHuman Resource Management, Vol. 20 No. 2, pp. 235-251.Steele, A. and Sodhi, D. (2006), “Race, ethnic minorities and construction industry”, in Gale A.W.and Davidson M.J.(eds), Managing Diversity and Equality in Construction: Initiatives and practice,Taylor &Francis, London, pp.195-208.Trajkovski, S. and Loosemore, M. (2005), “Deficiencies in construction safety as a result of lowEnglish proficiency of site operatives”, International Journal of Project Management, Vol. 24 No. 4,pp. 446-452.422

Success Factors in Large Construction ProjectsSzentes, H.Department of Civil, Mining and Environmental EngineeringLuleå University of Technology, Luleå, Sweden(email: henrik@szentes.se)AbstractThe study aimed to identify and define general success factors in large construction projects. Thebasis for the study was interviews with 15 project managers and additional project team members, allworking in different construction projects with an individual contract sum of 200 – 1000 MSEK, infour of the Nordic countries. The interviews were complemented by a 2-day workshop withexperienced project managers, directors and specialists, and two additional interviews as 2 nd opinion.The study identified an extensive list of potential success factors, and by using the combinedexperience gathered in the workshop the most important success factors were defined. The result interms of comprehensive success factors was then analysed and compared to some previous relatedresearch. The comparison confirmed many conclusions made in previous research but did also putforward new aspects to what important success factors are. The overall conclusion is that focus onorganizational aspects is crucial - management skills and a culture/attitude ensuring an open andeffective communication, but also competence and availability of resources. The use of a wellcomposed project board with defined purpose and agenda is another important success factor, as isthe application of a common and structured approach to project risk management. Monitoring ofproject performance gives an early indication of deviations from plan, enabling swift actions.Furthermore, a stringent process and stringent handling of contract and commission are alsoimportant factors.Keywords: project management, construction, success Factors, organization, risk management423

1. Introduction1.1 Construction industry – project oriented businessAccording to PMI (2004) – A guide to the Project Management Body of Knowledge (PMBOKGuide), the definition of a project is: A temporary endeavour undertaken to create a unique product,service or result. Though there are process based activities in the construction industry, for instanceregarding manufacturing of building materials, from a contractor or a property developer perspectivemost of the activities in the construction industry are project based. Also when considering differentinitiatives to industrialise the construction process the recent years it is fair to say that a major part ofthe money spent in the construction sector is invested in project activities. Considering this, it iscrucial for the players in the construction industry to be experts in management, monitoring andcontrol of projects, thus find the recipe for successful projects. Major parts of a recipe for successfulprojects ought to be generic for all kind of projects, but it is reasonable to believe that some otherfeatures are more specific to the construction industry, to certain types of projects, to the project sizeand to other characteristics of a project.According to Jaafari (2001), complexity is one distinctive characteristic of many projects to manageto enable successful projects. The complexity in construction projects is mentioned by Tah and Carr(2000), and Chan and Scott and Chan (2004). Complexity in terms of turbulent environment in largescaleengineering projects is emphasised by Floricel and Miller (2001).Key Performance Indicators (KPIs) may be used to monitor performance and measure how successfulcertain projects are. This topic has described by for instance Chan and Chan (2004), and they statethat it is essential to define what project success means, or it will not be feasible to discussperformance measurement. Further, they conclude that both qualitative and quantitative KPIs aredesirable. A set of methods on how to measure the performance is presented by Salminen (2005), andthat the criteria cost, schedule deviation, quality and safety form a coherent description ofconstruction project success. Often failure in one aspect indicates failure in more of the aspects,though this dependency is not necessary.Even though this paper is focused on how to create success, a study of the related topic of how tomeasure performance and success may serve as inspiration.1.2 Success factors for projects - previous researchOther researchers have previously investigated success factors for projects. Some researchers havedefined success factors for projects in general, while others have studied construction projectsspecifically.424

Cooke-Davies (2002) defines 12 different comprehensive success factors for projects in general,divided into three categories: Factors critical to project management success – enabling achievementof cost targets, and time schedule; Factors critical to success on individual projects – enabling thereach of project specific objectives as anticipated by main stakeholders as the customer and sponsor;Factors that consistently leads to successful projects – forming the basis for continuous improvementof a corporate general principles for how to manage projects. One core element is a defined routinefor collecting and analysing portfolio metrics to reveal the relation between current performance in aspecific project and the final success of the same project.Chan and Scott and Chan (2004) define a conceptual framework to describe factors affecting successof a construction project: Project Management Actions, Project Procedures, External Environment,Project-related Factors, and Human-related Factors. 44 more specific factors and actions are listed –example for each area, in the same order; Communication system, Procurement method, Economicenvironment, Type of project, Client’s experience.Chua and Kog and Loh (1999) have investigated critical success factor for projects in theconstruction industry. All in all 67 expected success factors were examined in a questionnaire to getthe relative importance for each of the projects objectives; budget, schedule and quality. Whenanalysing the results, they took into consideration what organization each respondent were workingfor; consultant, contractor; client, or project management. The result is a top ten list of successfactors for each objective and perspective, where adequacy of plans and specifications is consideredas one of the most important factor for most objectives, by most of the respondent categories. Othertop ranked factors are constructability, project manager commitment and involvement, and realisticobligations/clear objectives.According to Salminen (2005) one important area of success factors for construction projects is WorkBehaviour and Leadership. The management style is important, and it is needed to combine focus onpeople with focus on production, with a slightly higher importance of the latter. Furthermore, forwork behaviour – control is slightly more important than flexibility – thus communication andeffectiveness & clarity of tasks are more important than community spirit and satisfaction & growth.Other areas of success factors according to Salminen (2005) are Preconditions – defined as thesupport from client/consultant, designers and company headquarters, and Management Systemsdefined as the principles and methods of operation and documentation. One interesting result is thatmanagement systems are indicated as only slightly important for project success.2. Research scopeThe study aimed to identify and define success factors in large construction projects, and focus wasset on four of the Nordic countries; Sweden, Norway, Denmark and Finland. In this study, peoplewithin a contractor organization were asked to elaborate on project success factors – thus in practiceproject success was defined as achieving the contracted objectives within the calculated cost, in timeand with the agreed quality – enabling a satisfied customer.425

The research question:What is apprehended as crucial Success Factors in large construction projects – in the mindsof people working as contractors in the construction industry?2.1 Research methodThe chosen research method is a multiple case study, based upon interviews with people actuallyworking with management of large construction projects. For further refinement of the results, a 2-days workshop was conducted, and then additional interviews with two very experienced projectmanagers were made for comparison with the results from the workshop.Interviews with the project manager and his/her closest team at each large constructionproject part of this study, with the aim on identifying success factors in each specific project.The basis for the interviews was implicit questions of a quite open nature, not to influencethe person interviewed. A predefined set of questions was used, but not sent to the project inadvance, nor shown during the interview sessions. Instead, the author used the questionnaireas a checklist to ensure that the same topics were covered in each project review. Thisapproach was chosen to enable the interviewees to emphasise whatever issue they consideredas most important.The interviews resulted in a thorough list of potential success factors, but also notifications ofphenomenon to avoid and attitudes that ought to affect the project success. The implication isthat the avoidance of these phenomenon and understanding of attitudes in reality is animportant basis for how to create successful projects.To prioritize the findings and establish a platform for definition of what the most crucialsuccess factors are, a workshop was conducted. With the author acting as process leader, agroup of 16 people including project experienced project managers, directors and specialistsgathered for 2-days for discussions and analysis.Finally, two additional interviews were made to evaluate the results that far. Two veryexperienced project managers that did not take part in the workshop were simply asked tomention the success factors for large project according to their preferences.426

2.2 Prerequisites / delimitationsThe following prerequisites and delimitations were chosen to define a feasible scope of the project:The initial investigation comprises interviews with personnel active in 15 large constructionprojects, with an individual contract sum between 200 MSEK and 1000 MSEK (1 SEK ~ 0,1Euro ; 2009-12-11), in four of the Nordic countries; Sweden, Norway, Denmark and Finland.The aim was to mix experiences from different kind of projects/objects as civil engineering,retail, offices, housing and other buildings, and to mix experiences from different type ofcontracts.Focus is on production phase, though the research methodology applied made it possible foranyone to put forward any success factor, no matter what project phase. Furthermore, themain perspective is the contractor view on successful projects – defined by askingexperienced project managers, directors and specialists active within a contractororganisation.All interviewees are/were active within the same large Nordic domiciled constructioncompany – a fact that imposes a risk of vague general validity. However, considering thegeographical spread – from the very north to the south of the four countries, and the fact thatmany of the interviewees have also been active in other contractor organizations over theyears thus bringing in broad experience into the actual project execution, the risk ismitigated. The positive side of the specific sample of interviewees is the simplified access topeople and information forming the foundation for this paper.3. ResultThe complexity is put forward in many interviews as one important feature of large constructionprojects. The main sources of complexity indicated though not analysed with stringency seem to be;the size of the project organization, many dependent activities, logistics, and long lasting projectswith many change requests and variation orders.The most important success factor established is the importance of keeping focus on organizationalaspects. This was emphasised by most interviewees and was clearly an important subject during theworkshop as well. Aspects included are; 1) Appointment of a project manager with the appropriateexperience, great managerial skills, and an ability to delegate and to deal with conflicts. Furthermore,the project manager has an important role in terms of symbolic leadership – forming the culture andattitude in the organization. 2) Appointment of key personnel with the needed knowledge andspecialist competence, and if possible with experience from similar projects. To mitigate the effect ofinformation gap between project phases, it is good if some personnel in execution phase are involvedalready in tender phase.3) Resources enough – for production, but also for administration and management. If the scope ofwork increases it is important to adjust the organization accordingly. 4) A project culture427

emphasising open communication and avoidance of the attitude “I manage on my own”. This willenable early identification of risks and potential problems, enable more creative solutions, but alsocreate involvement and good social working environment. The aim should be to combine differentcompetence areas and perspectives on a common set of project objectives. It is important tocontinuously spend some efforts on creating a good team spirit to handle the changes in the projectteam that will always be the case in a long lasting project. 5) Use the experience that the blue collarworkers have – for better planning and choice of production methods.The use of a Project Steering Committee (Project Board) is an effective way to deal with decisionsoutside the mandate of the Project Manager. To achieve good results though, a structured approach isneeded; 1) A clear and communicated purpose of the Project Steering Committee – support to theproject manager to get the best project outcome possible. 2) Extra effort when defining whatstakeholders that should be included in the Project Steering Committee. 3) A predefined agenda,scheduled meetings but also a preparation for extra meetings on demand.A clear distribution of responsibility and authority minimizes the risk of unforeseen activities. At thesame time, it helps the project members to focus on their own main tasks. This is true within theproject organisation, as well as between the project manager and the project steering committee.A systematic Risk Management approach is another success factor. A common methodology shouldbe applied from the start of the project and follow it to the very end. In addition to a structuredapproach, it is important to always strive to develop the personnel further – improved risk awareness,improved competence in risk management and an increased understanding of how people makedecisions (thoughts versus feelings).A continuous monitoring of the project performance and status is a good way to get early warningsand early indications of deviations from plan. This enables swift actions to minimize the effect andset the project back on track.The use of a common process with strictly defined milestones dividing the project into differentphases contributes with structure to the project execution. One important aspect of the process is astrict and formalised handover of information and knowledge from one phase to the succeeding one.The number of variation orders and the corresponding additional contract sum is often very high in alarge construction project; hence a successful project is dependent on a strict handling of variationorders, new requirements and on how such changes affect cost and time schedule. To achieve this it isimportant to be strict from the very beginning and appoint resources enough, including experts incontract specifics and jurisdiction as soon as a claim is arising.An open mind to previous experiences enables a project to take part of success stories and bestpractice from other projects. Even if there are some differences in terms of technology, geography,customer etc, there are most certain similarities and analogies to learn from.428

An overview of the most important comprehensive success factors are presented in table 1 – in orderof spelling.Table 1: The most important comprehensive Success Factors as defined by the study, with a shortcomment on whether it was confirmed by the concluding interviews or not.Headline / AreaCommissionContract ManagementMonitoringOrganizationProcess / PhasesProject SteeringCommitteeDescriptionClear distribution of responsibility andauthority.Stringent handling of variation orders andclaims – appoint resources enough and engagelegal experts.Continuous monitoring of project status to getearly warnings of deviation from plan.A project manager with good leadership skillswho facilitates open communication andcooperation creating a common view onobjectives, team members with experience fromlarge projects.Milestones with clear requirements, and aformalised handover of project informationfrom one phase of the project to the succeedingphase.Define and utilize a well functioning ProjectSteering Committee, with clear purpose andagenda.Confirmed by theconcluding interviews?NoYes, both interviews coverthis aspect to some extent.NoYes, both interviewsdefined this as the mostcrucial success factor. Alsodetails were confirmed.Not specifically, but oneinterview emphasises theimportance of planning.Yes, confirmed by bothinterviews.Risk Management A comprehensive Risk Management System –used through the entire project. Risk awarenessand competence in risk managementmethodology.Not specificallySuccess storiesShare of Success Stories and Best Practicebetween projects.Yes, one interview puts thisforward strongly.4. Analysis and discussionThis study focused on production phase, hence the success factors identified are close to “hands-onactions during execution” to optimize project performance. There are also important aspects on howto create projects success in the preparations of the project – and in the continuous learning anddevelopment between projects, as mentioned in the references. This deviation in approach might be429

one explanation to differences in success factors defined. One other possible explanation is that thenature of this study has been open questions, while Chua and Kog and Loh (1999) tested the internalorder of 67 predefined success factors, Salminen (2005) examined specific hypothesis and Chan andScott and Chan (2004) made a literature review. The advantage of the approach used in this study isthat preconceived notions can be mitigated, but at the same time conclusions are not as wellestablished as with other methods.The complexity in large construction projects as mentioned by Jaafari (2001), Tah and Carr (2000),Chan and Scott and Chan (2004), and Floricel and Miller is confirmed by this study. Duringdiscussions on the subject organisation it was specifically stated that large construction projects arecomplex, thus when forming the organization it is needed to have personnel with experience fromlarge/complex projects – not only experienced personnel in general.The success factor “Monitoring” confirms the need for measurements of performance as mentionedby Chan and Chan (2004), and Salminen (2005). However, many of the tentative performanceindicators that were discussed are important in the sense that they enable future successful projects(in terms of cost, time and quality) and a successful corporate all together. This is similar to theconclusions made by Cooke-Davies (2002) regarding consistently successful projects and corporatesuccess. There was a tendency that the need for a common and comprehensive monitoring processwas more emphasised by directors and specialists than by project managers. The reason for this isprobably that the project managers (usually) have control of their respective project on a daily basis,using far more detailed monitoring principles. It is logic that the need for overview and earlywarnings is greater amongst the managers in a contractor organization, not working in detail or ondaily basis in the specific projects but still very dependent on the result in the same projects.Salminen (2005) concludes that “Work Behaviour and Leadership” is very much affecting the projectsuccess, thus a similar conclusion as made in this study under the headline “Organization”. Othersimilarities can be found in table 2.As many as 8 of the 12 success factors listed by Cooke-Davies (2002) are to some degree confirmedby this study, as presented in table 2. The overall conclusion made by Cooke-Davies (2002) regarding“The people side of project management” is very close to what this study summarizes under thecomprehensive success factor “Organization”.The factors affecting the success of construction projects as defined by Chan and Scott and Chan(2004) are to some extent identified in this study as well. Those factors are a bit different fromsuccess factors, but still important to reflect upon. Details can be found in table 2.The comparison of success factors as defined by Chua and Kog and Loh (1999) is based upon thecontractor perspective on each project objective budget, schedule, and quality – hence, similar to thisstudy. Many of those success factors are more detailed than the ones defined in this study, still thereare similarities to elaborate around. Details can be found table 2.430

Table 2. Comprehensive comparison of the result from this study with success factors defined byprevious research. Similarities identified in each reference are referred to as a “quote”.PreviousCooke-DaviesChan and ScottChua and KogSalminen (2005)Research(2002)and Chan (2004)and Loh (1999)This studyCommissionYes,Yes, “organizationSomewhat,Yes, “clarity ofsuccess factorstructure” and“project managertasks”“F5”“organizingauthority”skills”ContractYes,Somewhat,No, not specificNo, not specificManagementsuccess factor“adaptability to“F7”changes”MonitoringSomewhat,Somewhat,Somewhat,Yes, “performancesuccess factor“control“constructionmanagement” is“F8”mechanism”control meetings”,the main topic of“Site inspection”the thesis.OrganizationYes, as describedYes, by manySomewhat,Yes, “Workin “people side ofspecific factors“projectbehaviour andprojectand actionsmanager’sleadership” is onemanagement”competence andmain areacommitment”Process / PhasesSomewhat,No, not specificSomewhat,Somewhat,success factor“clear objectives”“mgt systems”“F6”, “F9”Project SteeringCommitteeSomewhat,success factor“F9”No, not specific No, not specific No, not specificRisk ManagementYes, successNo, not specificNo, not bySomewhat, part offactor “F1-F4”contractor, but“mgt systems”clientSuccess storiesSomewhat,success factor“F12”No, not specific No, not specific No, not specific5. ConclusionsThe first finding established is the complexity in large construction projects, a factor that very muchaffects the recipe for achieving successful projects. The complexity is one reason to why focus on431

organization is crucial. The best crew, with experience from other complex projects – lead by anexcellent project manager with great managerial skills seem to be more important in large andcomplex projects than in smaller projects with more obvious tasks. In a large project there is time toharvest investments in education and training of the project personnel, and there is budget forbringing in specialists of different kind instead of trying to solve all obstacles with the permanentcrew. Whether this is utilized or not is very much dependent on the attitude of the projectmanagement team and on the situation. There is a risk that a project struggling to keep time andbudget will try to solve even more issues by themselves to save costs, with the effect that poordecisions are made causing even more costs and further delay. This aspect is true also regarding theproject manager in the sense that a project manager for a large project needs to be willing to delegatetasks to his/her team, while this is not possible to the same extent in a small project. Thus, experiencein general is good – but specific experience from other large projects is essential.Project success is also dependent on the interaction of the success factors; Project SteeringCommittee, Commission, Process/Phases and Monitoring. A well composed and well functioningproject steering committee can be a great support for the project manager, who from the clearlydefined commission knows what decisions he/she may effectuate without escalation. The dialoguebetween internal stakeholders and the ability to focus on the most important issues is supported by acontinuous and structured monitoring of the project performance. Such a monitoring routine shouldclearly point out deviations from the agreed plan to meet the requirements for each milestone andproject phase. In the planning phase, it is a great opportunity for the project to learn from successstories from other similar projects – both as inspiration and not to re-invent solutions that are alreadydefined as best practice in other projects.Project success is supported by the application of a common and comprehensive risk managementsystem, from start of the project to the very end. From a contractor perspective, the project most oftenstarts with a tender phase – but from the customer perspective it starts with an idea and some sort ofpre-study. In addition to a structured approach, it is important to spend some effort to create riskawareness, increase the competence in risk management methodology and to increase theunderstanding of human behaviour.If one could guarantee that all thoughts, ideas and information that have been once mentioned in acertain project were available at all time, most projects would reach a far better result for all involvedparties. However, for different reasons information, thoughts and ideas disappears along the roadespecially if not documented properly. One way to mitigate this negative effect is to introduce aformalised and focused routine for handover of information between the different phases in theproject, another way is to let some key personnel be engaged in the entire project – from tender tohandover.432

ReferencesChan, A.P.C and Scott, David and Chan, A.P.L (2004) “Factors Affecting the Success of aConstruction Project”. Journal Review: Journal of construction engineering and management, Vol.130, No. 1.Chan, A.P.C and Chan A.P.L (2004) “Key performance indicators for measuring constructionsuccess”. Benchmarking: An international Journal, 11(2), 203-221.Chua D.K.H and Kog, Y.C. and Loh, P.K. (1999) “”Critical success factors for different projectobjectives”. Journal of construction engineering and management, May/June 1999.Floricel, S and Miller, R (2001) “Strategizing for anticipated risks and turbulence in large-scaleengineering projects”. International Journal of Project Management, 19, 445-455.Jaafari, Ali (2001) “Management of risks, uncertainties and opportunities on projects: time for afundamental shift”. International Journal of Project Management, 19(2), 89-101.PMI (2004) “A guide to the Project Management Body of Knowledge” (PMBOK Guide)Salminen, J (2005) “Measuring performance and determining success factors of construction sites”.A Doctoral Dissertation at Helsinki University of Technology Construction Economics andManagement433

Identifying the Factors that Influence InnovationChampioning Behaviour in Construction SupportServices Organisations: A Review of the Role of MiddleManagementKissi, J.Mouchel Group(email: john.kissi@mouchel.com)Payne, R.Luke, S.Dainty, A.Liu, A.AbstractInnovation has been considered an important means by which organisations seek to achieveadvantage over competition and for improving performance in today's highly competitive businessenvironment. A number of factors have been identified as influencing innovation in project-basedconstruction organisations. These include internal factors such as organisational culture, climate,leadership style and exogenous influences such as clients. Although research recognises howimportant it is for senior management to create an environment conducive to innovation, there is littleunderstanding of how these internal and external factors interact to impact on innovativeness. Thispaper reviews relevant literature on innovation, organisational culture, organisational climate andleadership style while examining how they combine with external factors to promote innovation inconstruction support services organisations. The study particularly focuses on the role of keyorganisational actors with responsibility for developing a climate to facilitate innovation at thedivisional or business unit level. The review reveals that efforts to develop a climate that promotesinnovation championing behaviour among project managers will be influenced by the organisationalculture, leadership style and the extent of external influence on project delivery. The study furtherreveals the importance of middle managers in promoting innovation. A methodology is presented forexamining the role of this key managerial constituency and the ways in which they can enable orimpede the innovation process.Keywords: construction support services, innovation championing, innovation climatemiddle management, organisational culture434

1. IntroductionInnovation has become an important source of competitive advantage as it provides an avenue bywhich organisations can differentiate their products or services (Dulaimi, Nepal and Park, 2005).While innovation in the construction industry has mainly been driven by developing solutions toproblems encountered on site, others have been motivated by the aspiration to improve performance,(Dulaimi et al, 2005). Profit maximisation has also been identified as an important driving forcebehind efforts at innovation by construction firms (Lim and Ofori, 2007). A common criticism of theconstruction industry has been that, firms often deliver products and services which fall short inquality and fail to meet client expectation of price certainty and assured delivery (Lu and Sexton,2006). This has prompted many calls for performance improvement in the industry (Latham, 1994;Egan, 1998). Innovation can be an important means of improving performance across the industry. Ina professional services environment, successfully creating and managing knowledge provides animportant means of creating value although this value creation has been called into question byclients (Lu and Sexton, 2006).Calls have also been made for enthusiastic and committed individuals to spearhead innovation in theconstruction industry referred to as „champions‟ (Nam and Tatum, 1997; Dulaimi et al, 2005). In theproject environment Dulaimi et al (2005) among others have identified the project manager as key inthis regard, suggesting that they should exhibit certain behaviours in order to positively influenceproject performance. A number of individual and situational factors have been identified asinfluencing the effectiveness of championing behaviour and therefore the resultant direct or indirectimpact on the level of innovation and project performance. Significant among them is the „climate forinnovation‟ which is manifested in support for innovation (Dulaimi et al, 2005).Based on a critical literature synthesis, this paper proposes a model within which leadership style,organisational culture and other exogenous influences combine to create a „climate for innovation‟that impacts on the innovation championing behaviour of the project managers. This study willcontribute to on-going debate about the nature of the relationship among these key factors identifiedabove and their impact on innovation and project performance in UK construction support servicesenvironment. Due to space limitation, the exogenous influences on innovation will be discussed ingreater detail in a future paper.2. Conceptual modelFollowing literature review aimed at exploring the factors that promote successful innovation in aproject setting; leadership, organisational culture, organisational climate and other external factorsincluding the client were identified as key, (Jung et al, 2003, 2008; Ahmed, 1998; Ivory, 2005).Whereas a number of studies have investigated the relationship between organisational culture andinnovation (e.g. Hartmann, 2006), leadership and innovation (e.g. Jung, Wu & Chow, 2003, 2008)and client and innovation (e.g. Ivory, 2005), there is little understanding of how these factorscombine to impact on innovation in the context of UK based construction support servicesorganisations. Also, most organisational studies examining leadership style have tended to focus on435

senior managers (e.g. Sarros et al, 2008; Jung et al, 2003, 2008) with little attention paid to middlemanagement. Moreover, whereas these constructs are known to influence innovation in organisations,not much is known about how this actually takes place.This study will seek to fill these gaps by proposing a model that integrates the leadership,organisational culture and exogenous influences on innovation constructs, investigating how theyimpact on „climate for innovation‟ and hence the innovation championing of project managers andproject performance as depicted in Figure 1 below. The model proposes that innovation is a productof the transformational leadership style of middle managers, the organisational culture for innovationand exogenous influence on innovation. These influences combine to create a „climate forinnovation‟ within which the project manager operates. The climate in turn influences thechampioning behaviour of project managers and consequently their tendency to adopt innovativeapproaches to design and project delivery and hence project performance. The model also proposesthat these constructs individually impacts on championing behaviour directly. The model furthersuggests that leadership will influence innovation championing through the organisational culture andthrough the relationship that is built with external stakeholders of projects. It is also suggested that adirect relationship exists between championing behaviour and project performance. The sections thatfollow provide details on each of the constructs incorporated in the model; outline the justificationsfor their inclusion and the suggested relationships among the constructs.Figure 1: Conceptual Model2.1 Climate for innovationClimate has been defined as a characteristic ethos or atmosphere within an organisation at a givenpoint in time which is reflected in the way the members perceive, experience and react to theorganisational context (Rollinson and Broadfield 2002: 597). Human cognition is said to play anintervening role between environmental stimuli and how people respond to the stimuli. Thiscognition is the psychological meaning that individuals associate with the environment. Within thework environment, these meanings that employees ascribe to their work environment such as jobs,436

co-workers, leaders among others is described as psychological climate (James et al 2008, Kissi et al,2009). Climate in organisational studies is essential because employees draw conclusions regardingwhat is important to management from what they observe rather than what is said and take steps toalign their own priorities with what they perceive to be important to the organisation. It couldtherefore be said that these perceptions of priorities serve the purpose of providing direction andorientation for employees in deciding where to channel their energies, abilities and efforts (Schneideret al, 1994) and determine their motivation, attitudes and behaviour, (Kozlowski and Hults, 1987).Moreover, perceptions of the work environment impact on the creativity of individuals in theorganisation and ultimately on innovation (Amabile et al, 1996).Innovation generally involves a social psychological process as it is the product of socialrelationships and complex system of interaction (Lu and Sexton, 2006). This interaction mainly takesplace among the members of the project team including the client and the project manager and canmanifest itself in a form „climate‟ (Panutwanich et al, 2008). Consistent with Schneider and Reichers‟(1983) recommendation that for climate studies to deliver meaningful and useful results they shouldbe facet specific, this study will focus on „climate for innovation‟ within the „design‟ environment asopposed to the construction phase where most innovation studies in the industry have focused. In thispaper „climate for innovation‟ incorporates leadership for innovation, organisational culture forinnovation and the external influences on innovation as elaborated below.2.2 Organisational culture for innovationOrganisational culture has been defined in many ways by different researchers. This study definesculture as the fundamental values and beliefs held and shared by members of an organisation thatprovide boundaries for choices, clarifies expectations and provide a platform for collaboration (Kissiet al, 2009: 78). The role of culture in organisational performance has been well documented (e.g.Sarros et al, 2008). The competing values framework developed by Quinn and Rohrbaugh (1983) hasbeen a very important tool for assessing the effectiveness of organisations on many dimensionsincluding innovation and flexibility. The model formed the basis for Cameron and Quinn (1999)typology of culture which included; clan, hierarchy, adhocracy and market cultures. According to theauthors the adhocracy culture stresses external positioning combined with a high degree of flexibilityand presents a dynamic, highly creative and entrepreneurial environment in which individualinitiative and risk taking is highly recommended. In such an environment, visionary leadershipcombined with innovation and risk taking is desirable. These organisations are held together by acommitment to experimentation and innovation while success is measured by the production ofunique, innovative products and services, (Cameron and Quinn, 1999).In a study of 181 architectural and engineering design professionals, Panutwanich et al (2008) foundthat organisational culture mediated between leadership for innovation and team climate forinnovation and concluded that without a culture of innovation associated with support andencouragement, innovative ideas are not likely to yield the desired outcomes and realise its fullpotential. It is therefore important that organisations do not only incorporate innovation in theirvalues and policy statements but also take steps to create a culture for innovation that can be437

perceived and experienced by the members of the organisation. Sarros et al (2008) supported thisview, suggesting that a competitive, performance-oriented organisational culture has a positiverelation with climate for innovation. The study also found that organisational culture mediates therelationship between transformational leadership style and organisational climate for innovationfurther buttressing the importance of culture is in promoting innovation. In that direction this studywould expect that adhocracy culture which is associated with flexibility and risk taking will play avery important role in promoting innovation championing, innovative approaches to developingprojects and ultimately project performance and that effort to develop an innovative climate will bedifficult if not impossible in a situation where the underlying culture is unsupportive of innovation.2.3 Leadership style and innovationLeadership style has been highlighted as an individual factor exerting significant influence oninnovation in organisations either directly or indirectly through other intervening variables such asculture and climate (Nam and Tatum, 1997; Jung et al, 2003, 2008; Gumusluoglu and Ilsev, 2008;Kissi et al, 2009). Transformational leadership has been associated with change of culture andmotivation of people in pursuit of organisational goals, employee satisfaction and organisationalproductivity (Jung et al, 2008). Panutwanich et al (2008) also highlighted the important role thatleadership for innovation plays in creating a climate for innovation by influencing organisationalculture that support innovation. The study suggested that organisations could raise leaders forinnovation by cultivating transformational leadership among their managers and supervisors. There ishowever evidence to suggest that culture could also influence the behaviour of managers. Leadershipcould also indirectly influence innovation through the client as they interact with existing andprospective client to identify how services or products need to change to enhance client satisfaction,(Waldman and Bass, 1991). The authors further noted that „the major innovative turn-arounds oforganisations occur when senior executives take the trouble to visit at length with their prospectivecustomers and clients to find out what is good and what is bad about the firm‟s current products andservices‟ (Walderman and Bass, 1991: 174).Bass and Avolio (1994) submitted that through intellectual stimulation, transformational leadersquestion assumptions and by so doing stimulate their followers‟ efforts to be innovative, creative andapproach old situations in new ways. Through idealised influence, the leader earns credit with thefollowers by placing their needs ahead of their own, shares risks with them and avoids publiccriticisms of individuals who make mistakes. This engenders a greater willingness on the part of thefollowers to take risks and adopt more innovative approaches to delivering projects.Studies on leadership have primarily focused on top management with little attention paid to middlemanagement and less so in the construction industry (Kissi et al, 2009). Styhre and Josephson (2006)in a study of 13 construction site managers drew a comparison between site managers in theconstruction industry and middle managers in other industries and found that they generally had apositive experience of their work situation. Although the sample size was small and therefore thefindings cannot be generalised, it highlights a departure from many other negative reporting onmiddle managers (Dopson and Stewart, 1993). The study also revealed the gap in literature on middle438

management in the construction industry (Kissi et al, 2009). Moreover, most of the literature onmiddle management has been based on organisations in general while studies on site managers ormiddle managers in the construction industry have seldom referenced the general managementliterature (Styhre and Josephson, 2006; Kissi et al, 2009). Notwithstanding the conflicting views onmiddle management, they play an important and central role in ensuring organisational and projectobjectives are achieved (Styhre and Josephson 2006; Kissi et al, 2009). Hence it can be hypothesisedthat the leadership style exhibited by middle managers will influence the perceptions of climate forinnovation which will in turn influence the innovation championing behaviour of project managersand hence project outcomes.2.4 Innovation championingChampioning behaviour is defined as „the project manager‟s observable actions directed towardsseeking, stimulating, supporting, carrying and promoting innovation in the project‟ (Dulaimi et al,2005: 566). Drawing from Dulaimi et al (2005), project managers‟ (PM‟s) championing role could besaid to be very important. PMs can provide direction and leadership towards the attainment of projectgoals. As the leader of the delivery team, the PM can sell and persuade innovative ideas to the otherpartners in the project, obtain their buy-in, coordinate input from other parties involved in the projectsuch as sub-consultants and facilitate the implementation of ideas introduced into the project. Also,when PMs demonstrate their commitment in the innovation process by working hard on it and takingresponsibility as well as a measure of risk, it may be enough to overcome the inertia and resistanceand provide the needed encouragement to others associated with the innovation. The PM is howeverunlikely to take the risks associated with innovation if they perceive the organisation and themanagers are risk averse and do not support innovation.In a study of construction projects based in Singapore, Dulaimi et al (2005) surveyed 32 projectmanagers and 94 project team members, in an effort to identify the key situational and individualfactors that influence championing behaviour. The study concluded that unlike the manufacturing andR&D organisations, PM‟s championing role in construction is multifaceted and important inpromoting innovation as well as achieving project objectives. The findings also suggested that thePM‟s role should be complemented by individual factors such as the PM‟s competency andprofessionalism and situational factors such as sufficient supply of resources and an environment,climate or culture that is conducive to foster and promote the PM‟s role as a champion of innovation.Dulaimi et al‟s (2005) study made a significant contribution and highlighted a number of importantissues in the study of innovation in construction especially in project environment. However the smallsample size used means the result cannot be generalised. The time element associated with innovationoutcomes is also missing as the research was cross-sectional in design. Also, PMs selected teammembers to be interviewed. The likelihood is that PMs selected the people who are more likely toprovide good feedback on their role. Besides the PM‟s self-reporting of their influence tactics mayintroduce bias into the result. Moreover the data collected was based on perceptions instead of actualobservable practices. Although this study focused on site works, the principles will be applicable inthe design environment. This study will expect innovation championing to have a positiverelationship with the level of innovation and hence project performance.439

2.5 Innovation and project outcomesDodgson, Gann and Salter (2008) essentially defined innovation as "the successful commercialexploitation of new ideas. It includes the scientific, technological, organisational, financial andbusiness activities leading to the commercial introduction of new (or improved) product or service”(Dodgson et al, 2008:2). Among other avenues innovation in the construction industry takes placeduring project execution primarily through personal exchanges among designers (Salter and Gann,2003) which makes innovation difficult to plan (Bayer and Gann, 2007) and highlights the need tocreate the right environment to facilitate such exchanges.The ability of project-based design, engineering and construction firms to meet changing demandsfrom clients and improve performance through innovation management is closely linked to thedevelopment of technical capabilities, (Gann and Salter, 2000; Kissi et al, 2009) which is consideredto be embodied in the staff of the organisation (Bayer and Gann, 2007). Given the high level ofinternal divisions in project-based firms (Gann and Salter 2000), it could be argued that eachidentifiable division or business unit will have their unique ability to innovate which will beconsistent with their internal characteristics (Kissi et al, 2009). Such internal characteristics ascooperative behaviour, service offer together with external factors including innovation acceptance ofclients will influence innovative performance (Hartmann, 2006). Following a review of literature, thisstudy will define innovation as the generation or adoption of ideas, design concepts or deliveryprocesses, new to the adopting organisation which when implemented will yield a reduction in costand/or time associated with project delivery and improve the quality of the final output with a highlevel of client satisfaction. In view of the fact that each division within the organisation under studyserves a different client and have a different set of internal variables such as middle managers, cultureand clients this study would expect that innovation performance will vary from one division of firmsto another.Whereas a linkage has been established between PM‟s championing and project performance in themanufacturing, such a linkage has not been categorically established for the construction industry,(Dulaimi et al, 2005). Innovation championing has been found to be linked to the level of innovationand project performance (Dulaimi et al, 2005; Howell and Shea, 2001) and business outcomes ingeneral (Panuwatwanich et al, 2008). This linkage has however been questioned by Markham (1998),whose earlier studies examined the impact of championing on project performance from theperspective of the team members and found no support for this proposition. Markham‟s (1998)contradictory findings could be ascribed to the fact that the study sought to investigate the impact ofthe team‟s response to the champion‟s influence tactics on project performance instead of thechampion‟s direct impact on project performance, (Howell and Shea, 2001). Given the contestednature of this hypothesised relationship, it will be interesting to explore if indeed there is and thenature of this relationship between championing behaviour and project performance in the context ofUK based construction support services organisations.In line with the observation that different stakeholders have different expectations of projects and thatproject success has a different meaning to each of them, a multi-dimensional approach to measuringproject performance will be adopted in this study (Shenhar and Levy, 1997; Kissi et al, 2009). The440

project outcomes to be measured will extend beyond the traditional financial measures (Salter andTorbett, 2003) and will include both subjective and objective measures such as client and staffsatisfaction, profitability and project delivery to budget and programme (Kissi et al, 2009).3. MethodologyYin (2003) identified five main strategies of conducting research as experiment, survey, archivalanalysis, history and case study. The choice of method depends on the type of research questionposed, extent of control over actual behavioural events and how contemporary the events are. Thisresearch seeks a deeper understanding of contemporary events which does not require control overbehavioural events. The research questions have generally been posed as “how and why questions”and seeks a deeper understanding of a complex phenomenon of how key actors influence innovationin a construction support services organisation. Then case study approach is therefore consideredmost appropriate. Moreover a case study method is more suitable for research work if; “the researchaims not only to explore certain phenomena but to understand them within a particular context”.(Collis and Hussey, 2003: 69).The aim at this stage will be to explore if other factors other than those mentioned above at this stagewill influence innovation championing behaviour and for that matter the level of innovation. Theoutput from this stage will be a refined model. The revised model will be tested by a survey of asample of project managers across the company. The first phase of the study will primarily employsemi-structured interviews, direct observations and documents review. These multiple sources willenhance the validity of data gathered. Interviews form an important source of evidence in case studiesas they help to focus directly on the case study topic and are more insightful, (Yin, 2003). Thisnotwithstanding, interviews do have some weaknesses described as questioner bias, response bias,inaccuracies due to bad recall and reflexivity which results when the interviewee gives answers theinterviewer expects to hear, (Yin, 2003). In order to overcome these weaknesses associated withinterviews other sources of information will be used to validate the findings.Two cases involving project teams working from different offices and under different contract will bestudied in this research. One of the selected cases is a partnering contract and the other is aframework contract. Project managers will be interviewed on the transformational leadership ofmiddle managers, organisational culture and client influence on innovation, level of innovation andproject performance. Secondary sources of information such as project records, minutes of projectmeetings, records of client feedback interviews and project review records will be used tocomplement the information obtained through the semi-structured interviews. Evidence obtainedfrom the various sources will be compared while examining how they reflect on the phenomenonbeing studied. A database will be created in the form of audio recording and notes taken from theinterviews, newspaper cuttings and website pages among others. To enhance the reliability of theresearch, a chain of evidence will be kept from the research questions to the conclusion, (Yin, 2003).Subsequent to the interviews, quantitative data will be obtained through surveys. This will be used totest the revised model. The organisational culture of the organisation will be investigated using the441

Organisational Culture Assessment Instrument (Cameron and Quinn, 1999) as the dimensions oforganisational culture to be investigated is well aligned with the dimensions incorporated in thecompeting values framework. The leadership style of middle managers (divisional managers) will beassessed from the point of view of project managers using the four dimensions of transformationalleadership, (Bass and Avolio, 1994). These four dimensions have been known to favourably predictinnovation performance in many studies (e.g. Sarros, 2008 et al; Jung et al, 2008). A set of questionswill be derived from literature to test the influence of client on innovation championing behaviour ofproject managers and the level of innovation. Structural equation modelling will be undertaken todetermine the structure of the factors at the same time as examining the relationship among theconstructs comprising the model (Panuwatwanich et al, 2008). A further set of survey data will becollected after one year in an effort to establish causal inferences among the constructs.4. ConclusionFindings from this review suggest that innovation has become a very important source of competitiveadvantage for organisations including those in the construction industry. A number of factors internaland external to organisations as well as individual and situational appear to influence innovationwithin UK based construction support services organisations. These include leadership,organisational culture, climate for innovation and other exogenous influences such as clients.Whereas much research has been undertaken individually on leadership, culture and client and howthey influence innovation, little is understood of the interrelationship among these constructs andhow they together influence the project manager‟s perception of the „climate for innovation‟, theirchampioning behaviour and ultimately project performance.This review reveals that transformational leadership will impact on innovation by influencing theclimate for innovation which in turn act on championing behaviour of project managers andultimately project performance. Leadership could also influence innovation championing through theclient as they interact with existing and prospective client to identify what needs to change onexisting offerings. Efforts to create an innovative climate will also be influenced largely by theculture within the organisation. Evidence from the literature reviewed suggests that change initiativesto introduce more innovative practices in the construction industry are hindered by the project-basednature of the industry and the multiple stakeholders with interest in construction products.Most of the studies reviewed employed cross-sectional approach and therefore fail to track theprocess of developing climate for innovation and how it ultimately impacts on performance. Thisstudy proposes a longitudinal approach to address this gap. Moreover the leadership aspect ofprevious studies rather focused on top managers. It is surprising to find how few studies have focusedon middle management given the important role they play in either promoting or resisting changeefforts in organisations. This study will therefore contribute to a better understanding of how middlemanagers can influence the environment within which project managers operates and ultimatelyimpact on project performance. From the foregoing, it could be concluded that this study will berelevant in addressing such research questions as;442

what is the relationship between transformational leadership style of middle managers andinnovation championing of project managers?does culture moderate this relationship?does championing behaviour of project managers impact on project performance?These questions will be addressed as part of an on-going investigation to examine how the leadershipstyle of middle managers interact with and shape the culture of a construction professional services tocreate a climate for innovation.ReferencesAhmed, P.K. (1998), "Culture and climate for innovation", European journal of innovationmanagement, vol. 1, no. 1, pp. 30-43.Amabile, T.M., Conti, R., Coon, H., Lazenby, J. & Herron, M. (1996), "Assessing the WorkEnvironment for Creativity", Academy of Management Journal, vol. 39, no. 5, pp. 1154-1184.Barrett, P. & Sexton, M. (2006), "Innovation in Small, Project-Based Construction Firms", BritishJournal of Management, vol. 17, no. 4, pp. 331-346.Bass, B.M. and Avolio, B.J. (ed) (1994), Improving Organisational Effectiveness ThroughTransformational Leadership, Sage, London.Bayer, S. & Gann, D. (2007), "Innovation and the dynamics of capability accumulation in projectbasedfirms", Innovation: Management, Policy & Practice, vol. 9, no. 3-4, pp. 217-234.Cameron, K.S. and Quinn R.E. (1999), Diagnosing and Changing Organizational Culture: Based ofthe Competing Values Framework, Addison-Wesley, Reading, M.A.Collis, J. and Hussey, R. (2003), Business Research 2 nd Edition London Palgrave MacmillanDodgson, M., Gann D. M. and Salter, A. (2008) The Management of Technological Innovation:Strategy and Practice , Oxford Press, Oxford.Dopson, S. and Stewart, R. (1993), What is happening to Middle Management? In Managing Change,Mabey, C. and Mayon-White, B. (eds) 2nd edn, Sage, London, pp. 35-46.Dulaimi, M.F., Nepal, M.P. & Park, M. (2005), "A hierarchical structural model of assessinginnovation and project performance", Construction Management & Economics, vol. 23, no. 6, pp.565-577.443

Eaton, D. (2001), "A temporal typology for innovation within the construction industry",Construction Innovation, vol. 1, no. 3, pp. 165-179.Egan, J. (1998), Rethinking Construction, DETR, London.Gann, D.M. & Salter, A.J. (2000), "Innovation in project-based, service-enhanced firms: theconstruction of complex products and systems", Research Policy, vol. 29, no. 7, pp. 955.Gumusluoglu, L. and Ilsev, A. (2009), "Transformational leadership, creativity and organisationalinnovation", Journal of Business Research, vol. 62, pp. 461-473.Hartmann, A. (2006), "The context of innovation management in construction firms", ConstructionManagement & Economics, vol. 24, no. 6, pp. 567-578.Howell, J.M. and Shea, C.M. (2001), "Individual differences, environmental scanning, innovationframing and champion behaviour: key predictors of project performance", Product innovationmanagement, vol. 18, pp. 15-27.Ivory, C. (2005), "The cult of customer responsiveness: is design innovation the price of aclient‐focused construction industry?", Construction Management & Economics, vol. 23, no. 8, pp.861-870.James et al (2008), "Organizational and psychological climate: A review of theory and research",European Journal of Work & Organizational Psychology, vol. 17, no. 1, pp. 5-32.Jung, D.I., Chow, C. & Wu, A. (2003), "The role of transformational leadership in enhancingorganizational innovation: Hypotheses and some preliminary findings", Leadership Quarterly, vol.14, no. 4, pp. 525.Jung, D. Wu, A. & Chow, C.W. (2008), "Towards understanding the direct and indirect effects ofCEOs' transformational leadership on firm innovation", Leadership Quarterly, vol. 19, no. 5, pp. 582-594Kissi, J. Payne, R., Luke, S., Dainty, A.R.J., and Liu, A. (2009) “A study of the role of middlemanagement in developing innovation climate in construction support services organisations. InDainty, A.R.J (Ed) Procs 25th Annual ARCOM Conference, 7-9 September 2009, Nottingham, UKAssociation of Researchers in Construction Management, 75-84.Kozlowski, S.W. & Hults, B.M. (1987), "An Exploration of Climates for Technical Updating andPerformance", Personnel Psychology, vol. 40, no. 3, pp. 539-563.Latham, M. (1994), Constructing the Team, HMSO, London.444

Lim, J.N. & Ofori, G. (2007), "Classification of innovation for strategic decision making inconstruction businesses", Construction Management & Economics, vol. 25, no. 9, pp. 963-978.Lu, S.L. & Sexton, M. (2006), "Innovation in small construction knowledge intensive professionalservice firms: a case study of an architectural practice", Construction Management & Economics, vol.24, no. 12, pp. 1269-1282.Markham, K.M. (1998), "A longitudinal examination of how champions influence others to supporttheir projects", Journal of Product Innovation Management, vol. 15, pp. 490-504.Nam, C.H. & Tatum, C.B. (1997), "Leaders and champions for construction innovation",Construction Management & Economics, vol. 15, no. 3, pp. 259-270.Ott, J.S. (1989), The Organizational Culture Perspective, Brooks-Cole, Pacific Grove, CA.Panuwatwanich, K., Stewart, R.A. and Mohamed, S. (2008), "The Role of Climate for Innovation inEnhancing Business Performance", Engineering Construction & Architectural Management, vol. 15,no. 5, pp. 407-422.Quinn, R. & Rohrbaugh, J (1983), "A Spatial Model of Effectiveness Criteria: Towards a CompetingValues Approach to Organizational Analysis", Management Science, vol. 29, no. 3, pp. 363-377.Rollinson, D. and Broadfield, A (2002), Organisational Behaviour and Analysis: An IntegratedApproach., 2nd edn, Prentice Hall, London.Salter, A. & Gann, D. (2003), "Sources of ideas for innovation in engineering design", ResearchPolicy, vol. 32, no. 8, pp. 1309.Salter, A. & Torbett, R. (2003), "Innovation and performance in engineering design", ConstructionManagement & Economics, vol. 21, no. 6, pp. 573-580.Sarros, J.C., Cooper, B.K. and Santora, J.C. (2008), "Building a Climate for Innovation ThroughTransformational Leadership and Organisational Culture", Journal of Leadership and OrganisationalStudies, vol. 15, no. 2, pp. 145-158.Schneider, B., & Reichers, A. E. (1983), On the etiology of climates. Personnel Psychology, 36, 19Shenhar, A.J. & Levy, O. (1997), "Mapping the dimensions of project success", Project ManagementJournal, vol. 28, no. 2, pp. 5.Styhre, A. and Josephson P. (2006), "Revisiting site manager work: stuck in the middle",Construction Management & Economics, vol. 24, pp. 521-528.445

Waldman, D.A and Bass, B. M (1991), "Transformational leadership at different phases of theinnovation process", The journal of high technology management research, vol. 2, no. 2, pp. 169-180.Yin, R.K. (2003), “Case Study Research: Design and Methods” 3 rd Ed, Sage Publications, London.446

Multidisciplinary Integrated Tools in Seismic RiskManagementVahdat, K.School of civil Eng.,University of Leeds(email: cnkv@Leeds.ac.uk)Smith, N.J.School of civil Eng.,University of Leeds(email: N.J.Smith@Leeds.ac.uk)AbstractEarthquake disaster is inevitable but it is possible to manage the potential risk by assessingcontributory factors in a hierarchical manner. In this paper the risk assessment techniques areclassified into two major groups: Conventional Methods, based on the classical perspective ofreducing consequences or impacts of earthquake damages; Holistic Models, based on modellingcharacterisation of the risk sources through a multidisciplinary approach. Since the conventionalmethods target a limited audience, holistic models are suggested to cover a new range of applications.A decision support tool is proposed which includes a matrix presents a multi attribute technique todemonstrate the ability and scope of analysis appropriately. General framework of the indicatorsystem as core concept in holistic models is also discussed. This tool would help decision makers toincorporate the knowledge of seismic risk to build an appropriate strategy at national, regional orlocal level.Keywords: seismic risk management, holistic models, indicator system447

1. IntroductionMaking decisions in high-seismic regions usually involves different considerations than in areaswithout any earthquake threat. Mitigation projects without effective risk assessment may fail toreduce the seismic risk and its consequences. Mora et al (2006) pointed out many reasons for lack ofproactive risk management and stressed on incorporating multi attribute factors of mitigation, such asfinancial and social protection to control the cause and consequence of seismic risk in early stage ofprojects. Chen et al (2005) developed an economical index (e.g. GDP) to address the significantincrease in loss due to earthquake events. Nevertheless, the performance of any risk analysis is mainlydependent upon the methodology used and the comprehensiveness of the available data to becollected from focused region. In the context of seismic risk due to large uncertainty in bothmethodology and hazard data, selecting the appropriate tools considering these issues seems to be acrucial decision.Traditionally, wide range of techniques is still available to estimate the seismic risk, regardless oftheir capability, effectiveness and degree of uncertainty; however, several studies have shown that fewtechniques could be used in practice effectively and efficiently. Moreover, the variety of tools anddata may be misleading in the selecting of appropriate technique by decision makers (DMs).Consequently, within different contexts, there is a strong need for a metric to be employed in riskidentification and assessment and registration. To cover this gap, a decision support tool is developed.This tool comprises a comparative matrix that assists DMs to choose appropriate techniqueconsidering different aspects of methodology, range of data, degree of subjectivity and scale ofanalysis.2. Risk and uncertaintyThe concept of risk can have variable meanings depending on the context either qualitativelyor quantitatively. The most common definition of risk states the risk as a product oflikelihood an event and consequence of it as displayed below:Risk = Likelihood x Consequence (Ansell 1992; FEMA 2004)Based on the above definition the qualitative measures of seismic risk can be expressed in amatrix (Figure 1).In the risk matrix, the qualitative risk scale can be categorized as low,moderate and high which is the multiple product of severity of consequence and degree oflikelihood. For example, earthquake hazard is recognized as low-likelihood, highconsequence event and according to this matrix, it is deemed as a moderate risk.448

Figure 1: Qualitative expression of seismic risk (FEMA 2004)In contrast, quantitative definition of risk, which is described by Varnes (1984) considers risk as aproduct of "V=vulnerability", "H=hazard" and "E=exposed elements or assets" in equation of R=HxVxE. This expression has gained international acceptance according to UNDRO (1982) andadopted by FEMA (2004). "Exposed elements "or "Elements at risk" are objects which posses thepotential to be adversely affected, e.g. people, properties, infrastructure and economic activitiesincluding public services (Hufschmidt 2005; Cardona 2007). Since the quantitative measure of risk isnot always possible, due to a lack of data, so qualitative estimation may be applied based on expertopinion. However, it is acknowledged by practitioners that considerable uncertainties exist in anyanalysis of risk based on subjective expert experience. These uncertainties might be caused by manysources in both quantitative and qualitative approaches due to imprecision in data or parameters,modelling and incompleteness of knowledge in general.2.1 Seismic Risk Management (SRM)Having accepted the risk management as “the reaction to perceived risks”, SRM can be admissible asa set of activities and decision making in every stage of a project to reduce or mitigate the impact ofearthquake (Muhlbauer 2004; FEMA 2004).Hence, the new concept of seismic risk management isconsistent with four distinct components: mitigation, preparedness, response and recovery (Canton2007). Different views on SRM are proposed in various analytical concepts which attempt tosystemise the model through holistic approach. A distinguished conceptual framework of seismic riskwhich referred many factors from various disciplines is presented by Davidson (1997) and adopted byBollin et al (2003). This framework considers seismic risk as product of hazard, vulnerability,exposure and capacity measures as shown in Figure 2.While Vulnerability is defined through fourdifferent factors, hazard is characterised by probability and severity. In contrast, while exposure isdetermined using structures, population and economy factors, capacity and measures is closelyaddressed the resilience concept.449

Seismic RiskHazard- Probability- SeverityExposure- Structure- Population- EconomyVulnerability- Physical- Social- Economic- EnvironmentalCapacity, Measure-Physical planning-Social capacity-Economic capacity- ManagementFigure 2: The conceptual framework to SRM (Davidson 1997, Bollin 2003)Many approaches are developed to model seismic risk and vulnerability by integrating data. Whileinductive approaches, model the risk through weighing and combining different hazard, vulnerabilityand risk reduction variables (i.e. risk indexing system),deductive approaches , whereas it is alsopossible to use historical pattern to define a new scenario of likely earthquake (i.e. disasters, damageand loss estimation methods). A major impediment of inductive modelling is lack of standardprocedures for assessing values and weights to the different risk contributing factors (i.e. hazard,vulnerability and exposure).Deductive modelling, in the other hand, due to large uncertainty of data,could not completely reflect the risk when frequency of hazards are low and thus historical data arenot available (Cardona, 2003).Despite of this weakness, deductive approaches is utilised effectively inregional scope to assess the risk using severity of hazards and to validate the results from inductivemodels.Quantification of various sources of uncertainty is crucial to develop the models of SRM. Themodelling and evaluation of low-probability, high-consequence natural events involve significantuncertainties arising from imperfect knowledge and modelling, simplifications, and limited databases.To assess the uncertainties in the SRM, many techniques have been introduced including analyticalmethods, sensitivity analysis and Monte Carlo simulation. All of these techniques examine theinteraction of variability between input and output parameters in risk analysis.3. Risk indicator systemRisk indicator system employs different subjective indicators to reflect multiple aspects of risk,vulnerability, preparedness and mitigation (Birkmann 2007).Various indicators can be designed forrisk analysis and risk management purposes. Using indicators to estimate or measure risks, allowcombination of factors relating to vulnerability, hazards and exposure qualitatively and quantitatively.Indicators allow the identification of attributes that are not feasible, to estimate easily or turn to beimprecise using mathematical models or algorithms (Cardona et al 2003). System of indicators arealso stressed in Hyogo Framework for Action (HFA) 2005-2015, multi scales in order to assess theimpact of disasters on social, economic and environmental conditions (UN 2005). The character of anindex comes from the particular elements and values chosen as important for measurement, the450

subjects and scope (local, regional, national, global) of analysis, the methodology used to generate theindex from input data and the specific data sources used.Risk indicator application is proposed by Davidson (1997, 1998) as “Earthquake Disaster Risk Index”(EDRI), a composite index to compare the relative risk of cities subject to various socio-economicfactors. The newer version of indicator system which is developed by Cardona (2001) focused ondifferent zones of a city based on holistic view. He considered the conceptual framework consist ofexposure and socioeconomic characteristics of the different localities (units) of the city as well asdisaster coping capacity or resilience factor. The model was made to guide decision making in riskmanagement, helping to identify the critical zones of the city and different aspects of vulnerability(e.g. physical, economic). Carreno et al (2007) have developed a revised version of the holistic modelto evaluate risk in terms of “physical damage”, obtained from exposure and physical susceptibility,and an “impact factor”, obtained from the socio-economic fragilities and lack of resilience (Birkmann2006).4. Models in seismic risk managementDepending on risk assessment methodology, current techniques falls into two categories include:Conventional Methods; based on the predicting probable losses to a given element at riskover a specified time frame (Coburn and Spence 2002)Holistic Models ; based on modelling characterisation of risk sources through amultidisciplinary approach4.1 Conventional MethodsThe conventional methods use the statistical database to deduce the seismic risk and try to fitprobability distributions to the data from which predictions can be made. This traditional conceptfocus on reducing the expected consequences or impact of earthquake damage and economic loss as itis distributed throughout a region. Impact of earthquake is then created by estimating death, injuries,damaged buildings or other economical factors. Two common approaches in this context are pointedin following subsections.1.1.1 Loss EstimationEarthquake loss models use a probabilistic approach in which predicted damages in various categoriesof structure and facilities in the region concerned are estimated and added together to obtain a totalloss for particular intensity ranges (Coburn and Spence 2002). Such approach requires detailedinventory database of the structures and facilities in the region, which is not always readily availablein many regions of the world. The most comprehensive work toward earthquake risk calculation untiltoday is provided in HAZUS (FEMA 2003) which is developed mainly for damage estimation causedby earthquakes in the United States.451

Current loss estimation methodologies have several limitations, due to lack of data and complexnature of contributing factors. Most methods for estimating earthquake losses require a detailedinventory of the facilities and structures in the region. In many cases, however, difficulties inacquiring such database, coupled with insufficient knowledge of local faults and soil conditionsrender difficulties undertaking this kind of loss studies. Also, the basis upon which a loss estimate ismade by a particular city may not be used by another, or even outside its city limits. Consequently,earthquake loss estimation is mostly done for individual cities or areas (e.g., Algermissen, 1989;Steinbrugge et al., 1987).4.1.2 Earthquake ScenarioThe scenario study is an analytical approach which is also based on statistics of past earthquakedamage, such as the 1985 Mexico City damage, which provided a wealth of experience could be usedin later scenarios and for calibration(Molina et al 2007). They are used to estimate the likely losses ofextreme earthquake, to check the financial resilience and resources needed for emergency disastermanagement. To build a scenario, often the “maximum probable” or “maximum credible” severity ofearthquake is assumed (Coburn et al., 2002).Scenarios are widely used to understand better and to help planning for the future by improvingawareness and response to a certain earthquake and its specific impacts. It helps decision makers tovisualize specific impacts that are based on currently accepted scientific and engineering knowledge.By describing a single, catastrophic event, a community can produce a scenario that realisticallydescribes the earthquake risk and potential impacts, giving clear reasons for individuals, businesses,and policy makers to act now and prevent devastating losses. However various source of informationsuch as local seismicity and geology, GIS data, current characteristics of the building stock are neededto build and project an earthquake over a community to get a plausible feedback.4.2 Holistic ModelsHolistic models are referred to ways of describing risk as product of multiple factors in a givenindicator system. In the framework of indicator system, numerous factors can be brought together andclassified in order to simplify the complexity of the seismic risk concept. The most recentclassification developed by UNDP and GTZ have been proposed for the national and regional levelsand include several quantifiable risk indicators (UNDP 2003; GTZ 2003). Throughout the process, adecision support system (DSS) can be employed to generate the risk indices by processing multiattributeinformation in a hierarchical structure as indicated in Figure 3.These indices can help DMs tobenchmark and compare the seismic risk in different regions.452

Figure 3: The hierarchical structure of data in holistic concept (Birkmann 2006)All approaches presented in this context are based on a common theory which defines the disasterrisk as a product of three major elements, the frequency or severity of the hazard, exposure and thevulnerability. Moreover, all the approaches aim to measure risk and vulnerability through selectedcomparative indicators in a quantitative way in order to be able to compare different areas orcommunities (Dilley et al., 2005; Peduzzi, 2006; Bollin et al, 2006; Cardona, 2005). Defining thescope of analysis, the model implements appropriate indicators which may contribute in the risk’selements. Mathematical combination is then employed for scaling different range of indicators.Analytical ranking/scoring methods could be utilised to make a relative importance of indicatorscontribute in risk. The combination of scaled indicators could generate seismic risk indices whichcan be implemented in final stage of procedure.Typically, the procedure of holistic approaches can be demonstrated as shown in Figure 4. Incontrast to the conventional methods which are targeted limited scope of audience such as nationaland global scale, the holistic models could also focus on regional and local scale as well. However,the weakness of indicator system is principally associated with large subjectivity in estimation,selection of variables, measurement techniques used, and the aggregating procedures employed(Cardona et al 2003).453

Risk IdentificationNational/globalRegionalLocalHazard-HExposure-EVulnerabilityCapacity &Measure-CDefine Target level(Scope of analysis)Data GatheringSocio-economy - politicalPhysical-structuralManagement - technologicalGeological - SeismologicalIndic-H1- HnIndic-E1-EnIndic-V1- VnIndic-C1-Cn……Risk AggregationFactor & indicatorCombinationMathematicalFormulation&SubjectiveJudgmentRisk AssessmentAHPFuzzy LogicScoring…..……Function 1Function 2……Weighting(Ranking)ScalingExpert OpinionQuestionnaireCase StudiesLinear, NonlinearTransformationSensitivityAnalysisSeismic Risk Index(SRI)InterpretationFigure 4: Process of Holistic Risk Assessment (Indicator-Based System)-AuthorA problem often occurred in compiling indices relates to the summing and weighing of itscomponents. Moreover, there are no standard procedures for measuring or weighing theeffectiveness of risk assessment.5. FindingsCurrent paper has introduced holistic methodology on the basis of indicator system whichcontributes with both range of qualitative and quantitative information available in most ofregions. Different methodologies in seismic risk management are classified in a followingtable which can be used as a comparative tool in seismic risk management.454

Table 1: A comparison matrix for conventional and holistic modelsToolsHolistic methods – (Deductive)Earthquake DisasterRisk Index (EDRI)Urban Seismic RiskIndex (USRi)Conventional methods (Inductive)Loss Estimation ScenarioStudiesInputQuantitative Data(Low)Quantitative Data(Low)High DetailedHigh DetailedTechnical info.MainElementsHazard, Exposure,Vulnerability,Response andresilience factorPhysical loss and Impactfactors, Socio-economicfragility and resiliencefactorAssets in RegionsHazard dependantfactors(site specific)Population andBuildings density ,EQ magnituderecordsOutputOverall CompositeRisk Index andindicators in citiesRisk Index in cities andurban districtsResilience indicatorsLoss estimation& distributionwithin the citiesloss estimation& distribution ofresource neededprocessMath combinationWeighting& Scalingcomponents usingAHPMath. combinationScaling TransformWeighting with AHPNormalizingConsequence effectand Cost-BenefitanalysisConsequencebasedriskassessmentScopeGlobal, National,RegionalGlobal, Regional, LocalRegional, Local(Specific portfolio)National ,RegionalSoftware User defined User defined HAZUS HAZUS,MAEvizRangeEvaluating andBenchmarking the riskin metropolitan areaand internationalEvaluating andaddressing the risk andresilience capacity of acityMulti-LossevaluationIndividual orPortfolio ofbuildingsEvaluation ofSeismic riskstrategy foremergencyplanningVarious seismic risk models, the input/output and range of application in conventional andholistic approaches are shown in Table 1. Conventional approaches as an inductivemethodology uses probability and impact concept that often require a detailed inventorydatabase (record) of the structures and facilities in the region may not always available inmany regions (Chen et al 1997).Holistic models, in addition, consider socio-economiccharacteristics of different regions as well as seismic coping capacity or degree of resilience(Carreno et al 2009).In contrast with conventional view which takes account on seismic risk in terms of physicaldamage, victims and economic equivalent losses; the holistic approaches add more factors interm of social, organizational and institutional. This holistic concept is characterized using amultidisciplinary evaluation of risk indicators. The interpretation of different set ofheterogeneous indicators into the qualitative metrics reduces the impact and hides complexnature of factors (Taubenbock et al 2008). Rather, quantitative combination of the indicators455

ings deeper insight into the complex processes of interrelation, and thus it makes a moretangible concept on vulnerability and risk than conventional methodology.6. ConclusionThis paper has described a means of holistic view by examining different methodologies inseismic risk assessment. Holistic methodology is highlighted as indicator based system whichcan contribute both range of qualitative and quantitative information available in most ofregions. Conventional approaches are also suggested for local areas when direct estimation oflosses is intended. However, this approach should be implemented with care as it mayoverestimate the loss in high magnitude earthquakes and underestimate in lower casesalternatively.All approaches in risk context are associated with some degree of uncertainty. Uncertaintiesarise from limitations of data or our understanding of the relationship between naturalcontributing elements at risk, or failure to model all relevant relationship in calculations.Good practice requires that the analyst identify as many sources of uncertainty as possibleand attempt to account for them in calculation, rather than consider the values which arealready fixed and guaranteed (Haque 2005).ReferencesAlgermissen S T (1989) "Techniques and parameters for earthquake risk assessment", Bull. NewZealand Nat. Soc. Earthquake Eng. 22, 202.Ansell J, Wharton F(1992) " Risk: Analysis, Assessment, and Management. John Wiley and SonsBirkmann, J (2006) "Measuring vulnerability to natural hazards : towards disaster resilient societies",United Nations University Press:178-197Birkmann, J. (2006). "Measuring vulnerability to natural hazards : towards disaster resilient societies" United Nations University Press:178-197Birkmann, J. (2007), Risk and vulnerability indicators at different scales: Applicability, usefulnessand policy implications, Environmental Hazards , (7) 20–31Bollin C, Cardenas C ,Hahn H. and K.S. Vatsa (2003) "Natural Disasters Network: ComprehensiveRisk Management by Communities and Local Governments", WashingtonCanton L (2007). "Emergency Management ,Concepts and Strategies for Effective Programs." JohnWiley & Sons: 157-187.Cardona O.D. (2003)Information and Indicators Program For Disaster Risk Management, Institue deEstudios Ambientals(IDEA)456

Cardona, O.D. et al (2008) "Earthquake Loss Assessment for Integrated Risk Management." Journalof Earthquake Engineering 12(S2): 48-59.Carreno, M. L., O. D. Cardona, Marulanda and Barabt (2009) "Holistic Urban Seismic RiskEvaluation of Megacities: Application and Robustness", Geotechnical, Geological, and EarthquakeEngineering, 167-177Carreno M. L.,Cardona O.D et al. (2007) "Urban seismic risk evaluation: A holisticNatural Hazards 40(1): 137-172.approach."Chen Q,Mi H, Huang J (2005) " A Simplified Approach to Earthquake Risk in Mainland China",Dissertation Abstracts International, Pure appl. geophys. 162 (2005) 1255–1269Coburn A., R. S. (2002). "Earthquake Protection." John Wiley & Sons Ltd: 311-352.Davidson R.A and H. C. Shah (1997) "An Urban earthquake disaster risk Index(EDRI)." The JohnA.Blume Earthquake Engineering Center.Dilley M, Chen R.S, Deichmann U, Lerner-Lam A, Arnold M ( 2005) " Natural Disaster Hotspots. AGlobal Risk Analysis", The World Bank, Hazard Management Unit, Washington, DC.FEMA,(2003) "Expanding and using knowledge to reduce earthquake losses" . Department ofHomeland Security Emergency Preparedness and Response Directorate FEMA Mitigation DivisionWashington, D.C.FEMA (2004). "Primer for Design Professionals (FEMA 389)" Department of Homeland SecurityEmergency Preparedness and Response Directorate FEMA Mitigation Division Washington, D.C.GTZ (2003) " Indicators and other Disaster Risk Management Instruments for Communities andLocal Governments, Comprehensive Risk Management by Communities and Local Governments",Component III, by Hahn, H., Initial Draft. Background study for Inter-American Development Bank,IADB, Regional Policy Dialogue, WashingtonHaque C.E. (2005) "Mitigation of Natural Hazards and Disaster", SpringerHufschmidt, G.,Crozier,M., Glade,T.,(2005),Evolution of natural risk: research framework andperspectives, Natural Hazards and Earth System Sciences,(5),375-387Molina S, Lindholm C.,(2007) "Estimating the confidence of earthquake damage scenarios: examplesfrom a logic tree approach"Mora S, Keipi K(2006) "Disaster risk management in development projects: models and checklists,Bulletin Eng Geological Environment" (65) , 155–165457

Peduzzi P( 2006) "The disaster risk index: overview of a quantitative approach. In: Birkmann, J.(Ed.), Measuring Vulnerability to Natural Hazards—Towards Disaster Resilient Societies", UNU-Press, TokyoSteinbrugge, K. et al( 1987) "Earthquake planning scenario for a magnitude 7.5 earthquake on theHayward fault in the San Francisco Bay Area", Calif. Dept. Conservation, Sacramento, 243Taubenbock, J., et al (2008) "A conceptual vulnerability and risk framework as outline to identifycapabilities of remote sensing", Natural Hazards Earth Syst. Sci.,(8),409-420UNDRO (1982) "Natural Disasters and Vulnerability analysis", United Nation Disaster ReliefOrganization, GenevaVarnes D.J(1984) "Landslide Hazard Zonation : a review of principles and practice", UNESCO,Paris,63458

Appropriate Time and Costs Estimates for the BuildingProject Feasibility AnalysisDe Filippi, G. A.Escola Politécnica - University of São Paulo - Brazil(email: giancarlo.filippi@poli.usp.br)Melhado, S. B.Escola Politécnica - University of São Paulo - Brazil(email: silvio.melhado@poli.usp.br)AbstractIn a high competitive market as the one we are living in, project oriented companies frequently needto go through quicker, more objective and precise feasibility analysis. Feasibility analysis mistakescan lead to losing a contract to a competitor or cause financial loss that may compromise thecompany’s bottom line results.In such environment, this paper intends to study the tools andtechniques that provide reliable estimates regarding budget and schedule, which can help makinggood decisions whether a project should or should not be chosen to the detriment of others.Goodestimates will also improve the success chances of one project and will make its coordination easieras well.Another purpose goal of this study is to identify the main problems that can lead to incorrectanalysis and distortions in project decision making.The research methodology used was a field study,with the implementation of structured interviews, with project managers at four firms in the SãoPaulo city, Brazil.After review and analysis of the interviews, it was possible to understand that toachieve the best estimates for the project is appropriate to consider the balance between accuracy,time and resources available to accomplish it. With the definition of such requirements is possible toidentify best practices to be implemented to bring good results and quality in the estimates.Keywords: estimates, feasibility analysis, project management, time, cost459

1. The importance of estimates in projectsIn recent years, there has been a growth of companies engaged in projects. Although projects havebeen made for centuries and administration tools have developed for decades, only from the ninetiesthere has been a growing demand for information and concepts related to a good project management.However, a company that studies the performance of a particular project needs to conduct a goodfeasibility study before the implementation of these management concepts.Vargas (2005) and PMI (2005) identify problems with estimates that are among the most commoncauses of failures in projects. The studies quote the lack of resource allocation, implementationmethodologies, empirical experience and other items are factors that produce poor results.In this environment, there is a need for a study on the subject, in order to identify the most commontechniques for performing estimates time and costs and problems of such procedures.According to Kerzner (2002), a project in any area, is characterized by an enterprise with identifiablegoal, which consumes resources and is under pressure of time, cost and quality.PMI (2004) defines project as a temporary endeavor to create a product, service or unique result.The preparation of estimates is an essential part of a project, the defendant before the definition ofthe entire scope and later to its planning.To carry out the estimates are necessary basic information and models of what actually happens inthe project. This information can be realistic if the activities are known in detail or if there isexperience in conducting similar activities.However the projects are unique. The more differentiated from the other, the harder it is to cherishthem, it will be used a different set of assumptions. Moreover, these assumptions are not clear whenthe scope is still undefined. There is, then, the complexity inherent in the estimation process onprojects.Besides the uniqueness of a project, Verzuh (1999) identifies other factors considered unpredictablethat directly affect the performance of estimates:• People who are part of the project team do not participate in the estimate, although theirskills and knowledge affect the project productivity;• Projects that use new technologies have problems regarding the reliability of themethodology and the learning curve of the team;• Experts set changes in each project, but usually cannot predict how many will be;460

• Wrong time estimates cost money and wrong cost estimates influence the schedule;• Project managers and team members will be evaluated based on their ability to meetestimates.All these aspects show the complexity of drawing up an estimate and this fact must be taken intoaccount in subsequent use of the result.2. Ratings estimateSeveral classifications and methodologies are identified by several authors, such as Dingle (1997),Maximiniano (2002), Verzuh (1999), Meredith & Mantel (2003), Gould (1997), but in general itappears that the amount of detail and accuracy depend on the time that is invested in the planningprocess. More time means more precision. After determining the need to estimate the degree ofaccuracy, we can adopt different techniques for its realization.Specifically in the analysis of costs in general, we can summarize the estimates in Top-down andBottom-up.Top-down costs estimates use the results observed previously in similar projects as a basis forestimating the cost of the current project, or an estimate by analogy. This kind of estimate hasn´t gotgreat precision, although the effort or the resources allocated for its realization are small.To slightly improve the precision, you can use a parametric modelling, or build a mathematical modelbased on some key parameters, which results in estimates closer to the reality of the project (whencompared to open analogies).The other way to estimate, called bottom-up involves the estimation of the specific cost of eachactivity (as the level of detail required) and the subsequent summation of the costs for the project as awhole. This presents another systematic greater precision and is more expensive (in some cases evenimpossible).You can consolidate the ratings in 3 different groups, as identified in Table 01.461

Table 1: Types of estimationNecessity Accuracy required Decisions involved Estimates indicatedScenario Analysis(evaluation of the initialidea and definition ofconcepts)Low accuracy (errors ofup to 90%)Invest or not in theproposal, mobilizeresources, conduct moredetailed estimatesTop-down (expert opinionor benchmarking)Study design (selection /approval of the project)Average accuracy (errorsaround 20% and funds forcontingency)Definition of PMP, IDcode of accounts / WBS,approval of the beginningof the planningParametric (extrapolationof similar projects,mathematical models withhistorical data)Planning and Budget(project control)High accuracy (detailed,with errors of less than10% and few resources forcontingencies)Approval of planning forimplementation, analysisof results / projections,redesign.Bottom-up (detailedestimates of each activityand sum of results)As the objective of the study is related to the initiation process of a project, the first twoclassifications are very important for the study.3. Improvement or refinement of estimatesRegardless of the technique used to estimate there are recommendations for it to be more appropriateand provide better results.Keeling (2002), Verzuh (1999), Shtub et al. (1994), Moylan (2002) and Lewis (1999) suggest ways toimprove the performance of estimates. These practices are summarized in the Table 02 and were usedin order to structure a research protocol which would verify if these practices were really applied incompanies of the sector.Table 2: Criteria for improving estimates462

FocusPeople involvedMethods ofimplementationestimatesBreakdown of timeitemsBreakdown of costitemsFurther use of theestimateSuggested Practice• Using experienced people, but open to market fluctuations and new technologies;• Involve people responsible for the project implementation;• Involve customers or other stakeholders.• Consider appropriate techniques according to the required accuracy;• Analyze actual performance of finished projects to refine the estimate model, evaluate theapplicability of past experiences to current conditions;• Perform estimates the resources at the same time they identify the time;• Not use applications closed (with standard indicators) without relevant adaptations;• Include, if possible, the likelihood of events;• Not set criteria with the best performance possible (but very likely);• Request more than one individual to the estimate activity and they come together tovalidate the results.• Include support tasks (not just the main tasks), like approvals, orders or delivery;• Consider enough time for quality activities (training, inspections and corrections);• Avoid safety margins calculated without reference, consider the learning curve• Include in the cost of labor, the taxes, incentives and overhead;• Watch for the possibility of using equipment on other projects simultaneously;• Allocate costs of raw materials (losses inherent in the process);• Investigate possible cost additional delay, consider the economic environment variablessuch as inflation, taxation or exchange rate.• Do not accept changes in the estimates with no change in productivity or productrequested;• Matching estimation procedures accounting and cost management in the organization;• Develop systematic recording of historical data and use of new estimates.4. Research methodologySince the characteristics of the processes of estimates vary greatly according to the project area, wetried to define a population with similar characteristics. Defined as managers or people responsiblefor implementing construction projects within the city of São Paulo.The purpose of the interviews was to determine whether the techniques identified in the theoreticalliterature are used by the market and how this occurs. Also, identify problems and suggestions forimproving the methods used.The interviews were conducted based on a script in order to direct the replies of the respondents,seeking greater compatibility between the results. However, other relevant information provided byrespondents was also collected and helped the conclusions of this work.463

Used as sample 4 companies, even though they act in different market niches, some common features,as always external customers, number of employees reduced, low degree of formality and fewprojects. Business features are described in Table 03.Table 3: description of the case study companiesTypeCompaniesCompany A Company B Company C Company DArea / MarketReal State(Construction)Construction /BuilderFacilitiesConstructionManagementClients (sector) Private Public (mainly) Private (mainly) Public and PrivateProjects Time 2- 3 years 4 - 6 months 6 months – 1 year 6 months – 2 yearsProjects Costs* 15 - 25 millions 100.000 - 1 million 100.000 - 1 million 100.000 - 300.000(*) Brazilian currency5. Conclusions and recommendationsAfter the review and analysis of the interviews, it was concluded that the first step for appropriateestimating time and cost to the project is to balance between the accuracy required and the time andresources to accomplish it. Next, we must choose one type of estimate which allows to meet therequirements identified.After doing this, the project manager can check which of the practices identified in item 3 can beuseful.5.1 Search resultsOne of the factors identified that may influence the accuracy required is whether the project servesthe internal or external customers. In the companies surveyed, the project and external customers aredirectly linked to core business. As the projects are the main sources of revenue of these companies,accurate estimates of time and cost assume a critical role in the survival of the organization.The profitability of the market analysis also influences the accuracy of the estimates. In markets withtighter results, the importance of precise estimates will be higher, since small deviations underminethe outcome of the project. In markets with large results, the estimates may be less accurate and willbe useful to determine which projects are more profitable.464

Organizational culture also influences the need for precision in the estimates. Depending on theorganization, the projects will be approved only if they can justify their result by a complete and wellfounded estimate.It was identified in the research field for the analysis of the feasibility of projects, the techniquesmentioned are basically parametric. This can be explained by some reasons described below.The construction sector (area of operation of companies) has characteristics that facilitate the use ofparametric techniques. This is an industry with extensive bibliography of direct costs indexes,productivity of labor force and market prices. Furthermore, with regard to companies andprofessionals specializing in market research and evaluation of products, which may contributegreatly to the improvement or development of other indexes.Another favorable condition is the type of product. Buildings or works are fully measurable and canbe subdivided into several subsystems with inputs also measurable. This facilitates the creation ofindexes for the various parts of the product. Thus, even using parametric techniques, it is possiblethat the initial estimates are accurate for a feasibility study. For different sectors such as IT andresearch field, where most of the inputs are hours of work, which are more difficult to preview andforecasting.Finally, the surveyed companies work on very similar projects. They have clearly defined scopes ofdesign more conducive to their businesses, which also help to justify the techniques adopted.A final important observation was to verify the greater importance given to the final estimate of thecost than the time (feasibility analysis).Thus it is concluded that the project manager needs to understand clearly the environment of theenterprise and raise other factors that may influence decisions on estimates. Knowing the factors thatinfluence the need for precision in the estimates we can choose more adequate estimate methods andtechniques.5.2 RecommendationsResearch shows that many of the practices identified in the literature and recommendations for theimprovement of the estimates are performed by the companies interviewed, but some of them soineffective.Admittedly there is no systematic for the treatment of lessons learned or acquired knowledgemanagement projects. This fact undermines the implementation of best estimates, which are onlyachieved by more experienced professionals.In fact, experience is necessary to do a good estimate, but personal experiences are different, the lackof information management does not allow the synergy of this information.465

Another very important fact was the lack of participation of those responsible for implementing theproject in preparing the estimate. Changing this reality it will contribute to the improvement of theestimates, helping to increase the involvement of field staff with the goals of time and cost.It is also evident in interviews that the consideration of different scenarios and assigning probabilitiesto each of these practices are not a daily practice in these companies. This probably occurs becauseestimates of scenario are more complex and take longer to get things done.5.3 ConclusionTo be able to validate the findings, it recommended a new larger study, with companies from otherregions of the country and in larger amounts. The approach of large companies, or organizations thatoperate in sectors less specific, with innovative projects, would also be very interesting, and wouldbring new variables to the study.Furthermore, the analysis methods and practices related to planning processes (instead of theprocesses of initiation or feasibility analysis) complement these findings.There is also the importance of a more detailed study of other research themes, which were treatedfairly generic in this text, such as, the knowledge management.ReferencesDingle J (1997) Project Management: orientation for decision makers. London: Arnold. 279p.Gould F E (1997) Managing the construction process: estimating, scheduling and project control.New Jersey, USA: Prentice Hall. 338p.Keeling R (2002) Gestão de projetos: uma abordagem global. São Paulo: Saraiva. 293p.Kerzner H (2002) Gestão de Projetos: as melhores práticas. Porto Alegre: Bookman. 519p.Lewis J P (1999) The project manager's desk referense: a comprehensive guide to project planning,scheduling, evaluation and systems. 2 ed. USA: McGraw-Hill. 546p.Maximiano A C A (2002) Administração de projetos. 2 ed. São Paulo: Atlas. 281p.Meredith J R, Mantel S J (2003) Project management: a managerial approach. New York: JohnWiley & Sons, Inc.466

Moylan W A (2002) Planning and Scheduling: The Yin and Yang of Managing a Project. SantoAntonio, Texas, USA: Proceedings of the Project Management Institute Annual Seminars &Symposium.Project Management Institute – PMI (2004) Project management body of knowledge: PMBOK®Guide. Ed. 2004. Newton Square: PMI.Project Management Institute - PMI (2005) Rio de Janeiro, Brazil Chapter. Estudo de Benchmarking:2.º Fórum Nacional de Benchmarking em Gerenciamento de Projetos. (available onlinehttp://www.pmirio.org.br/estudo2005 [accessed on 20/02/2006])Shtub A, Bard J F, Globerson S (1994) Project management: engeneering, technology andimplementation. New Jersey: Prentice Hall. 634p.Vargas R V (2005) Manual prático do plano de projeto. 2ed. Rio de Janeiro: Brasport. 210p.Verzuh E (1999) Fast forward MBA in project management. New York: John Wiley & Sons.467

Project Trade-Off DecisionsThe Gap between Reality and the Academic WorldVahidi, R.Built Environment School, Northumbria University(email: r.vahidi@unn.ac.uk)Greenwood, D.Built Environment School, Northumbria University(email: david.greenwood@unn.ac.uk)AbstractThis paper draws attention to project trade-offs significance in project management and criticallyreviews the current state of the knowledge on the elements to be considered and the methods toresolve trade-off decisions. Traditionally the elements to be considered in trade-offs are mainlylimited to time and cost and to some extent quality or risk or the well-known Project Triangle. Thetrade-off methods are also dominantly developed based on mathematical models familiar inOperations Research. The limitations of traditional approaches in identifying trade-off elements; theconstraints of the common methods of trade-off resolution; and the necessity of compatibilitybetween resolution methods and features of trade-off decisions are highlighted. The researchers‟approach and methodology to fill the gap between the realities of project trade-off decisions mainlybased on the compatibility of the decision problem characteristics and capabilities of the decisionmaking method are described.Keywords: project trade-off, trade-off elements, trade-off methods, project triangle, operationsresearch468

1. IntroductionThe general theme for this study is making critical decisions in projects, notably „trade-offdecisions’. Decision-making (DM) can be considered as one of the most influential and importantskills for a project manager (Wideman, 2001) as he/she needs to use it on a daily basis (Lewis, 2008).Regarding its significance in project management (PM), Virine and Trumper (2008, xv) state that“project management is the art of making the right decisions” and Schuyler (2001) refers to it as oneof the most important issues in project success.Throughout a project‟s lifecycle, management have to make a large number of different decisions interms of outcomes, consequences and their effect on project success or failure. „Trade-off decisions’can be considered as some of the most challenging decisions in a project‟s journey. It is generallyaccepted that these types of decisions are complex and have significant importance in project successor failure (Virine and Trumper, 2008). Belassi and Tukel (1996, p.150) include the project manager‟sability to do tradeoffs as one of the project success factors. Shenhar et al. (1996) emphasize successcriteria as the foundation of project tradeoffs both in the launch of and during the project. Themethodology for project tradeoffs is perceived as a facilitator of project success by Babu and Suresh(1996).The general approach to identifying the project elements involved in this type of decisions and themethods suggested by academia to resolve the trade-off problems have been critically reviewed in thispaper. The paper is a snapshot of an ongoing research study which aims at filling the gaps between thecurrent state of knowledge in this field and the reality of trade-off decisions in project environments.2. Theoretical framework2.1 Project trade-off definition‘Decisions’ to be made during a project might vary in terms of their significance and impact. Somedecisions are routine and not very sensitive, might affect or be affected by a small group of projectstakeholders, or their outcomes may fit within the project‟s assigned resources and limitations.Making such decisions usually does not require a significant amount of time or effort from projectmanager.However, project managers or (whoever the decision-maker may be) might encounter one-offdecisions demanding a considerable amount of time and effort to analyse and make. Such decisionsmight affect a large number of project stakeholders or be affected by them. It is possible that theoutcomes of such decisions would lead the project to go beyond its assigned resources andconstraints. The way of handling such critical decisions, and their outcomes might have a significantimpact on the assessment of the project‟s success or failure. This type of decision usually requires a„trade-off’ in order to find a resolution to the problem. Thus they are referred to as ‘Trade-offDecisions’ in this study.469

Traditionally, the concept of „trade-off’ in Project Management tends to refer specifically to problemswhich demand finding a balance between the project‟s „time and cost’. Such challenges have beensaid to be the origin of the Critical Path Method (CPM) developed in 1950s (Pollack-Johnson andLiberatore, 2006). In general, a tradeoff comprises „making a decision‟; hence, it can be perceived asa type of DM problem and not simply a controlling or scheduling tool like CPM.In PM literature time and cost elements of projects are variously introduced as „project resources‟ or„objectives‟. In terms of „resources’, tradeoffs might be necessary due to their scarcity (Dobson,2004) and when ‘objectives’ are considered, tradeoffs serve as a balancing act when these objectivesconflict (Williams, 2002; Lock, 2007). In fact, if a project went well according to the plan, had thebenefit of unlimited resources, or all the stakeholders had the same expectations from the project,there would not be a need to make any trade-off (Williams, 2002; Kerzner, 2006). However, in themore recent PM literature there is a broader view on project trade-offs that focuses on the necessity ofkeeping a balance between the project‟s real „objectives’ (Virine and Trumper, 2008; and Williams,2002), i.e. not just limited to time and cost. These are indeed different or even conflicting ‘objectives’of the project‟s stakeholders.2.2 Elements of trade-off decisionsPrimarily, Time and cost were known as the main elements of project tradeoffs. However, afterinvention of the well-known project „Triangle’, its elements i.e. cost, time and quality/ performancewere introduced as trade-off‟s basis (e.g. Barnes, 1988; Lock, 2007; and Afshar et al., 2007). Dobson(2004, xii) argues the significance of these triple constraints as: “the core of the most crucial decisionsabout a project” and highlights their significance in analyzing project tradeoffs.Nevertheless, there is research stating that project tradeoffs should consider other factors besides the„Triangle’ elements (Babu and Suresh, 1996; Shenhar et al., 1996; Leu et al., 2001; and Pollack-Johnson and Liberatore, 2006). However, a review of PM literature on trade-off methods reveals thatthe recognition of additional factors has not effectively directed the approach and focus of the PMresearchers to enter these factors in tradeoff resolution methods. Examples of the factors beyond theproject triangle elements are market position and reputation of the company, and these might havesignificant impact on choosing among the alternatives for a critical decision in a project.The link between project tradeoffs and the recognition of top management and the project team‟sexpectation had been demonstrated by Shenhar et al. (1996). The four elements of trade-offssuggested by Marasco (2004) are scope, time, quality and resources illustrated as a pyramid. Kerzner(2006, p.684) also introduces a number of factors affecting, or „forcing‟ the tradeoffs. He does not gointo details on these factors and the way they influence tradeoffs but generally categorizes the factorsas „internals‟ such as reputation, market position and profit and „externals‟ such as reliability, service,response and controls.470

2.3 Methods of trade-off decisions resolutionA considerable amount of research has aimed at developing project tradeoff methods; either based onexisting approaches or proposing totally new ones (e.g. Deǐneko and Woeginger, 2001; Yang, 2007;and Wuliang and Chengen, 2009). These methods are predominantly based on mathematical models;mainly the ones familiar in Operations Research (OR). However, there are also other approaches suchas Fuzzy Theory (e.g. Leu et al., 2001; and Abbasnia et al., 2008).OR originated in the UK during the Second World War era and is defined as the science of themathematical modelling of decisions (Taha, 2003). Williams (2003) states that OR has made asignificant contribution towards project management for over 50 years, specifically in modellingprojects and project decisions. However, he notes the difficulty of considering intangible and nonmeasurablefactors, e.g. market position or reputation, and detachment from the reality of projects, asthe major drawbacks of such mathematical models in the new era of project management. A fewinstances of OR models developed for project tradeoffs are Babu and Suresh (1996); Pollack-Johnsonand Liberatore (2006); and Tareghian and Taheri (2006a, 2006b, 2007). The models presented bythese researchers normally only deal with time-cost tradeoffs and at most include quality.A major critique of trade-off models was raised over a decade ago by Babu and Suresh (1996). Theycriticized incapability of trade-off methods in dealing with the „quality’ factor as they could not find amodel in the literature to simultaneously consider the three objectives of time, cost, quality. Thecriticism was still valid ten years later, while Pollack-Johnson and Liberatore (2006) were stillcriticising the traditional time-cost tradeoffs for ignoring the quality factor (see also, Vahidi andGreenwood, 2009). Surprisingly, in reviewing the recent literature, it is still noticeable that thenumber of research papers focusing merely on time and cost is increasing.Hence, one line of research on trade-off has centred around developing methods which can deal with„quality‟ in their calculations. The usual approach in such studies is to „quantify‟ quality and theninclude it in the calculations; alternatively, there are authors like Woodward (2003) who resist to theidea, suggesting that quality cannot be traded-off but should be treated as a fixed contractual „given‟.Babu and Suresh‟s (1996) work involves mathematical method based on three linear programmingmodels to overcome the problem. But Pollack-Johnson and Liberatore (2006) suggest a framework tocombine different definitions of quality with their related time, cost, and priorities. They used mixedinteger linear programming and goal programming for problem modelling and the Analytic HierarchyProcess (AHP) for choosing among the alternatives.A number of tradeoff methods have also been developed based on different other approaches likeFuzzy Theory, Genetic Algorithms, Heuristics or mixed methods, and so on. Examples of these areworks by Leu et al. (2001) and Abbasnia et al. (2008) which try to capture risk and uncertainty aswell as time and cost elements. Leu et al. (2001) attempt to find the best balance between time andcost, considering the risk levels. Their model is based on Fuzzy Set Theory and searches for anoptimal solution by Genetic Algorithms (GAs). Abbasnia et al. (2008) use Fuzzy Logic Theory aswell as a multi-objective optimization method to consider cost uncertainties.471

Tareghian and Taheri (2006a) developed a method to resolve the time-cost tradeoff in 2006, but soonafter, in two subsequent papers (Tareghian and Taheri, 2006b, 2007) they included ‘quality’ in theirmathematical methods. These papers used (respectively) „the fast algorithm of randomized minimumcut‟; three „inter-related integer programming models‟; and „electromagnetic scatter search‟ astradeoff methods.Marasco (2004) illustrates his suggested four trade-off elements as a pyramid and his method forresolving the trade-off involves simply calculating the pyramid‟s volume.3. Nature of trade-off problemsIn decision science, ever set of modelling tools and methods will target specific type of problemsbased on the problem features and requirements. A good understanding of the trade-off problem‟snature is an essential step to be taken before selecting the proper method for its formulation andresolution. Furthermore, it provides the necessary criteria for assessing the capabilities of currentresolution methods in matching with problem‟s characteristics. Some key features of trade-offs as adecision making problem will be discussed here.In a critical trade-off, decision makers deal with balancing the different or even conflicting objectivesof stakeholders. Hence, multi-objectivity can be recognized as a feature of these problems (Virine andTrumper, 2008), in fact, such a „key influencing‟ feature as this might force the decision to take theform of a ‘group decision making’ problem which in turn will affect the choice of DM tools andapproach.‘Criteria’ are essential parts of making any decision from the simplest one is daily life to the mostprofessional ones. Normally project decision makers need to consider a set of criteria (such as time,cost, customer satisfaction, and standards, etc.) together rather than just one criterion like cost or time.Decisions such as tradeoffs, involving more than one criterion are called multi-criteria. It should benoted that these criteria could be tangible or intangible, (such as time vs. customer perceptions),measurable or non-measurable, (e.g. monetary benefits vs. customer satisfaction). Dealing withdifferent kinds of criteria in one trade-off decision necessitates using the proper decision making toolsand techniques developed for such types of problem.4. Discussion4.1 Necessity to improve trade-off’ elements and methodsThe current state of the knowledge on project tradeoffs in project management reveals the limitationsof the traditional approaches to project trade-off decisions. Three different, though closelyinterrelated, aspects can be perceived for these limitations: first, the elements to be considered in atrade-off; second, the methods developed for trade-off resolution; and last but not least, thecompatibility of the method with the problem‟s features.472

4.2 The aspect of trade-off ‘elements’Based on the arguments presented so far, it can be claimed that neither the Project Triangle nor alimited predefined set of elements is a sufficient basis to serve every project trade-off decision. Thelogic is that even the Project Triangle that has been traditionally introduced as the project‟s importantelements and the basis for trade-offs, has been subjected to criticism because of its insufficiency inreflecting the reality of projects (Gardiner and Stewart, 2000; and Dobson, 2004). Hence, otherelements to be added to the Triangle elements have been proposed by Devaux, (1999); Atkinson(1999); Gardiner and Stewart (2000); Frame (2002); Nokes et al. (2003); Wideman (2004); Gardiner(2005); Lock (2007) and a number of other researchers.Every project is, to a certain extent, unique and one cannot ensure that a certain set of elements willcover all trade-off situations. For example, in one situation a company‟s current reputation and inanother, a firm‟s long term market position might need to be considered alongside time, cost, and soon. Hence, prescribing a predefined set of elements to include in every trade-off decision is far fromthe reality of projects. It seems that Frame‟s (2002, p.6) statement about traditional PM approach “ …single-minded focus on a fixed set of tools for dealing with scheduling, budgeting, and resourceallocation” is indeed valid in case of trade-off decisions.On the other hand, the close relation between tradeoffs and project success logically necessitates thatall recognisable project success elements or criteria be considered in tradeoffs. The extensive researchon project success reveals that numerous factors have been suggested and several classificationsystems have been developed regarding success elements: as yet, however, these do not appear tohave affected the approach to trade-off methods (discussed in Vahidi and Greenwood, 2009, pp. 931-932). In other words, yet the trade-off methods so far developed can merely deal with a very limitednumber of success elements in decisions.4.3 The aspect of trade-off ‘methods’In terms of trade-off methods, it has been already shown that the predominantly mathematicalmethods mainly focus on time, cost and (to a limited extent) quality, risk or uncertainty. The lack ofmodels considering quality in addition to time and cost has been criticised and has lead to some effortsto redress this (as described already). Nevertheless, the necessity of including the other influencingfactors recognized in literature besides the triangle elements has remained unspoken and has attractedtoo little attention in PM literature.In criticizing current tradeoff methods, Clough et al. (2000, pp.140-141) pinpoint the limitations andfailures of the time-cost based computerized methods in construction projects‟ context. They associatethese with „oversimplification‟ of trade-off‟ reality which ultimately leads to a continued dependenceon human „judgment‟ and „insight‟ as the most important factors in such decisions.It is worth noting that the necessity for considering alternative/additional elements is mainly thesubject of those papers that are not aimed at developing a tradeoff resolution method. In other words,473

when it comes to method development, the elements considered are usually restricted to the original„triangle‟ (Vahidi and Greenwood, 2009).Vahidi and Greenwood (2009) raise a major question in this regard: “whether the tradeoff methods arechosen based on their capability to deal with the real factors, or the tradeoff factors are chosen basedon the capabilities of the most known or available methods?” They suggest that the evidence fromliterature more closely support the latter.5. Compatibility of ‘decision problem’ with ‘resolutionmethod’According to the previous discussions, project trade-off could be characterized as multi-objective,multi-criteria, and group decision making problems. These characteristics necessitate using propertools and methods to enable the decision makers to effectively solve the problem. Ignoring any ofthese features in the selection and development of a method means failure in capturing the fulldimensions of the problem. This in turn will lead to the development of methods which are notcapable of coping holistically with the criticality of such decisions in projects.Having reviewed a wide range of literature in the scope of this research, the authors can claim thatresearch on project tradeoffs suffers from a lack of compatibility between problem characteristics andmethod capabilities. The current methods (of which examples were given before) can hardly providea decision making environment and process that different project parties with different objectives andcriteria can be involved in.It is important to note that time, cost, quality and many other project elements which are involved incritical decisions can have different priorities and values for various stakeholders. The purelymathematical approaches which are based on quantification of these variables are not able to deal withtheir different facets. This might be considered as one of the issues that leads the researchers to leavesuch a large leeway for human judgment in project decisions and specifically in trade-offs.6. Future studyThis paper is based on a research in progress. The aim of the research is to fill in the gaps between thereality of project trade-off and the academic studies by developing a theoretical framework for suchdecisions. The approach of this research is to select and apply a project trade-off method based on thecharacteristics of trade-off decisions, which means it should support multi-objective/ multi-criteriadecisions and can be applied in group decision making. It is perceived that this can be taken as a stepto overcome some of the major deficiencies of the common mathematical models.The empirical phase of the study will be based around a number of semi-structured interviews andcase studies to accredit the model that will be developed through the study. The interviews will beconducted with highly experienced professionals in decision-making positions withinmultidisciplinary project environments. So far, the outcome of a few interviews confirms the fact that474

limiting the trade-offs to time, cost, and quality is far from the real situations. Additionally, there hasbeen no evidence of the application of purely mathematical models in real cases.7. ConclusionsIt is widely accepted that the project trade-offs which are kind of project decisions can haveconsiderable impact on project success and failure. The necessity of considering intangible, nonmeasurablefactors besides the famous project triangle’s elements has been recognized in the PMliterature from one hand, and their existence in real situations is widely accepted by practitioners onthe other hand. However, the research on trade-off methods reveal a large gap between the reality ofsuch decisions and the perceived elements and developed methods for dealing with these decisions.The methods available to resolve the trade-offs are dominantly based on the old-fashioned viewpointof limiting the project‟s elements and success elements to cost, time and quality/ performance andpurely mathematical models to deal with these elements.Another remarkable issue about developing a proper method is lack compatibility of the method andproblem features. This can be also perceived as a deficiency in academic studies of project trade-offmethods as they are detached from the characteristics of these kinds of decisions in real projectenvironments. The tools and techniques suggested by common methods cannot fully capture theproblem requirements. Hence, the models that have been developed are not extensively used inpractice; or, if some of them are ever used, they are not strongly supported by examples of theirapplication in real project situations. This all attests to a gap between reality of trade-off decisions andthe academic studies.This paper is part of a research in progress. The research is aimed at developing a method based ondecision making theories, specifically multi-objective/ multi-criteria decision making models, whichcan better cope with trade-off problems characteristics. The theoretical study will be followed by anempirical study to examine the applicability of the suggested model in real project environments.ReferencesAbbasnia, R., Afshar, A. & Eshtehardian, E. (2008) “Time-cost Trade-off problem in constructionproject management, based on Fuzzy Logic”. Journal of Applied Sciences, 8 (22), pp. 4159-4165.Afshar, A., Kaveh, A., & Shoghli, O.R. (2007) “Multi-Objective Optimization of Time-Cost-QualityUsing Multi-Colony Ant Algorithm”. Asian Journal of Civil Engineering (Building and Housing), 8(2), pp. 113-124.Atkinson, R. (1999) “Project management: cost, time and quality, two best guesses and aphenomenon; it‟s time to accept other success criteria”. International Journal of Project Management,17 (6), pp. 337-342.475

Babu, A.J.G. & Suresh, N. (1996) “Project management with time, cost, and quality considerations”.European Journal Operations Research, 88, 320-327.Barnes, M. (1988) “Construction project management”. Project Management, 6 (2), pp. 69-79.Belassi, W. & Tukel, O.I. (1996) “A new framework for determining critical success/failure factors inprojects”, International Journal of Project Management, 14 (3), pp. 141-151.Clough, R.H., Sears, G.A. & Sears, S.K. (2000) Construction Project Management. 4 th edn. Canada:John Wiley & Sons, Inc.Deǐneko, V.G. & Woeginger, G.J. (2001) “Hardness of approximation of the discrete time-costtradeoff problem”. Operations Research Letters, 29, pp. 207-210.Devaux, S. A. (1999) Total Project Control- A Manager’s Guide to Integrated ProjectPlanning, Measuring, and Tracking. New York: John Wiley & Sons, Inc.Dobson, M.S. (2004) The triple constraints in project management. United States of America:Management Concepts Inc.Frame, J.D. (2002) The New Project Management: Tools for an Age of Rapid Change, Complexity,and Other Business Realities. 2 nd edn. Jossey-Bass.Gardiner, P. (2005) Project Management: A Strategic Planning Approach. New York or Hampshire:Palgrave Macmillan.Gardiner, P.D. & Stewart, K. (2000) “Revisiting the golden triangle of cost, time and quality: the roleof NPV in project control, success and failure”. International Journal of Project Management, 18, pp.251-256.Kerzner, H. (2006) Project Management: A System Approach to Planning, Scheduling andControlling. 9 th edn. New Jersey: John Wiley & Sons.Leu, S.S., Chen, A.T. & Yang, C.H. (2001) “A GA-based fuzzy optimal model for construction timecosttrade-off”. International Journal of Project Management, 19, pp. 47-58.Lewis, J.P. (2008) Mastering Project Management. 2 nd edn. US, McGraw-Hill.Lock, D. (2007) Project Management. 9 th edn. Hampshire, UK: Gower Publishing Limited.Marasco, J. (2004) The Project Pyramid, (available onlinehttp://www.ibm.com/developerworks/rational/library/4291.html [accessed on 12/01/2010])476

Nokes, S., Major, I., Greenwood, A., Allen, D. & Goodman, M. (2003) The definitive guideto project management. Great Britain: Pearson Education Limited.Pollack-Johnson, B. & Liberatore, M.J. (2006) “Incorporating quality considerations into projecttime/cost trade-off analysis and decision making”. IEEE Transactions on Engineering Management,53 (4), pp. 534-542.Schuyler, J. (2001) Risk and decisions analysis in projects, 2 ndManagement Institute.edn. Pennsylvania: ProjectShenhar, A. J., Renier, J. J. & Wideman, R. M. (1996) “Improving PM: linking success criteria toproject type”, (available onlinehttp://www.pmforum.org/library/papers/2002/improvingpm_wideman.pdf [accessed on 2/01/2010])Taha, H.A. (2003) Operations Research - An introduction. 7 th edn. New Jersey: Pearson Education,Inc.Tareghian, H. R. & Taheri, H. (2006a) “An application of randomized minimum cut to the projecttime/cost tradeoff problem”. Applied Mathematics & Computation, 173, pp. 1200-1207.Tareghian, H. R. & Taheri, S. H. (2006b) “On the discrete time, cost and quality trade-off problem”.Applied Mathematics & Computation, 181, pp. 1305-1312.Tareghian, H. R. & Taheri, S. H. (2007) “A solution procedure for the discrete time, cost and qualitytradeoff problem using electromagnetic scatter search”. Applied Mathematics & Computation, 190,pp. 1136-1145.Vahidi, R. & Greenwood, D. (2009) “Triangles, Tradeoffs and Success: A Critical Examination ofSome Traditional Project Management Paradigms”. CIB Joint International Symposium 2009-Construction Facing Worldwide Chalenges. Dbrovink, September, 27-30, pp. 927-936.Virine, L. & Trumper, M. (2008) Project decisions – The art and science. Vienna: ManagementConcepts Inc.Wideman, M. (2001) “Project Management Simply Explained- A Logical Framework to Help YourUnderstanding”. (available online http://www.maxwideman.com/papers/framework/framework.pdf[accessed on 14/12/2009])Wideman, M. (2004) An Exciting New Model of Project Management. [Online]. (Availableonline http://www.maxwideman.com/musings/newpmmodel.htm[accessed on 11/01/2010])Williams, T. (2002) Modelling Complex Projects. West Sussex: John Wiley & Sons.477

Williams, T. (2003) “The contribution of mathematical modelling to the practice of projectmanagement”. IMA Journal of Management Mathematics, 14, pp. 3–30.Woodward, L. (2003) Construction Project Management. London: Thomas Telford Publishing.Wuliang, P. & Chengen, W. (2009) “A multi-mode resource-constrained discrete time–cost trade-offproblem and its genetic algorithm based solution”. International Journal of Project Management, 27,pp. 600-609.Yang, I. T. (2007) “Performing complex project crashing analysis with aid of particle swarmoptimization algorithm”. International Journal of Project Management, 25, pp. 637-646.478

Exploring the Potential Contributions of BenefitsRealisation to the Management of Complex ConstructionProjectsTillmann, P.A.Federal University of Rio Grande do Sul(email: patriciatillmann@gmail.com)Tzortzopoulos, P.University of Salford(email: p.tzortzopoulos@salford.ac.uk)Formoso, C.T.Federal University of Rio Grande do Sul(email: formoso@ufrgs.br)AbstractRecent research has pointed out a need for better considering complexity issues in the development ofconstruction projects, and a need to shift the traditional paradigm of project management. Within thiscontext, it is argued that projects should be seen as value generating processes, linking business strategy toprojects and managing the delivery of benefits to different groups of stakeholders rather than the simplydelivery of physical assets. In other sectors, such as information systems and technology, an approachnamed benefits realisation has emerged to focus the management of projects on the delivery of benefits.The approach intents to bring a greater awareness for stakeholders of what are the project benefits, whoshould be involved in their definition and what are the actions that need to be performed in order toachieve and maximise them. Thus, this research was motivated by a need to explore the contributions ofthe benefits realisation approach for understanding construction projects as value generation processes,while recognising projects as complex systems and the need to better deal with such characteristics. Thiswas pursuit through a literature review on project complexity, complex systems thinking and mainpublications that introduce the benefits realisation approach. As a result, this paper summarisescontributions of the benefits realisation approach for seeing projects as value generation processes and forbetter dealing with complexity in project management. Finally, further steps of this research arehighlighted.Keywords: benefits realisation, value generation, project management, complex construction projects479

1. IntroductionConstruction projects are typically characterised by the engagement of several separate and diverseorganisations, such as consultants and contractors, for a finite period of time (Baccarini, 1996). Accordingto the same author, the greater the differentiation and interdependency of the varied interrelated parts thatconstitutes a project, the more complex the project is. Projects can be characterised as complex due to theinvolvement of multiple stakeholders, the scope of the product being created, as well as to the existence ofmultiple goals (Williams, 2002). Moreover, the assumptions upon which the tasks of a project are based areoften instable (Jones and Deckro, 1993), leading to uncertainty, which contributes to project complexity.Accordingly, Atkinson et al. (2006) and the Office of Government Commerce - OGC (2006) describe thatsome projects present clearly and understood objectives, in which relevant solutions are easily identified. Inprojects with higher complexity, the scope is generally unbounded, the objectives are unclear and tends tobe little agreement on objectives among parties involved (OGC, 2006). Thus, it is difficult to determinewhat constitutes a solution.Winter et al. (2006) suggests that the complexity of projects is increasing as organisations face thechallenge to shift from the delivery of products (e.g. capital asset, system or facility) to better aligningbusiness strategy to projects, maximising revenue generation and managing the delivery of benefits inrelation to different stakeholder groups (Winter et al., 2006). Moreover, the literature suggests that thesuccess of a project or programme should extend the quality, time and cost triangle, to include thegeneration of benefits and value aligned with business strategy (Winter and Szczepanek, 2008). Theimportance of considering benefits as major success criteria for projects has also been emphasised (Thorp,1998; Farbey et al., 1999)In this context, an alternative approach for managing programmes of change in companies implementingInformation Technology (IT) solutions emerged in the beginning of 90’s, focusing on realising the benefitsof such initiatives (Thorp, 1998). The benefits realisation approach intends to better deal with projectcomplexity, increasing the predictability of project outcomes through a continuous process of envisioningresults, implementing, checking intermediate results and dynamically adjusting the path leading frominvestment to results (Thorp, 1998).The literature on benefits realisation points out that many large organisations and complex public interestsector programmes and projects fail to identify and achieve planned benefits (Bradley, 2006). According tothe same author, this is related to the difficulty of managing highly complex programmes, portfolios orprojects rather than lack of infrastructures’ performance. Similarly, OGC (2006) argues that failing toachieve success is more related to managerial than to technical problems. The same author argues that akey reason for failure is the informal approach that some organisations take to managing change. Theexpected benefits of projects are usually vaguely defined (Reiss et al., 2006), there is usually a pooridentification of necessary means to achieve benefits and poor ability to manage change (Thorp, 1998).Even though there is extensive literature on benefits realisation, most publications are dedicated to providemodels and tools to support the introduction of the benefits realisation approach (e.g. Bradley, 2006; OGC,480

2007). Little discussion is focused on the contributions of such approach for a different understanding ofprojects, and how this may contribute to moving forward from the traditional view of project management.The importance of considering alternative approaches for project management is further explained underthe session 2.2 of this paper.Thus, the present research is motivated by a need to discuss the contributions of the benefits realisationapproach for understanding construction projects primarily as value generation processes, whilerecognising projects as complex systems and the need to better deal with such characteristics. This waspursuit through a literature review on project complexity, the complexity thinking view of management andbenefits realisation approach, which are presented in the following sections. Finally, a table summarises themain relationships of benefits realisation to complexity thinking, highlighting the possible contributions ofsuch approach to project management. Further steps of this research are presented on the last session.2. Complex construction projects2.1 Defining project complexityComplex projects can be understood as consisting of many varied interrelated parts (Baccarini, 1996). Thesame author suggests that project complexity can be interpreted and measured in terms of differentiationand interdependencies. Differentiation refers to the number of varied elements, while interdependencyrefers to the degree of inter-relatedness (or connectivity) between these elements.Williams (2002) refers to organisational and technological complexities as structural complexity, which isin the underlying structure of the project. According to this same author, for projects such as design-andmanufacture,or design-and-build, the first major source of structural complexity is product complexity.Product complexity can be understood as the number of sub-systems of a product and their interrelationships,e.g. changes in the design to one sub-system that produces cross-impacts and affect thedesign of the other system.According to Williams (2002) there are two other types of structural complexity that should be taken intoaccount: the multiplicity of objectives and the multiplicity of stakeholders (Williams, 2002). The sameauthor explains that generally, projects are multi-objective, with conflicting goals, in which the effects ofactivities on all goals have to be assessed and trade-offs have to be considered. In addition, many projectshave a multiplicity of stakeholders (e.g. owner, champion, the public, public bodies), which will addcomplexity in a similar manner to the multiplicity of goals (Williams, 2002).Another source of complexity is uncertainty (Williams, 2002). Uncertainty can be understood as theinstability of the assumptions upon which the tasks are based (Jones and Deckro, 1993). Two types ofuncertainty can be present in projects: how well defined the goals are and how well defined are themethods of achieving those goals (Turner and Cochrane, 1993). According to Williams (2002) whenproject requirements are not frozen, uncertainty and change in some requirements will mean that481

interfacing elements also need to change, leading to cross-impacts, rework and feedback loops, thus,increasing complexity.2.2 The need for alternative approaches to manage complex projectsThe complexity of projects has been the main reason why the traditional practices of project managementhave been criticised in the literature (e.g. Thorp, 1998). The traditional vision of project managementconsiders that a group of sequential activities are necessary to achieve pre-defined objectives. Thus, projectmanagement is mainly dedicated on controlling these activities and removing or reducing uncertainty thatmay affect the achievement of expected objectives (Atkinson et al., 2006; Winter et al., 2006; Koskela andHowell, 2001). Traditional approaches consider projects and programmes as linear progressions, fromactivities to objectives and not take into account the need for further judgement and decision-makingthroughout their implementation (CDRA, 2001). Moreover, Winter et al. (2006) emphasise the inadequacyof such approach to deal with the emergent nature of front-end work, for tending to treat all projects as ifthey were the same, and for not accounting sufficiently for human issuesThus, it is important to understand the nature of projects in order to determine the appropriate managerialapproach (Atkinson et al., 2006). The same authors, based on the work of Crawford and Pollack (2004)present some main characteristics that can be used to identify the nature of projects, which can either leantowards a ‘hard’ systems model (rational and deterministic) or a ‘soft’ system model (Figure 1).Hard characteristicsSoft characteristicsGoal clarity Clearly defined objectives Objectives ambiguously definedGoal tangibility Tangible end product Abstract conceptSuccess measures Quantitative measures Qualitative measuresProject permeability Not subject to external influences Highly subject to external influencesNumber of solutionoptionsParticipation andpractitioner roleRefinement of single solutionExpert practitioner, no stakeholderparticipationExploration of many alternative solutionsFacilitative practitioner, high stakeholderinvolvementValues technical performance and Values relationships, culture andStakeholderefficiency, manages by monitoring meaning, manages by negotiation andexpectationsand controldiscussionFigure 1: hard and soft characteristics of projects (Crawford and Pollack, 2004)The recognition that some projects may be more complex than others, and that the theoreticaldevelopments on project management were not properly supporting the problems faced by practitioners,triggered new discussions in the field (Winter et al., 2006). Research projects, such as the EPSRC fundedRethinking Project Management or the German Programme Beyond Frontiers of Traditional ProjectManagement, are examples of efforts to move forward from the traditional view of project management,and better understand the issues surrounding that discipline. Systems theory is a topic that was brought up(e.g. Saynisch, 2005) as an alternative way to understand projects and project management. On the482

following session, a brief discussion about this topic is presented; focus is given to aspects related to valuegeneration.2.3 Complexity thinking applied to managementAlthough there is no universal definition of complexity science, its principles have inspired manyacademics and practitioners in the field of management in the development of useful explanatoryframeworks to understand organizations as complex systems (Mitleton-Kelly, 2004). In the literature, thereare some publications in which the topic of complexity and systems thinking are implicitly related to valuegeneration. Issues arising from these are briefly described bellow.Complexity thinking views the world as a network of interacting systems where change in one element canalter the context for all other elements (Kernick, 2004). Plsek (2000) describes a system as a comingtogether of parts, their interaction and sense of purpose. A system can exist in one of four different states:stasis, order, complexity and chaos. Stasis is the absence of dynamic behaviour; order is used to describepredictable, linear and stereotypical behaviour. Chaos refers to a system that appears random but containshidden order. Complexity is the state between order and chaos (Sweeney, 2006).Holt (2002) emphasises four main characteristics that need to be understood in complex systems: (a) themultiple dimensions – multiple variables can be related to the cause of one effect; (b) dynamicity – changein course caused by a determined factor; (c) non-linearity – two variables can result in a non-linear effect;and (d) emergency – complex interactions can generate new properties. Moreover, Burton (2002) describescomplex systems as consisting of multiple components that should be understood by observing theirinteractions. Such interactions are non-linear, this means that the result of any action depends on the stateof the elements at the time as well as the size of the input. Moreover, those interactions can generate newproperties, called emergent behaviours of the system, which cannot be predicted or explained throughstudying the elements of the system (Burton, 2002).In the management literature, it is suggested that complex systems exist in dynamic and changingenvironments (Lawlor-Wright and Kagioglou, 2008). According to the same authors, in order to developand adapt themselves, systems need to process information about their environment (and other systemswithin it) and learn. Thus, in organisational management, Nonaka and Takeuchi (1995) define learningorganisations as the ones capable to adapt in a changing environment by creating new knowledge,disseminating and effectively applying it to practice.Regarding value generation, Gault and Jaccici (1996) emphasise the importance of a strong leadership todefine a clear vision of goals, steering the organisation to success. Additionally, Smith and Graetz (2006)highlight that organisational structure is a continual topic of concern, as managers try to loose controlenough to stimulate creativity and innovation whilst maintaining strategic direction. Similarly, Beckerman(2000) points out the predominance of the reductionist view to solve complex engineering problems, whilethe combination of both strategies (reductionist and holistic) can facilitate the understanding of key factorsthat are necessary to achieve a specific effect. The holistic view allows the beginning of product483

development from the desired properties to the identification and development of the components andinteractions required to achieve the desired effects (Beckerman, 2000).In construction projects, Pennanen and Koskela (2005) make a distinction between necessary andunnecessary complexity. According to these authors, necessary complexity is related to the desirableflexibility of solutions during the design process. The design process is inductive by nature and theproblems to be solved are wicked, as suggested by Rittel and Webber (1987). The same authors classifywicked problems through a set of characteristics, among them: there are no right or wrong solutions towicked problems, but good or bad solutions instead; the nature of the problem changes from the originalone; it is difficult to know whether the problem actually has been solved, as there is no stopping rule to awicked problem and there is no ultimate test for a solution. Conversely, complexity should be avoided indeductive problems (Pennanen and Koskela, 2005). According to the same authors, achieving consensusamong stakeholders, for instance, is a way to deal with uncertainty regarding clients’ requirements, andthus avoiding further complexity. Also, during production, which is a deductive process (there are right andwrong solutions), complexity is unnecessary and should be avoided.Complexity thinking seems to introduce a more holistic and dynamic view to projects, enabling theintroduction of project management practices that can better support the problems being faced bypractitioners. According to Farbey et al. (1999), several managerial implementations are not successfulbecause they are based on the premise that all is stable in a stable world. The same authors introduce anactive benefits realisation process, arguing that such approach does not only provide procedures foraccountability and control, but also should enable the maximisation of benefits from its investment throughlearning and coping with contingencies (Farbey et al., 1999), Thus, the potential contributions of a benefitsrealisation approach to deal with complexity are presented in the next section.3. Potential contributions of the benefits realisation approach3.1 The benefits realisation approachTraditionally, the concept of value in project management thinking (including the value management bodyof ideas) has been essentially related to product creation: the development or improvement of a physicalproduct, system or facility to specification, cost and time (Winter et al., 2006). The same authors argue thatthe understanding of value should exceed the boundaries of product creation and be aligned with thebusiness strategy, focusing on the generation of benefits for different stakeholder groups.Bradley (2006) and Ward and Daniel (2006) define benefits as an outcome of a change that is perceived asan advantage by a particular stakeholder or a group of stakeholders. According to Payne (2007) and theOGC (2007), benefit is a measurable improvement resulting from outcomes, which is perceived as anadvantage by a stakeholder, and should contribute towards one or more of the strategic objectives (OGC,2007). Benefits are anticipated when a change is conceived (OGC, 2007) and are owned by individuals orgroups who expect to obtain value from an investment (Glynne, 2007).484

According to Reiss et al. (2006) benefits are achieved during the life of a programme, as completingprojects are decommissioned and new ones commissioned. The same author explains that only when thiscapability is used by the organization is a benefit actually realised: transport for London, for instance, has aportfolio of programmes, each of which creates a component of the London transport infrastructure,combining construction, ticketing, marketing and the integration projects to deliver improvements toLondoners. Thus, Reiss et al. (2006) explains that there is a value path from projects to benefits: projectscreate deliverables and the combination of these deliverables generates the capabilities that enable thedesired benefits to be achieved. Moreover, OGC (2007) presents a diagram that shows the path fromproject outcomes to strategic objectives (Figure 2), highlighting not only the realisation of benefits, but alsothe emergency of unexpected benefits or dis-benefits that are side effects of achieving the desiredoutcomes, and that also need to be managed.Figure 2: Path from project outputs to strategic objectives (OGC, 2007)Thus, the success of a project or programme often depends on the synergy among different activities, asone project or set of activities might only be successful if others complete in a certain way (Barlett et al.,2006). In this sense, the benefits realisation approach has been suggested as a way to expand the traditionalway of managing projects based on the control of costs, quality and time, to providing accountability forthe realisation of expected business benefits, and thus the achievement of success (Farbey et al., 1999).Moreover, the same authors emphasise that another contribution of this approach is to also enable benefitsmaximisation through learning and coping with contingencies.3.2 The benefits realisation management processThe benefit management process ensures that the capabilities created are used to deliver the anticipatedbenefits (e.g. improved quality, enhanced cost effectiveness, etc.). In the benefits realisation approach,emphasis is given to the need of looking at the project from a systemic view, being aware of every changethat is necessary to achieve the expected benefits (Ward, Taylor and Bond, 1996).485

According to Thorp (1998), a benefits realisation process should be able to deal with four dimensions ofcomplexity: (a) Linkage – the link between expected results and the organisation’s strategy should be clear;(b) Reach – there is a need to understand the scope of the change which is necessary to achieve theexpected results, including the areas that will be impacted and to what extend stakeholders will be affected;(c) People - people must be motivated and prepared to change; and (d) Time – the time for thetransformation process should also be considered.Since 90’s different benefits realisation models have been developed and applied in many sectors, e.g.Ward, Taylor and Bond (1996), Thorp (1998), OGC (2007), Sapountzis et al. (2010). Generally speaking,the models present a similar process, following a Plan-Do-Check-Act cycle (Nogeste and Walker, 2005).However, while some authors emphasise the contributions of benefits realisation for summativeevaluations (evaluations for accountability), others also highlight the contributions of such approach toformative evaluations (evaluations for learning) (e.g. Farbey et al., 1999). Furthermore, generic guidelinesfor a benefits realisation process could be drawn from the literature (Ward and Daniel, 1996; Thorp, 1998;OGC, 2007):Identifying and engaging stakeholders;Identifying and agreeing on benefits and possible dis-benefits;Setting the plan for benefits realisation and defining targets;Realising the benefits and measuring achievements;Adapting the process based on monitoring data and on emergent changes in expected benefits; andReview achieved benefits and identify opportunities to improve the process.Ward and Daniel (2006) argue that the non-consideration of some stakeholders and how they can influenceprojects’ results is a major reason for project failure. Reiss et al. (2006) suggests that the expected benefitsof a project are usually vaguely defined, leading to difficulties in maintaining focus when subsequentproblems occur. The vagueness of expected benefits can also lead to an increased uncertainty in allocatingresponsibility for managing and delivering benefits (Lin and Pervan, 2001).When planning for benefits realisation, Thorp (1998) emphasises the need to consider the interconnectedissues that might influence the project’s results, in order to achieve success. Moreover, Ward, Taylor andBond (1996) argue that the purpose of benefits realisation, when this process was introduced in IT was ―notto make good forecasts but to make them come true.” In this sense, planning for benefits realisation,including key assumptions and sensitivity and risk analysis of those benefits expected to contribute most tooutcomes - should be seen as a major component of this decision-making process, being a roadmap for theprogramme and providing focus for delivering change (OGC, 2009).OGC (2007) argues that the ultimate success of a programme should be judged by its ability to realisebenefits and the continuing relevance of these benefits to the strategic context. In this sense, the benefits486

ealisation is an approach has also been suggested as a way to better considers the dynamic nature ofprojects, recognising the emergency of unexpected benefits and dis-benefits, while supporting learning andadaptation (OGC, 2007; Alhurst and Doherty, 2003). Sapountzis et al. (2010) also emphasise the need forunderstanding that changes in expected benefits will emerge during the process, and these should berecognised and appropriately managed.4. DiscussionBased on the literature, it was possible to highlight potential contributions of the benefits realisationapproach for the management of complex construction projects. Due to space constraints, suchcontributions are summarised in the table bellow. The figure presents a comparison between the guidelinesfor benefits realisation and issues discussed on complexity thinking related to management, and morespecifically value generation.Generic guidelines forbenefits realisationIdentifying and engagingstakeholders;Identifying and agreeingon benefits and possibledis-benefits;Setting the plan forbenefits realisation anddefining targets;Realising the benefits andmeasuring achievements;Adapting the processbased on monitoring dataand on emergent changesin benefits; andReview achieved benefitsand identify opportunitiesto improve the processMain contributions to managing complexity in projectsUnderstand key factors that are necessary to achieve the desired effects, byadopting a holistic view (Beckerman, 2000);Achieve consensus to deal with unnecessary complexity and uncertainty(Pennanen and Koskela, 2005);Clearly define the goals, maintaining the organisation’s focus on success whilestimulating creativity (Gault and Jaccici, 1996; Smith and Graetz, 2006);Start from the desired effects to the identification and development of thecomponents and interactions required to achieve such effects (Beckerman, 2000);Understand the multiple variables that can be related to the cause of one effect(Holt, 2002);Reduce unnecessary complexity in deductive problems, after solving theinductive ones (Pennanen and Koskela, 2005);Understand the system by observing the components interactions (Burton, 2002);Monitor emergent behaviours of the system, which cannot be predicted orexplained through studying the elements of the system (Burton, 2002);Process information about the environment and learn (Lawlor-Wright andKagioglou, 2008);Adapt in a changing environment by creating new knowledge, disseminating andeffectively applying it to practice (Nonaka and Takeuchi, 1995);Take advantage of necessary complexity in inductive problems to develop bettersolutions (Pennanen and Koskela, 2005); andStimulate creativity while maintaining strategic focus (Smith and Graetz, 2006).Figure 3: Major contributions of benefits realisation to managing complexity in projectsIt was observed that the guidelines presented in the benefits realisation literature are related to complexityissues pointed out in the project management and complexity thinking literature. Even though it is not487

explicit in the benefits realisation literature, it seems that such approach can be partially supported by thetheory related to the complexity thinking view of the world.5. Conclusion and further steps of researchThe importance of considering value and benefits in managerial practices has been increasingly discussedin the literature, e.g. Thiry (2002), Winter et al. (2006), OGC (2007), Winter and Szczepanek (2008).However, based on traditional managerial practices, project managers are generating sub-optimal solutions,in which the expected benefits defined in the project conception, are not materialised (Bartlett, 2006;Thorp, 1998).The benefits realisation approach is being suggested in the literature as a way to better consider thecomplexity of projects (e.g. Thorp, 1998). Through a literature review on major complexity issues thataffect the management of projects and on the main literature on benefits realisation, it was possible toidentified and make it explicit some contributions of such approach for dealing with complexity issues inproject management. It is believed that this was one step forward in understanding the theoreticalcontributions of a benefits realisation approach to the management of construction projects. Further stepsof this research will be to further explore benefits realisation in practice, testing its practical contributionsfor dealing with value generation in complex construction projects in a more holistic and dynamic way.ReferencesAshurst, C., Doherty, N. F., 2003. Towards the formulation of ‘a best practice’ framework for benefitsrealisation in IT projects. Electronic Journal of Information Systems Evaluation, 6, 1-10.Atkinson R.; Crawford L.; Ward, S., 2006. Fundamental uncertainties in projects and the scope of projectmanagement, International Journal of Project Management, 24, 687–698.Baccarini, D.,1996. The concept of project complexity—a review. International Journal of ProjectManagement, 14, 201–204.Bartlett, J., 2006. Managing programmes of business change. 4th ed. Hampshire, UK: Project ManagerToday.Beckerman, L. 2000. Application of Complex Systems Science to Systems Engineering. Systems Engineering,3 (2), 96-102.Bradley, G., 2006. Benefit Realisation Management – A Practical guide to achieving benefits through change,Hampshire, UK: Gower.Burton, C., 2002. Clinical knowledge, chaos and complexity. In: Sweeney, K. and Griffiths, F., eds.Complexity and Healthcare: an introduction. Oxon, UK: Radcliffe Medical Press Ltd.488

Community Development Resource Association – CDRA, 2001. Measuring Development: Holding Infinity.Annual report. Available from: http://www.cdra.org.za/ [Accessed: 12 nov 2008].Crawford L, Pollack J., 2004. Hard and soft projects: a framework for analysis. International Journal ofProject Management, 22 (8), 645-653.Farbey B.; Land F; Targett, D., 1999. The moving staircase: problems of appraisal and evaluation in aturbulent environment. Information Technology & People, 12 (3), 238-252.Gault, S.B.; Jaccaci, A.T., 1996. Complexity Meets Periodicity, The Learning Organisation, 3 (2), 33-39.Glynne, P., 2006. Benefits management-changing the focus of delivery. In: Association for ProgressManagement Yearbook 2006/07, 45-49.Holt, T., 2002. Clinical knowledge, chaos and complexity. In: Sweeney, K. and Griffiths, F., eds. Complexityand Healthcare: an introduction. Oxon, UK: Radcliffe Medical Press Ltd.Jones, R. E.; Deckro, R. F. (1993) The social psychology of project management conflict. European Journalof Operational Research, 64, 216–228.Kernick D., ed, 2004. Complexity and Healthcare Organisation: a view from the street. Oxon, UK: RadcliffeMedical Press Ltd.Koskela, L.; Howell, G., 2001. Reforming project management: The role of planning, execution andcontrolling. In: 9th IGLC Conference. Kent Ridge Crescent, Singapore, 6 - 8 August 2001. Available from:www.poppendieck.com/papers/ReformingPM.pd [Accessed: 12 jan 2010].Lawlor-Wright, T.; Kagioglou, M., 2008. Knowledge Management in Complex Systems: a literature reviewand research agenda. HaCIRC report, march 2008.Lin, C.; Pervan, G. A., 2001. Review of IS/IT investment evaluation and benefits management issues,problems and processes. In: Grembergen, W.V. Information technology evaluation methods & management.London: Idea Group Publishing, 2-24.Mitleton-Kelly, E. 2004. Ten principles of complexity and enabling infrastructures. In: Mitleton-Kelly, E. ed.Complex Systems and Evolutionary Perspectives on Organisations: The Application of Complexity Theory toOrganisations, London: Pergamon, 23-50.Monroe, K. B., 1990. Pricing: making profitable decisions. New York: McGraw-Hill.NHS, 2005. Delivering Quality and Value: The ISIP Guide to Strategy and Benefits. Available from:http://www.isip.nhs.uk/library/archive/strategyandbenefits/ISIP_strategy_and_benefits_overview.pdf[Accessed: 10 august 2009].489

Nogeste, K.; Walker, D. H. T., 2005. Project outcomes and outputs: making the intangible tangible.Measuring Business Excellence, 9, 55 – 68.Nonaka, I.; Takeuchi, H., 1995. The Knowledge-Creating Company: How Japanese Companies Create theDynamics of Innovation. Oxford: University Press.Office of Government Commerce – OGC, 2006. Business Benefits Through Programme and ProjectManagement. London: The Stationery Office.Office of Government Commerce – OGC, 2007. Managing Successful Programmes (MSP). London: TheStationery Office.Office of Government Commerce – OGC, 2009. STDK Home, Delivery Lifecycle: Benefits Management.http://www.ogc.gov.uk/sdtoolkit/reference/deliverylifecycle/benefits_mgmt.html#benmanagement1[Accessed: 21 jan 2009].Pennanen, A. and Koskela , L., 2005. Necessary and Unnecessary Complexity in Construction. In: FirstInternational Conference on Complexity, Science and the Built Environment 11-14 September 2005 inConjunction with Centre for Complexity and Research, University of Liverpool, UK.Plsek, P., 2000. Crossing the Quality Chasm: A New Health System for the Twenty-first Century.Washington, DC: National Academy Press.Reiss, G., Anthony, M., Chapman, J., Leigh, G., Pyne, A., Rayner, P., 2006. Gower Handbook of programmemanagement, Hampshire, UK: Gower Publishing.Rittel, H. and Webber, M., 1973. Dilemmas in a General Theory of Planning, Policy Sciences 4, Amsterdam:Elsevier Scientific Publishing, 155-159.Sapountzis, S.; Yates, K.; Lima J.B. and Kagioglou, M., 2010. Benefits Realisation: Planning and EvaluatingHealthcare Infrastructures and Services. In: Tzortzopoulos, P.; Kagioglou, M., eds. Improving Healthcarethrough Built Environment Infrastructure. Oxford UK: Blackwell Publishing.Saynisch M., 2005. Beyond frontiers of traditional project management: the concept of project managementsecond order (PM-2) as an approach of evolutionary management. World Futures, 61, 555-590.Smith, A.C.T.; Graetz, F., 2006. Complexity Theory and Organising Form Dualities, Management Decision,44 (7), 851-870.Sweeney, K., 2006. Complexity in Primary Care understanding its value. Oxon: Radcliffe Publishing Ltd.Thorp, J., 1998. The Information Paradox: realising the business benefits of information technology. Toronto,Canada: McGraw-Hill.490

Turner, J.R. and Cochrane, R.A., 1993. Goals-and-methods matrix: coping with projects with ill-defined goalsand/or methods of achieving them. International Journal of Project Management, 11, 93–102.Ward, J., Taylor, P., Bond, P., 1996. Evaluation and realization of IS/IT benefits: an empirical study of currentpractice. European Journal of Information Systems, 4, 214–225.Ward, J.; Daniel, E., 2006. Benefits Management – Delivering Value from IS & IT Investments, West Sussex,UK: Wiley.Williams, T., 2002. Modelling Complex Projects. Chichester: John Wiley & Sons.Winter M.; Szczepanek,T. 2008. Projects and programmes as value creation processes: a new perspective andsome practical implications. International Journal of Project Management, 26, 95–103.Winter, M.; Smith, C.; Morris, P.; Cicmil, S., 2006. Directions for Future Research in Project Management:The Main Findings of UK government-funded research network. International Journal of ProjectManagement, 24, (8), 638-649.491

Advancement of Construction-Related RiskManagement ConceptsLehtiranta, L.Construction Management and Economics, Aalto University School of Science and Technology(email: liisa.lehtiranta@tkk.fi)Palojärvi, L.Construction Management and Economics, Aalto University School of Science and Technology(email: lauri.palojarvi@tkk.fi)Huovinen, P.Strategic Management in Construction, Aalto University School of Science and Technology(email: pekka.huovinen@tkk.fi)AbstractThe background involves a rigorous literature review of the conceptual research on constructionfocusedrisk management (RM), published between the years 2000-2006. The purpose of this paperis to identify the current developments of RM in construction. The review targeted the three mainlevels of managing firms and public organizations, businesses, and projects. The 116 eligibleconcepts vis-à-vis managing risk, uncertainty, and complexity were found, whereof 49 (42%) areconstruction focused. The method can accommodate various assessments along selected dimensions.Some valuable insights are herein captured along the dimension of theoretical advancement from thethree sub-dimensions, i.e. systemic holism, foresight, and human orientation. Along the dimension ofpractical applicability, the three sub-dimensions include simplicity, integration, and experience.Traditional RM approaches are typically straightforward and formal. Instead, many modern RMmethods are less binding in formality and they usually assign more consideration to the human andenvironmental complexity of risks and to the characteristics of each focal entity (i.e. a firm, abusiness, or a project). Such modern RM concepts have been enlarged towards or coupled with twowayuncertainty management concepts. In addition, a sense of foreseeing and proactive doing havegained the distinct recognition within many risk, uncertainty, and complexity concepts. Theperception of the evolutionary trends is grounded on a qualitative comparison between our resultsand those of one previous review involving risk and RM research between the years 1960 and 1997.In the future, the complex challenges of globalizing, environmentally-friendly, multi-stakeholder, andenergy saving construction imply that traditional, mechanistic RM concepts alone are not realisticanymore and efficient enough. It is herein posited that modern views will complement and advancegreatly traditional, reactive approaches to risks. It is envisioned that traditional RM concepts will becomplemented or replaced with modern, non-deterministic, integrated RM concepts.Keywords: complexity, construction, literature review, risk management, uncertainty492

1. IntroductionThis paper is part of the research program on enlarged risk management (RM) within the unit ofConstruction Management and Economics in the Department of Structural Engineering and BuildingTechnology at the Aalto University School of Science and Technology. The pioneering, on-goingprocess of reviewing relevant RM literature was initiated in the year 2006. Eligible literature hasbeen sought for via the 23 book publishers‟ digital catalogs, the two article databases (EBSCO andProQuest), and the two other websites (Google Book and Google Scholar). By now, Lehtiranta andHuovinen (2010) can offer some key guidance for conducting rigorous reviews of research on RMconcepts.Readily, a population of the 116 concepts for managing risk, uncertainty, and complexity inconstruction, published in English between the years 2000-2006, has been identified. Thereof, only49 (42%) RM concepts are related to construction. The concepts have been evaluated along the dualdimensions of theoretical advancement and practical applicability. The authors will submit acomplete list of the 116 references at request. A management concept is herein defined to be anabstraction representing an object, the properties of an object, or a certain phenomenon, e.g. a firmmanaging risk as part of its operations in international construction markets. Besides conceptsthemselves, eligible references often include one or several methods, techniques and/or tools(Huovinen 2006). The enlarged RM involves concepts on managing uncertainty, risk, complexity,and crisis (Palojärvi 2009). The focal context includes the three levels of managing firms and publicorganizations, businesses, and projects in construction. A population of firms consists of designers,contractors, suppliers, and other service providers. Contexts are global, international, national, andlocal.The purpose of this paper is to find some valuable insights on current developments vis-à-vismanaging risk, uncertainty, and complexity as well as to synthesize them for advancing enlarged RMapproaches in construction along both theoretical and practical dimensions. The insights are to befound and demonstrated with the help of the comparison of the three pairs of a traditional conceptand the modern one in the focal areas of managing risk, uncertainty, and complexity.The previous review by Edwards and Bowen (1998) reports on the development of the research onrisk and RM between the years 1960 and 1997 from the viewpoints of analytical constructionapplications, a systematic RM approach, and the emergence of a „soft systems‟ RM view. Theviewpoints somewhat correspond to our three sub-dimensions and, thus, the related qualitativecomparison (as part of the conclusions) provides an additional basis for discussing the evolutionarydevelopment of RM concepts in the future. In addition, some other conclusions are put forth on thefuture direction of RM in construction.The conduct of the desired search for insights vis-à-vis enlarged RM is clarified more in Section 2.The findings of the three pair-wise comparisons in the areas of managing risk, uncertainty, andcomplexity are reported upon in Section 3. The conclusions are presented in Section 4.493

2. Search for generic and contextual insightsThe search for some valuable generic and/or contextual insights for advancing enlarged RM inconstruction was carried out through a reliance of the identified, eligible literature on enlargedRM across various contexts (including the construction-related ones). The main criteria included theapplicability to construction project business and the providence of a wide enough risk, uncertainty,or complexity management concept, i.e. the concepts with a focus on the narrow types of risk orbusiness task were excluded. The sub-dimensions for a search were specified as follows. Along thetheoretical advancement, holism, foresight, and ‘soft methods’ were used as the three subdimensionsto capture valuable insights on any emerging theories on enlarged RM. Along thepractical applicability, simplicity, integration, and experience were used as the three subdimensionsto capture any valuable insights on enlarged RM practices. The six specified subdimensionsappear in Table 1.Table 1: Criteria for the evaluation of the degrees of theoretical advancement and practicalapplicabilityDimension Theoretical advancement Practical applicabilitySub-dimensionSub-dimensionsystemic holism refers to various degreeswith which concepts encompass the scopeand variety of managing firms, businesses,and projects as systems, respectivelyForesight refers to various degrees ofproactive thinking, plans, decisions, andactions as part of total management.Simplicity refers to various degrees ofactual effective use of one or severalenabling, enlarged RM concepts.Integration refers to degrees of both theexternal, integrated use of the concept aspart of the firm, business, or projectmanagement, and the internal integrationbetween the risks, uncertainties, andcomplexities.Sub-dimensionSoft systems refer to degrees of a relianceon embedded soft methodologies, tacitknowledge, collaboration, particularmanagerial competencies, etc. as well asacknowledging the complexity of humanbeing as a decision maker and adaptor.Experience refers to various degrees ofcumulative uses (with their positive andnegative outcomes) of one or severalenlarged RM concepts.Among the 166 concepts, the degrees of the advancement along each sub-dimension were assessedconcept by concept. The evaluation involved typically the following steps: (i) searching a reference‟sintroduction for epistemological implications including a foresight and a two-way or one-way riskview, (ii) assessing a process description (or a lack of it) and theoretical applications to assess thedegrees of systemic holism, simplicity, and integration, (iii) searching other parts of a reference bodyto assess the acknowledgement and possible advancement of soft systems, and (iv) reviewing thefurther research suggestions as this author‟s insights on advanced RM. The results were coded in adatabase for each concept.494

3. Insights in modern, enlarged RM concepts vis-à-visconstructionSome valuable insights in change and avenues for future advancement were found from among theintroductions (with the linking of the author‟s own, new concept to the existing knowledge), thehistorical summaries, and the predictive sections, besides the concept-specific treatments within the116 selected references. For the following reporting on the identified insights, a principle ofjuxtaposing or dichotomizing is relied upon, i.e. traditional concepts and states of affairs arecompared with the modern ones.3.1 Traditional and modern approaches to risk managementThe two kinds of the distinct approaches for designing RM concepts were identified. The traditionalRM approaches are straightforward and formal, e.g. a chain of tasks (identify – classify – analyze –respond) as this is presented, for example, in the RAMP model of the Institution of Civil Engineersand the Actuarian Profession (2005). Modern RM approaches are less binding in formality andusually accommodate more consideration to the characteristics of each focal entity (i.e. a firm, abusiness, or a project) and its stakeholders, as this is demonstrated by Loosemore (2006).Along the theoretical dimension, it seems that both generic and construction-related referencesinclude fairly holistic approaches vis-à-vis RM. Modern concepts, more often than the traditionalones, are explicit about coupling risks with their negative and positive consequences. This two-wayapproach defines risk as an uncertainty related to estimated consequences, and risk means that resultsmay be worse or better than expected (Lifson and Scheifer 1982). Recently, this two-way approachhas been adopted like a standard but several traditional concepts still concentrate heavily on theresponse to negative implications of risks only. In addition, many authors are more foresightful, i.e.proactivity is commonly emphasized. More soft system methodologies are emerging. For example,Weick and Sutcliffe (2007) present a mindful management approach that is fully concerned onbuilding a manager‟s personal capacity for risk responseAlong the practical dimension, many authors base their concepts on documented experience on thevarying degrees of the functionality of their RM concepts, respectively. Moreover, many conceptshave been designed as the integrated parts of firm level, business level, or project level management.There is an identifiable trend from traditional (e.g. mechanistic, straightforward) RM conceptstowards modern (e.g. adapted, less formal, yet systematic), enlarged RM models. Hence, thesimplicity of the concepts has decreased, albeit the authors claim that their modern concepts arebetter adapted to real-life complexities and dynamics. Thus, modern concepts may make more sensefrom the viewpoint of practicing risk managers.Widely used, traditional RM concepts in construction can be exemplified with the Institution of CivilEngineers and the Actuarian Profession‟s (2005) RAMP model and Flanagan and Norman‟s (1993)systematic RM process. Several concepts, e.g. Chapman and Ward‟s (2003) formal, structured RM495

process fall somewhere between highly traditional concepts and highly modern concepts. Palojärvi(2009) is emphasizing the goal setting to be included as the first step of RM processes, followed byrisk identification, assessment (analysis), and response. In turn, Loosemore‟s (2006) project RMapproach is a noteworthy example of a modern RM concept. He provides a non-mechanistic and nonsystematicdiscursive approach that acknowledges uncertainty and complexity stemming from humanperceptions and reaction to risk. The five key steps of the Institution of Civil Engineers and theActuarian Profession‟s (2005) RAMP model and the seven steps of Loosemore‟s (2006) modern RMconcept are compared in Figure 1.FIVE STEPS OF A TRADITIONALRM PROCESSThe Institution of Civil Engineers andthe Actuarian Profession (2005)1. Process launch (incl. context andobjective definition2. Risk review (inlc. identification,evaluation, and response planning)3. Risk management (incl. responseimplementation and control)4. Process close-down (incl.assessment and review)SEVEN STEPS OF A MODERN RM PROCESS(Loosemore 2006)1. Make stakeholders feel involved2. Maximize information for decisionmaking3. Equalize perceptions of risks andopportunities among those who can affectthe outcome of a project4. Make everyone understand the basis uponwhich a decision is made5. Make people feel involved and valued inthe process6. Make people feel that their interests arebeing considered7. Make people understand theirresponsibilities and role in the riskmanagement processFigure 1: Comparison of a traditional RM framework (of the Institution of Civil Engineers and theActuarian Profession 2005) and a modern RM framework (of Loosemore 2006)3.2 Two approaches to uncertainty view in risk managementUncertainty can be defined simply as a lack of certainty as Chapman and Ward (2003) do.Lichtenberg (2000) gives a more elaborate account, i.e. uncertainty means insufficient or inadequateknowledge of relevant activities and facts, their general context, and in particular, the potentialconsequences of and responses to these activities. As opposed to the definition of risk, no probabilitycan be attached to uncertainty. Two approaches to uncertainty management were identified. The„initial uncertainty‟ approach addresses uncertainty as a preliminary condition for risk identification496

and management and assesses it with a one-time basis (e.g. Chapman & Ward 2003). The „ubiquitousuncertainty‟ concepts deal with uncertainty explicitly in a cyclical manner during business or projectlife-cycles (e.g. Lichtenberg 2000).Along the theoretical dimension, it seems that uncertainty management concepts are beingtransformed from the generic descriptions of uncertainty (only) and the specific applications (e.g. thefuzzy sets application for prizing construction risks by Paek et al. 1993) towards the handling ofuncertainty as part of the holistic management of firms, businesses, or projects (e.g. the Lichtenberg2000). At the same time, risk and uncertainty are being coupled in new ways. For example, methodsfor the evaluation, prioritization, and response vis-à-vis the sources of uncertainty could beincorporated into effective, traditional RM concepts. Recently, the degrees of the systemic holismand the integration of uncertainty management concepts have considerably increased. Soft systemsare embedded in some uncertainty management concepts (e.g. Lichtenberg 2000) as tools forfacilitating group expertise utilization or analyzing bias in decision making. The notion of foresight isalso being embedded into uncertainty views. At the same time, both negative and positive outcomesof uncertainty are being taken into account.Along the practical dimension, very little experience has been shown to support the applicability ofuncertainty management concepts. Nevertheless, uncertainty related concepts have become morecomprehensive, more integrated within traditional and modern RM concepts, and more simplifiedregarding mathematical skills required among users.The „initial uncertainty‟ concepts are not exactly uncertainty management concepts rather than RMconcepts, and they include no uncertainty management process or framework. Thus, only an exampleof a „ubiquitous uncertainty‟ management framework is presented herein. Lichtenberg (2000)describes a concept for proactive management support using the efficient handling of uncertainty as acentral element of a decision-making process. The concept addresses explicitly both sides of risks,threats and opportunities. The systematic approach includes the initial uncertainty identification witha brainstorming method, the categorization of uncertainty by type, and a cyclical evaluation processthat targets the most crucial sources of uncertainty and addresses a response. The evaluation andresponse cycle is repeated as many times as economically realistic to improve each forecast.3.3 Two approaches to the complexity view in risk managementComplexity management denotes managing specific conditions including an embedded possibilityof occurring risk, not the latter on its own right, as part of firm level, business level, or project levelmanagement. Globalization, internationalization as well as multi-cultural and cross-culturaloperations add markedly onto challenges within complexity management. Over the recent decades,the complexity theory has emerged and ameliorated following the evolution of the chaos theory.Today, chaos is recognized as a specific kind of complexity. Organizationally, firms, businesses, andprojects are being more and more managed as complex, dynamic systems (McMillan 2008). Modernmanagers may also rely on the concept of emergence that refers to something unexpectedlymaterializing without or with little influence on outside (e.g. Guastello 2002).497

Along the theoretical dimension, foresight is part of managing complexity through various levels oforganizations. Assumptions, forecasts, and foresights are frequently used as a basis for pre-emptingfuture risks and adapting management styles to global-local environments, particular circumstances,specific projects, and qualitative tasks (e.g. Shenhar and Dvir 2007). Complexity managementconcepts have evolved from specific and partial mathematical techniques towards systemic, holisticmodels that correspond to the nature of one-of-its-kind projects and the sequences of such projects.The task of complexity management increasingly includes the address of complexity that is stemmingfrom irrational and nonlinear responses among stakeholders. Pryke and Smyth (2006) portray thedevelopment of a human-oriented relationship approach („soft system‟) to complexity management inconstruction.Along the practical dimension, many complexity management concepts are grasping the simplicityfor managerial comprehension, the integration with management frameworks, and practicalapplicability. In addition, the indicative empirical evidence has been reported upon as part of the firstexplorative studies. For example, Shenhar and Dvir‟s (2007) framework is useful in assessing projectcomplexity and distinguishing between projects and their appropriate management solutions. In turn,Ralls et al. (2009) apply complexity thinking to enlarge the scope of traditional project management.Complexity management seems to encompass the two relevant views. One stresses the recognitionof a project or a business in terms of complexity and the management of inherent risk anduncertainties, accordingly (e.g. Shenhar and Dvir 2007). This approach has a characteristicallynegative attitude towards complexity-induced risks. The other view focuses on the applications ofthe chaos theory (e.g. Ralls et al. 1999).Complexity determines an organization and a process as well as the formality with which a project ismanaged (Shenhar and Dvir 2007). Project complexity depends on a product scope, a number andvariety of elements, and an interconnection among them as well as on the complexity of anorganization and connections among its parties. The three steps of the selection of an adaptableproject management style include (i) the assessment of an environment, a product, and a task, (ii)the classification of a project by the degrees of uncertainty, complexity, and pace, and (iii) theselection of a right style to fit the specific project type (Figure 2).Figure 2: Selection of a complexity-adaptable project management style (Shenhar and Dvir 2007)498

According to Ralls et al. (1999), the grasping of order from chaos will be the source ofbusiness acumen in the twenty-first century. In chaos, there are two ways to access economicvalue. One way is to emerge with patterns that create a new order for business. The other way isto optimize, i.e. making systems, processes, or procedures as efficient, cost-effective, andproductive as possible. Tools for adaptation may be described as soft systems, i.e. theyacknowledge and utilize human relationships and environmental adaptation. The trustdevelopment and the career planning are the two keys for external and internal stakeholdercomplexity management.4. Conclusions4.1 Synthesis for the advancement of enlarged RM in constructionIt seems that more holistic, modern RM concepts are being designed to serve the two-waymanagement or handling of both risks and opportunities (Lifson and Scheifer 1982). At the sametime, many RM concepts have been enlarged towards or coupled with two-way uncertaintymanagement concepts. This observation is supported by Hillson‟s (2004) review of the riskdefinitions. Before the year 1997, most of the definitions addressed only the negative outcomes ofrisks. More recent definitions tend to be neutral or to take specifically into account both negative andpositive implications of risks. In addition, a sense of foreseeing and proactive doing have gained thedistinct recognition among each of the three subpopulations of risk, uncertainty, and complexityconcepts. It is posited that this modern view will complement and advance greatly the traditional,reactive combating of occurred risks.4.2 Evolutionary implications based on a qualitative comparison of theearlier and recent research on risk managementThe cumulative piles of RM concepts can be linked to a wider time scale by comparing them and theolder results of Edwards and Bowen’s (1998) comprehensive review. They analyzed the evolutionof the risk perception and the RM in construction between the years 1960 and 1997 from the threeviewpoints, i.e. construction-related applications, systematic approaches, and „soft systems‟. Theseare roughly comparable to our three sub-dimensions, i.e. experience (practical applicability), systemicholism (theoretical advancement), and soft systems (theoretical advancement). Some key differencesare the inclusion of generic RM concepts along with the construction focused ones in our review andthe exclusion of the concepts focusing on narrow risk types such as technical risks. We roughlycounted the numbers of the real-world applications within the construction contexts whereas Edwardsand Bowen (1998) elaborated the development of the applications vis-à-vis the various types of risk.The results of the qualitative comparison are compiled in Table 2.Today, the epistemology of risk is typically that of addressing threats and opportunities, not onlynegative implications. The epistemology of RM environments addresses the complexity, non-499

linearity, and irrationality of phenomena, decision making, and response. Before the year 1997, thestate of these affairs seemed different, as implied by Edwards and Bowen (1998).Edwards and Bowen (1998) addressed the steadily growing supply of construction-relatedapplications for several types of risks. Applications related to financial, legal, and technical risksbecame common in research in the 1980s and managerial, political, and cultural risks roughly in the1990s. Applications to health risks and social risks were deemed still undeveloped by the year 1997.In turn, our review supports the trend of common applications to construction. Experience is includedin most concepts. The latest decade has also witnessed an increase in health and social riskconsiderations. Whereas the former is outside our focus, the latter has produced several applications,e.g. that of Loosemore (2006).Systematic approaches to RM in construction emerged in the late 1980s. Since then, they havespread tremendously. Modern systematic approaches are typically more elaborated than the olderones and the need for such elaborating is widely acknowledged. The recent systematic approachesusually address goal setting and other managerial tasks that are integrated with the every-daymanagement.Before the year 2000, soft systems approaches within RM were rare. Edwards and Bowen (1998)mention the emergence of a human aspect to RM in a form of tools for analyzing human bias andirrationality in decision making. Major progress has been made in this area during the latest decade.Decision making analyses have became common and a new area of soft systems applications hasemerged. Soft systems approaches are nowadays not only used for decision making analyses but alsofor decision response analyses. This soft view emerges from complexity management concepts likethat of Ralls et al. (1999). The preliminary findings of our on-going sub-review of the selected bookson RM published during the years 2007-2009 include some evidence of the growing presence of softsystems.Table 2: The summary of recent and earlier developments in RM (in part, Edwards and Bowen 1998)EpistemologyRisk and risk management researchbetween the years 1960 and 1997(Edwards and Bowen 1998)Risk and risk management researchbetween the years 2000 and 2006Description Typical quote Description Typical quoteRisk is seen to includeonly negativeimplications of aphenomenonRisk is aprobability anadverse eventoccuring duringa stated periodof time (RoyalSociety 1991).Risk is seen toinclude positiveand negativeimplications of aphenomenonThe management ofboth upside risks(opportunities) anddownside risks(threats) is at theheart of businessgrowth. (Chapman& Ward 2003)Systematicapproach toThe early decades(1960's, 1970's andThe systematicapproach hasThe RM processincludes shaping500

iskmanagementroughly half of 1980's)of RM were dominatedwith partialapplications, such asmathematical analysismodels. Theconsequent earlysystematic approachesof the latter half of the1980's and the 1990'sare simple.The RM processincludes riskidentification,risk analysis,and riskresponse.(Flanagan &Norman 1993)becomemainstream andadvanced towardsmore multidimensionaldirection.and focusing thecontext, identifyingand structuring theissues, assigningownership,analyzing theissues, andharnessing andimplementingresponsestrategies. (Cooperet al 2005)View of 'softsystems' fromdecisionmakingperspectiveThe soft systems arean emerging issue,acknowledged relatedto subjectiveprobabilities,exploration ofheuristics and biases,and surveys of riskmanagement practices.Few applications.A knowledgebasedapproachto risk analysisusing fuzzylanguage sets,qualitativereasoning andknowledgeelicitation(Raftery & Ng(1993)The soft systemapproach hasbecome mainstream indecision making,even so that theword 'soft system'is seldom used.Delfi method isused to combinevarious expertforecasts withoutthe influence ofgroup bias. (Merna& Al-Thani 2008)View of 'softsystems' fromsystemscomplexitymanagementperspectiveNot addressed - The soft systemsin the context ofmanagingcomplexphenomena (incl.irrational peopleand non-linearsystems) are anemerging issue.Few applications.The new riskmanagement viewlooks intomanaging projectoutcomes in acontext of humanirrationalitytowards riskperceptions andresponses(Loosemore 2006)Construction-relatedapplicationsRare - Common -4.3 Towards modern, highly integrated RM conceptsThere are many natural connections between the three coinciding areas of managing risk,uncertainty, and complexity. Uncertainty is one of the main sources of complexity. Risk can be alsohandled as a key part of the wider concepts of uncertainty management. Many complex challenges of501

globalizing, environmentally-friendly, and energy saving construction imply that traditional,mechanistic RM concepts are not anymore realistic and efficient enough. The consequences ofactions are not necessarily proportional to the intensity of actions (non-linearity) and the probabilitiesof these consequences. Thus, it is herein envisioned that traditional RM concepts will becomplemented or even replaced with modern, non-deterministic, integrated RM concepts thatcapture both uncertainty and complexity. In addition, the concepts of crisis management can be takeninto account in order to promote a culture of pre-planning and to enhance business continuity.Finally, it is argued that the co-adoption of many compatible concepts of risk, uncertainty,complexity, and crisis management will enhance key managerial competencies within firms toaccommodate increasing turbulences in future construction markets. Any RM activities should beconducted as an integrated part of the total management of firms, businesses, and projects. Managersare encouraged to familiarize themselves with the insights within both traditional and modern RMconcepts. Each of the 116 insightful references addresses one of the three views only. Nevertheless,practicing risk managers can use them as the starting „pieces‟ in solving their puzzles of enlarged orintegrated RM, respectively.ReferencesChapman C and Ward S (2003) Project risk management - processes techniques and insights, Wiley.Edwards P and Bowen P (1998) Risk and risk management in construction: a review and futuredirections for research. Engineering, Construction, and Architecture Management 5(4): 339-349.Flanagan R and Norman G (1993) Risk management and construction, Blackwell.Guastello S (2002) Managing emergent phenomena – nonlinear dynamics in work organizations,Lawrence Elbaum Associates.Hillson D (2004) Effective opportunity management for projects – exploiting positive risk. CRCPress.Huovinen P (2008) “Reviewing Conceptual Research on International Management”. In Larimo J(ed.) Perspectives on Internationalization and International Management. Post-ConferenceProceedings of the 9 th Vaasa Conference on International Business. Proceedings No. 148. Vaasa,University of Vaasa: 363-383.Institution of Civil Engineers and The Actuarial Profession (2005) RAMP Risk analysis andmanagement for projects. London, Thomas Telford.Lehtiranta L, Huovinen P, Palojärvi L, Kiiras J and Jansson N (2010) Managing uncertainty,complexity, risk, and crisis in construction. Structural Engineering and Building TechnologyPublication. Espoo, Aalto University School of Science and Technology. (Manuscript)502

Lehtiranta L and Huovinen P (2010) “Conducting rigorous reviews of research on risk managementin construction.” In Proceedings of CIB World Building Congress 2010 on Building a Better World,10-13 May 2010, Salford, the UK.Lichtenberg S (2000) Proactive management of uncertainty using the successive principle.Polyteknisk Press.Lifson M and Scheifer E (1982) Decision and risk analysis for construction management. John Wiley& Sons.Loosemore (2006) “Managing project risks”. In Pryke S and Smyth H (eds.) The management ofcomplex projects – a relationship approach, Oxford, Blackwell Publishing.McMillan E (2008) Complexity, management and the dynamics of change: Challenges for practice,New York, Routledge.Merna T and Al-Thani F (2008) Corporate risk management, 2 nd edition, West Sussex, John Wiley &Sons.Paek J, Yong W and Jong H (1993) “Pricing construction risk: Fuzzy set application.” Journal ofConstruction Engineering and Management 119(4): 743-756.Palojärvi L (2009) Managing risks in the international growth business of Finnish constructioncontractors and building product suppliers. Doctoral Dissertation, No. TKK-R-DISS-3. Espoo, TKKHelsinki University of Technology, Department of Structural Engineering and Building Technology.Pryke S and Smyth H (2006) The management of complex projects: A relationship approach, HongKong, Blackwell.Raftery J and Ng T (1993) “Knowledge based approach to construction risk analysis”. In:Proceedings of CIB International Symposium – Economic Evaluation and The Built Environment,Commission W55 – Building Economics, Lisbon, LNEC, Vol. 1: 152-165.Ralls J, Webb K and Ralls Jr J (1999) The nature of chaos in business: Using complexity to fostersuccessful global alliances, Gulf Professional Publishing.Royal Society (1991) Report of the study group on risk: Analysis, perception, management, TheRoyal Society.Shenhar A and Dvir D (2007) Reinventing project management. The diamond approach to successfulgrowth and innovation, Harvard Business School Press.Weick K and Sutcliffe K (2007) Managing the unexpected: Resilient performance in an age ofuncertainty, 2 nd edition, San Francisco, Jossey-Bass.503

Conducting Rigorous Reviews of Research on RiskManagement in ConstructionLehtiranta, L.Construction Management and Economics, Aalto University School of Science and Technology(email: liisa.lehtiranta@tkk.fi)Huovinen, P.Strategic Management in Construction, Aalto University School of Science and Technology(email: pekka.huovinen@tkk.fi)AbstractThis paper is methodological. The purpose is to introduce a method for conducting rigorous reviewsof targeted conceptual research on management (areas) in construction-related contexts and todemonstrate the use of this review method in the area of risk management (RM) inside and outsideconstruction. The ten principles for conducting a review of conceptual research are re-introduced, i.e.(1) a choice of an independent review, (2) a choice of a targeted area of research and the formulationof a review problem, (3) the setting of the aims and the limitations for a review, (4) a search foreligible concepts published through formal channels, (5) an inclusion (and a retrieval) and anexclusion of identified concepts, (6) the coding, exposure, and analysis of conceptual data, (7) theprotection of the overall validity of a review, (8) a discussion of the findings of a review, (9)suggestions for the advancement of focal, conceptual knowledge and future reviews, and (10)conclusions on the usefulness of the reviewed concepts for practicing managers. These principleshave been applied to a pioneering review of RM concepts. The core RM view was enlarged toencompass uncertainty, complexity, and crisis management. A broad variety of the generic RMconcept types could be identified from among the books, the chapters, and the articles publishedbetween the years 2000-2006. 116 concepts were included in the review. 81 (70%) concepts(references) belong to the traditional risk view, 10 (9%) to the complexity view, 19 (16%) to theuncertainty view, and 6 (5%) to the crisis view. This group includes also a sub-population of 49(42%) construction-related concepts. Thereof, 11 (9%) concepts are designed for managing firm orbusiness level issues and 38 (33%) concepts are designed for managing project level issues. Themethod includes the evaluation of the levels of theoretical advancement and practical applicability ofeach concept. The results serve as a state-of-art database on RM vis-à-vis scholars (planning futureresearch) and practitioners (searching for highly applicable RM concepts). Similarly, researchersmay now conduct their rigorous reviews of conceptual research on any construction-relatedmanagement areas in the future.Keywords: Conceptual research, literature review, research method, risk management504

1. IntroductionIn general, literature reviews provide readers with a synthesized and analyzed comprehension of atargeted area‟s state-of-art empirical research (Cooper 1998). Recently, Fink (2010) emphasizes thatliterature reviews are being conducted to justify courses of actions such as strategic plans, grantproposals, or topics of dissertations. Literature reviews are justified as attempts to identify and tointerpret what is known about topics. In particular, the results of a qualitative research review aredepicted as a detailed, complex, and holistic picture or story. However, Fink undermines anydifferences between quantitative or qualitative research reviews by stating that conducting anaccurate review with valuable findings should be the primary concern. In turn, Ridley (2008)addresses literature reviews from a (PhD) student‟s perspective and sees them foremost as a means togather a wide understanding from a targeted domain, including its historical background and focalconcept introductions. Literature reviews are rarely entrusted upon as the only or primary researchmethod in management studies. Likewise, conceptual literature reviews or systematic managementrelatedliterature reviews are not addressed in the recent handbooks (e.g. Fink 2010, Ridley 2008). Asone exception, Huovinen (2006, 2008) has planned a review method for conducting rigorous reviewsof conceptual research on targeted (construction-related and international) areas of management.The purpose of this paper is (i) to re-introduce and to deepen a method for conducting rigorousreviews of targeted conceptual research on management (areas) also in construction-related contextsas well as (ii) to apply this review method to the relevant area, i.e. risk management (RM) inside andoutside construction as well as to provide a pioneering overview of the state-of-art RM literaturepublished in English between the years 2000-2006. The latter was chosen as the application areajointly by the synergic research teams in the area of construction management as part of Departmentof Structural Engineering and Building Technology at Aalto University School of Science andTechnology.This exemplary review combines the findings from two separate, complementary reviews as follows.The first sub-review covers the relevant RM books with and without a construction context publishedbetween the years 2000-2006. The second sub-review covers the relevant RM journal articles with aconstruction context published between the years 2000-2006. The systematic and extendable natureof the review method allows adding new sub-reviews to the state-of-art database whenever extensionsare seen appropriate. Thus, a third sub-review covering the relevant RM books published between theyears 2007-2009 is on-going.2. Conceptual research reviews2.1 Reviewing of empirical research versus conceptual researchEmpirical studies commonly rely on literature reviews as a complementary method. However,reviews are seldom conducted in a comprehensive way. Only a few handbooks address literature505

eviews as a primary research method on its own right, underlining the task of synthesizingempirical research (e.g. Cooper 1998). According to literature review pioneers, like Cooper (1998)and Cooper and Hedges (1994), the role of a reviewer is to conduct meta-analyses, to combineprimary, empirical studies‟ results statistically with quantitative procedures, and to draw conclusionsfrom investigations that address related or identical hypotheses. In turn, Ghauri and Gronhaug (2005)posit that any empirical research should start and occasionally look back as a consultation of pastliterature. This is so to identify a relevant research problem and its background, to plan a sampling, toformulate questions, and to choose statistical tests. A minimum requirement for a literature review issuch an evaluation that enables a researcher to justify the choices of an empirical research design anda conceptualization.Within the reviewing of conceptual research, the units of analysis are concepts. Conceptualresearch reviews produce syntheses, quantitative analyses, qualitative comparisons, and conclusionsalong the generic view as well as any notable exceptions to it. Herein, the term concept is used tocover all indications of theory such as models, concepts, frameworks, and methods (Huovinen 2008).2.2 Key rules for reviewersThe success factors for a research review are the principles of selectivity and neutralism (Hart 1998,Cooper 1998). The principle of selectivity implies limiting the potentially original scope of atargeted review by selecting basic criteria for eligible concepts and defining a unit of review.Primarily, criteria should be considered to ensure a functional, minimum size of a targeted conceptpopulation and its sub-populations, to describe the economic and societal context, and to determinethe language(s) and the period (years) of publication. Secondarily, a reviewer may define aconceptual study process respective to a unit of review. The principle of neutralism protects thevalidity of a review from biases such as preferring only one of paradigms of methodology, researchtraditions, business or market contexts, or ways of assessing the theoretical advancement andpractical applicability of concepts. Neutralism is closely related to following the pre-decidedselectivity. Key objective criteria for a study should be the only factor for including or excludingconcepts, not a reviewer‟s own preferences. Key criteria should remain unchanged during a reviewprocess and not be subject to alteration to support e.g. a certain minimum number of a sub-group or asimultaneous side study.Fink (2010) emphasizes four key virtues for a literature review, i.e. systematic, explicit,comprehensive, and reproducible. The four virtues of an objective review are best appreciated whencontrasting with the subjective one. For example, a subjective literature review lacks a justificationfor the selection of data, leaves out the availability of data, handles a literature population onlypartially, and makes inaccurate conclusions. The four virtues are being respected when a reviewerdefines clearly what is targeted and where, evaluates data and results with a critical stance, anddocuments her or his process (aligning Fink 2010). In addition, a reviewer is advised to adopt adualistic approach. For example, this duplicity implies the gathering of generic RM concepts at thesame time with applied concepts across focal (construction-related) contexts and the non-focal ones.506

7 Overall validity protection3 Definition of aims andlimitationsThis results in a wider pre-understanding for the selected, specific subject than a narrowly targetedapproach would accomplish.2.3 Ten principles for conducting a conceptual research reviewIn analogy with empirical research, literature review processes are being structured into five stages,i.e. formulating a research problem, searching literature, reading literature and evaluating data for aninclusion, analyzing eligible references, and designing and writing a report (Cooper 1998). In the caseof conceptual research reviews, Huovinen (2006) advocates the adoption of 10 guiding principles asfollows: (1) Choosing an independent conceptual review (as the primary/only research method) to beconducted, (2) choosing a targeted area of research and formulating a review problem, (3) definingthe aims and limitations for a review, (4) searching for eligible concepts published through formalchannels, (5) including (and a retrieving) and excluding identified concepts, (6) coding, exposing, andanalyzing conceptual data, (7) protecting the overall validity of a review, (8) reporting on the findingsand conclusions of a review, (9) providing suggestions for the advancement of focal, conceptualknowledge and future reviews, and (10) providing recommendations (including the evaluation of theusefulness of the reviewed concepts) to practicing managers.1 Method selection2 Selection of targeted area andresearch problem4 Literature search5 Inclusion and exclusion ofconcepts6 Coding and analysis8 Reporting of findings andconclusions9 Suggestions for advancing focalknowledge10 Recommendations to practicingmanagersFigure 1: 10 guiding principles for conducting a rigorous, conceptual research review.507

3. Case study – a pioneering review of conceptual research onrisk management3.1 Rationale for a review of research on risk managementIn principle, state-of-art knowledge on RM is needed for various purposes. It can be compiled andabsorbed through literature, scholar writings, seminars, consultants, experience, etc. In our case, suchknowledge was perceived to be essentially needed for enhancing RM practices and competenciesamong Finland-based firms that were aiming at achieving significant growth in their internationalconstruction businesses (as this is reported upon in Palojärvi 2009). Future growth would implymajor challenges, opportunities, and requirements for managing inherent risks well. The Federationof the Finnish Construction Industries (RT 2004) foresaw that the fast expanding internationalbusinesses will be the primary driver. In the same vein, the Association of Finnish Civil Engineersintroduced the scenarios of Finnish construction-related companies‟ potential to strengthen theircompetitive positions in international construction markets by the year 2030 (RIL 2004).It turned out that no comprehensive, up to date reviews of generic RM concepts were available, not totalk about the construction-related ones. In the year 2006, a RM research team at the HelsinkiUniversity of Technology (TKK) initiated an on-going review of the key generic RM concepts andthe applied, construction-related RM concepts, published between the years 2000-2006. The waysand levels of evaluating the degrees of theoretical advancement and practical applicability of RMconcepts were planned. The results of the 1 st and 2 nd phases have been published via the two reports(Ahonen 2007 and Lehtiranta et al. 2010a). The review method and its use are reported upon in thispaper and some of the relevant insights based on the results in Lehtiranta et al. (2010b).3.2 Four views on enlarged risk managementThe browsing of the RM literature early revealed that, besides the traditional RM concepts, thegeneric theories of complexity, uncertainty, and crisis were increasingly applied also to theconstruction-related contexts of managing firms, businesses, and projects. Many researchers aim atgaining new insights, more advanced RM concepts, and more useful RM methods along these threeviews (e.g. van der Velde and van Donk 2002, Langlo et al. 2007, Loosemore 2000). Aligning withHart (1998), the domain of the pioneering RM review was enlarged to encompass also the conceptsof uncertainty management, complexity management, and crisis management in order to allow thecapturing of any breakthrough ideas. At the outset, risk was perceived as a possibility that the goal(s)set for the managing of a firm, a business, or a project may not be attained due to one or several(risky) events. The consequences of a realized risk may be negative or positive. Uncertainty is seen asa lack of knowledge of future actions. Complexity is a sum of multiple tasks and theirinterdependencies. In turn, both of them increase the existence of risk. Crisis is deemed to be amishandled negative risk. This pre-understanding was later both strengthened and challenged by thefindings of the review.508

3.3 Conduct of the review of enlarged risk management conceptsThe review process was planned by applying Huovinen‟s (2006) 10 guiding principles as follows.The principles were applied in the same way to each of the two sub-reviews as follows.(1) The conduct of an independent conceptual review as the primary research method was justifiedby its partial comprehensiveness versus targeted RM concepts and its extensiveness versus the twoeligible publication channels (scientific books and articles).(2) The enlarged, conceptual RM research was selected as the targeted scope of the review. Thecontext of internationally growing firms was adopted as the major criterion for including the initiallyidentified concepts in the review. The study problem, shortly, was to map and to review the state-ofartliterature on enlarged RM along the generic dimension and the contextual, construction-relateddimension.(3) The sub-objectives for the review were specified as follows:(a) To identify and to procure the eligible references, i.e. books and articles on managinguncertainty, complexity, risk, and crisis by using the representative publishing andprocurement channels(b) To assign each reference primarily (i) to one of four views: uncertainty, complexity, risk, andcrisis, (ii) to one unit of review: a firm and/or a business or a project, and (iii) to one of twocontexts: non-construction or construction-related(c) To retrieve the relevant information from the eligible references and to tabulate it in thestructured way, i.e. the name of each concept, the purpose, the primary view, (the typologyof) the definitions, the context, the qualitative and quantitative methods, and the empiricalevidence (in a form of in-depth applications, cases, and examples)(d) To introduce and to analyze the common (and possible divergent) definitions of uncertainty,complexity, risk, and crisis to be found within the references(e) To introduce and to analyze all the eligible concepts for managing uncertainty, complexity,risk, and crisis as part of firm, business, and project management in non-construction andconstruction-related contexts(f) To assess the theoretical advancement of each reference and the practical applicability ofeach concept(g) To choose and to introduce one exemplary concept for dealing with uncertainty, complexity,risk, and crisis as part of firm/business and project management509

(h) To compile the direct distributions (listings) of all the eligible management concepts andtheir focuses, contexts, typologies, applications, and techniques/tools as well as to assessthem in terms of commonness, newness, and practical applicability(i) To recommend the most useful concepts of managing uncertainty, complexity, risk, and crisisto construction-related firms (primarily based in Finland) for the planning of their own RMstrategies and procedures(j) To establish a structured, extendable on-line database, in a form of the excel-based tables,that initially consists of all the reviewed references and to plan the procedures for making thecompiled RM literature and the database available among firms based in Finland and forupdating this literature/database in the future(k) To suggest the critical areas and topics for complementary studies in the future.The limitations of the review, i.e. the selection criteria for the inclusion and exclusion of theidentified concepts were set as follows:(i)The systematic search focused only on the scientific and professional books and thescientific articles published in English between the years 2000-2006.(ii) The book search was limited to the on-line catalogues of 23 international publishers,including some professional organizations, and the article search to 20 scientific journals.(iii) Any eligible books must imply a view on uncertainty, complexity, risk and/or crisis.(iv) The typical reasons (criteria) for the exclusions were as follows: (a) the book did notemphasize RM enough, (b) the book focused too much on the technical risks and notenough on any firm, business, or project management risks, and (c) the book focused toomuch on a limited market area or too a specific business.(4) The search for eligible concepts was conducted through the formal channels by using a preselectedset of the search words each time when the initial numbers of the hits were otherwise toolarge (> 500 hits).(5) The inclusion and exclusion of the identified concepts was based on the original selectioncriteria, following the principles of neutrality. A few exceptions were allowed to include some olderkey references (e.g. Flanagan and Norman 1993) on which many recent references are based. Or, tocover less popular sub-populations such as complexity in construction by literature identified outsidethe hits of the basic literature search.(6) The coding, exposure, and analysis of the conceptual data were performed formally by usingthe pre-structured excel database and by exposing each concept and reference in the same way.510

(7) The high validity of the review was pursued after by following the principles of selectivity andneutralism. The comprehensiveness of the book search was tested applying a random check, i.e. “Arethe six key references of Kaliprasad‟s (2006) article on the state-of-art RM in construction included?”All the six references were among the search hits, but only one of them was evaluated to be eligible.The review team consisted on one MSc student, two senior scholars, and one senior doctoralcandidate. This candidate had made his prior career by occupying many key managerial positionsinside the three internationalizing, Finland-based firms. The complementary pre-understanding of themembers increased the likelihood that the principle of neutralism was protected successfully.(8) The reporting was pre-planned, by sub-group, to consist of the basic results, i.e. the review of thereferences that contained the RM concepts (the introductory text and the summary table), the keyfindings (the text paragraphs), and one exemplary concept (the text paragraphs and 1-2 key figures).Finally, the findings and validity of the review enabled (9) to prepare the suggestions for theadvancement of focal, conceptual RM knowledge and future reviews as well as (10) to plan therecommendations to practicing managers (based on the evaluated applicability of the RMconcepts).3.4 Overview of the results of the reviewThe 1 st sub-review, i.e. the comprehensive book search through the 23 publishers‟ digital catalogsand the 3 article databases resulted in the 3247 hits published between 1 January 2000 and 31December 2006, whereof the 388 book-related hits were assessed. Thereof, the 37 eligible books andthe 18 chapters were included into the review. All these hits were based on the 14 publishers‟catalogs. In turn, the complementary article search produced the 914 hits, whereof the 60construction-related articles were included into the review as well (Figure 2).511

Hits in literature search3247 + 914 concepts116 concepts selectedComplexityview10 conceptsUncertaintyview19 conceptsRisk view81 conceptsCrisis view6 conceptsCompl.view inPMcontext4 conceptsComp.view inbusiness/firmcontext6 conceptsUncert.view inPMcontext13conceptsUncert.view inbusiness/firmcontext6 conceptsRisk viewin PMcontext49conceptsRisk viewin bus./firmcontext32conceptsCrisisview inPMcontext2 conceptsCrisisview inbusiness/firmcontext4 conceptsConstructionfocus 0Constructionfocus 0Constructionfocus 5Constructionfocus 1Constructionfocus31Constructionfocus 9Constructionfocus 2Constructionfocus 155No Constructionfocus 4No Constructionfocus 6No Constructionfocus 8No Constructionfocus 5No Constructionfocus 18No Constructionfocus 23No Constructionfocus 0No Constructionfocus 3Figure 2: Overview of a 3-factor categorization of the 6948 hits (published between the years 2000-2006) during the two search rounds in the years 2006 and 2007.In total, the 116 references were reviewed and the inherent RM concepts analyzed (the authors willsubmit a complete list of these references at request). The pre-itemized information was retrievedfrom each reference and typed into a set of the structured tables in order to ensure the similar, reliabletreatment of each reference and each concept. The quoted items included the primary view, thedefinitions and the typologies for the key terms, the name of the concept, the context, the purpose, theapplications, the methods, the techniques, the tools, and the empirical evidence (as the in-depthapplications, the cases, and the examples). The analysis was enabled by the 3-factor categorizationas follows.(1) The enlarged RM view enabled to assign each of the references into one of the four views. The81 (70%) concepts belong to the traditional RM view, the 10 (9%) concepts belong to the complexityview, the 19 (16%) concepts belong to the uncertainty view, and the 6 (5%) concepts belong to thecrisis view.(2) The three focal areas or levels of management could be identified, i.e. the 48 (41%) conceptsare designed for managing firm level or business level issues and the 68 (59%) concepts are designedfor managing project level issues.512

(3) The focal contexts could be grouped into the two groups, i.e. the majority or the 67 (58%)concepts deal with the non-construction contexts. Only the 49 (42%) concepts address the variousconstruction-related contexts. Thereof, the 38 (33%) concepts are designed for managing projectlevel issues and the 11 (9%) concepts are designed for managing firm level or business level issues.In addition, (4) the dual evaluation of each of the 116 references (containing the concepts) wasperformed along the dimensions of theoretical advancement (completeness, system likeness, andvariety) and practical applicability (a variety of applications, methods, techniques, and tools; andempirical evidence) on the 3-level scales. The respective criteria were specified for the high, medium,and low levels, see Table 1. Thus, the 28 (24%) references are theoretically highly advanced, the 69(59%) references are fairly advanced, and the 19 (16%) references are less advanced. In turn, the 20(17%) references are highly applicable, the 62 (53%) references are fairly applicable, and the 34(29%) references are less applicable.4. ConclusionsThe 2-stage review of the conceptual research on enlarged RM has been conducted during the tworounds, during the years 2006 and 2007. It is herein posited that the variety of the enlarged RMconcept types vis-à-vis risk, uncertainty, complexity, and crisis could be identified reliably andcovered to the large extents from within the books and the articles published in English between theyears 2000-2006.In principle, a research review may be considered successful only when it reveals vital needs forfurther research on targeted areas (applying Huovinen 2006) and when its results become a usefulplatform for advancing the knowledge of researchers and practitioners on targeted areas.Table 1: Evaluated levels of the theoretical advancement and the practical applicability of the 116references and the RM concepts, published between 1 January 2000 and 31 December 2006.Level Theoretical advancement Practical applicabilityHigh28 (24%) complete, systemic conceptdesigns with a high variety20 (17%) references with high variety ofapplications, methods, techniques, and toolsand/or highly valid empirical evidenceMediumLow69 (59%) partially systemic conceptdesigns with a limited variety19 (16%) concept designs with no systemicfeatures and no variety62 (53%) references with limited variety ofapplications, methods, techniques, and toolsand/or limited valid empirical evidence34 (29%) references with some or no varietyof applications, methods, techniques, andtools and/or no valid empirical evidenceTotal 116 (100%) references 116 (100%) references513

This review of the RM research is verifiably meeting the two criteria. The 116 references, i.e. the 56books and the 60 articles are today compiled within an enlarged RM library of the unit ofConstruction Management and Economics at Aalto University School of Science and Technology.The structured, extendable Excel database consists of the itemized reviews of the references and theconcepts with the evaluations of the theoretical advancement and the practical applicability,respectively. Since the year 2006, this database has been exploited frequently by scholars and it hasbeen modified and distributed, for example, to lay a ground for the relevant readings as part of newstudies and to provide the theoretical bases for the renewal of RM practices among Finland-based,internationalizing contractors and building product suppliers. In the future, this knowledge of theenlarged RM knowledge will be promoted at seminars, workshops, and public presentations. In thesame vein, the first inquiries on the usefulness of this database will be carried out among businessand project managers.Noticeably, the state-of-art knowledge database becomes soon outdated without updates on acontinuous basis, i.e. many future sub-reviews of books, journal articles, and conference proceedingswill be conducted to support this pioneering database. Readily, it is assumed that new referencespublished after 31 December 2006 provide some novel RM concepts. Thus, a third complementarysub-review is being processed, targeting the books and journal articles published in English betweenthe years 2007-2009 on enlarged RM concepts vis-à-vis risk, uncertainty, complexity, and crisis.Today, researchers rely very rarely on literature reviews as the primary research method. Literaturereviews are no popular subjects within handbooks etc. on research methods. Likewise, only a fewcomprehensive reviews have been conducted vis-à-vis the managing of construction-relatedcompanies, businesses, and projects. Nevertheless, it is herein envisioned that scholars will gaindeeper pre-understanding and rigorous conduct of comprehensive literature reviews in the futureand this will advance the respective piles of generic and applied knowledge. For example, morehighly relevant research problems will be disclosed and formulated as valuable starting points fornew research programs.In general, the rigorousness of a literature review lies in its retractable process and the careful,documented application of the guiding principles (e.g. Huovinen 2006, 2008). Indeed, a hurdle ofvalidity of a literature review can be markedly heightened from the traditional level where reviewsare being started with a few well-known references and such references‟ references as well asresearchers are easily content with random or subjective hints, e.g. recommendations fromcollaborative peers. In some cases, this so-called chain-method may well lead to a high coverage ofup to 80% of relevant, published knowledge, gathered with only 20% of the total (and in part„hidden‟) efforts. Without a systematic, comprehensive search, it is very likely that researchers fail toidentify many contradicting and/or emerging concepts. The same risk is embedded within saturationmethods where new references are sought for until no new information is found, i.e. a researchershould learn the sub-areas and boundaries of a targeted knowledge base before he or she makes adecision that no more interesting knowledge will be looked after.514

ReferencesAhonen L (2007) Managing Uncertainty, Complexity, Risk, and Crisis in Construction. Master‟sThesis. Espoo, TKK Helsinki University of Technology, Structural Engineering and BuildingTechnology.Cooper H M (1998) Synthesizing Research – A Guide for Literature Reviews. 3 rd Edition. New York,Russel Sage Foundation.Cooper H M and Hedges L V (1994) “Potential and Limitations of Research Synthesis” In Cooper HM and Hedges L V (eds.) The Handbook of Research Synthesis. New York, Russell Sage Foundation:521-529.Fink A (2010) Conducting Research Literature Reviews: From Internet to Paper. 3 rdCalifornia, Sage Publications.Edition.Hart C (1998) Doing a Literature Review. Oxford, Sage Publications.Huovinen P (2006) “Reviewing Conceptual Research on the Targeted Area of Construction-relatedManagement”. In Pietroforte R, De Angelis E and Polverino F (Eds.) Proceedings of Joint CIBW65/W55/W86 International Symposium on Construction in the XXI Century: Local and GlobalChallenges, 18-20 October 2006, Rome, Italy. Edizione Scientifiche Italiane.Huovinen P (2008) “Reviewing Conceptual Research on International Management”. In Larimo J(Ed.) Perspectives on Internationalization and International Management. Post-ConferenceProceedings of the 9 th Vaasa Conference on International Business. Proceedings No. 148. Vaasa,University of Vaasa: 363-383.Kaliprasad M (2006) “Proactive Risk Management”. Cost Engineering, 48(12): 26-36.Langlo J, Olson N, Johansen A and Torp O (2007) “Uncertainty management in owner´sperspective”. Proceedings of 21 st IPMA World Congress. 18-21 June 2007. Cracow, Poland.Lehtiranta L, Huovinen P, Palojärvi L, Kiiras J and Jansson N (2010a) Managing Uncertainty,Complexity, Risk, and Crisis in Construction. Espoo, Aalto University School of Science andTechnology, Structural Engineering and Building Technology Publication. (Manuscript)Lehtiranta L, Palojärvi L and Huovinen P (2010b) “Evolution of Construction-Focused RiskManagement Concepts”, Proceedings of CIB World Building Congress 2010 on Building a BetterWorld, 10-13 May 2010, Salford, the UK.Loosemore M (2000) Crisis management in construction projects. ASCE Press.515

Palojärvi L (2009) Managing risks in the international growth business of Finnish constructioncontractors and building product suppliers. Doctoral Dissertation, No. TKK-R-DISS-3. Espoo, TKKHelsinki University of Technology, Department of Structural Engineering and Building Technology.Ridley D (2008) The Literature Review: A Step-by-Step Guide for Students. Cornwall, SagePublications.RIL Association of Finnish Civil Engineers (2004) Envisioned Status of Construction in Finland inthe Year 2030. Report No. RIL 224-2004. Helsinki, RIL. (in Finnish)RT Confederation of Finnish Construction Industries (2004) International Competitiveness ofFinland’s Construction Industries. Report. Helsinki, RT. (in Finnish)Van der Velde R R and van Donk D P (2002) “Understanding bi-project management: Engineeringcomplex industrial construction projects”. International Journal of Project Management 20(7): 525-533.[The authors submit a complete list of the 116 references at request.]516

Critical Success Factors of Sustainable OfficeDevelopment in the NetherlandsVink, G.Eindhoven University of Technology(email: gjaltvink@gmail.com)Abdalla, G.Eindhoven University of Technology(email: g.abdalla@tue.nl)Favié, R.Eindhoven University of Technology(email: r.favie@tue.nl)Huyghe, J.Eindhoven University of Technology(email: j.huyghe@deerns.nl)Maas, G.Eindhoven University of Technology(email: g.j.maas@tue.nl)AbstractCommercial buildings are responsible for large percentage of the global emission of greenhouse. Thedevelopment of sustainable offices is being driven by ecological and political motifs as well as byeconomical and social arguments. Despite all efforts to encourage it, sustainable office developmentis still far from being main stream business. The success of a sustainable office development can beinfluenced by critical success factors at project level. The critical success factor of a constructionproject has gained a considerable attention the last three decades and has extensively been studied byresearchers. However, studies on the critical success factors for sustainable offices development arehardly mentioned. This paper reveals the importance of 23 project critical success factors. This resultis based on face to face interviews and an online multiple choice questionnaire. The factors thathave been considered to be very important are: „commitment to sustainability by the involvedpersons‟, ‟willingness to invest in sustainability by the user‟, ‟focus on long term value creation bythe stakeholders‟, „early involvement of all stakeholders‟, and „clearly defined sustainability goals‟.The study shows that project stakeholders have different perceptions about the project success andsubsequently the importance of the success factors.Keywords: critical success factors, sustainable office development, the Netherlands.517

1. IntroductionSustainable development is considered to be a quality of life; allowing people to live in a healthyenvironment and improve social, economic and environmental conditions for present and futuregenerations (Ortiz et al., 2009). In the last years, sustainable development has gained much attention.The Brundtland report has called for a strategy to unify the building development and theenvironmental impact. Sustainable development has to meet the needs of the present withoutcompromising the ability of future generations to meet their own needs (Brundtland report, 1987).Commercial and residential buildings are responsible for a large percentage of global emissions ofgreenhouse gases from fossil fuel combustion (Coffey et al., 2009). In the USA, residential andcommercial buildings are responsible for 18% and 21% respectively of this total greenhouse gasproduction (Kwoka and Rajkovich, 2010). In Europe, the building sector is responsible for one thirdof the total energy consumption (Brown and Southworth, 2008). The commercial building sector hastherefore great potentials to mitigate CO2 emissions and reduce energy consumption.In recent years, sustainable office development has gained attention from both governmentalorganizations and commercial companies (Clift, 2007). Research has contributed to this developmentby evaluating new technical solutions for sustainable building and possibilities for governments tostimulate sustainable development. From the perspective of the developing companies, however, littleresearch has been done on the critical success factors in the process of developing sustainable offices.1.1 Barriers for sustainable office developmentsBarriers for sustainable office developments begin at the design stage. There is no an evident goal.Clients rarely demand an energy efficient building, and architects are not forcing it on to the agenda(Scrase, 2001); this is part of the so called the circle of blame phenomenon (SCFG, 2000). Otherbarriers mentioned are: the involvement of the environmental engineers is to late in the designprocess in general and particular in the design process building services (Bordass, 1993), theperception that sustainable buildings are costly and non standard products (Gibson and Lizieri, 1999),lack of information on energy costs for the tenant (Gibson and Lizieri, 1999), non-ownership ofbuildings and benefits of sustainable offices are intangible, or poorly understood, by commercialproperty investors, owners and professionals (Scrase, 2001).1.2 The project critical success factorsThe concept of project success factors is first introduced by Ruben and Seeling in the year 1967(Rubin and Seeling, 1967) and the terminology critical success factors (CSF) is used by Rockart in1982 for the first time (Rockart, 1982). In the last three decades a considerable many studies havebeen executed on CSFs for construction projects. Researchers are (Ashley et al. 1987), (Jefferies etal., 2002), (Pinto and Selvin, 1988), (Songer and Molenaar, 1997), (Chan et al., 2001), (Nguyen et al,518

2004), (Fortune and White, 2006) and (Toor and Ogunlana, 2008). The CSF approach has been alsolinked with Core Competency (Lowes et al., 1994), Value Chain (Johnson & Scholes, 1993) andBusiness Process (Watson, 1993) perspectives.Stakeholders of sustainable construction projects have different perceptions about success factors fora project compared to the opinions of the project team members and designers, (Phua, 2004). This isdue to their distinctive interests in the project (Chan et al., 2001). Beside this the project criticalsuccess factors itself are likely different due to the variable nature and distinct objectives of everyconstruction project (Chua et al., 1999). A traditional definition of project success emphasizes time,cost and quality as criteria of project success (Ogunlana, 2009). This definition has been criticized by(Low and Chuan, 2006) as inadequate and incomprehensive and can lead, due to incommensurabilityof project success and product success, to very difficult and ambiguous objective measurement. Otherauthors define project success as completing the project according to certain specifications, with timeand budget, and in accordance with stakeholder‟s satisfaction (Savindo et al. 1992), (Munns andBjeirmi, 1996) and (Nguyen et al., 2004). In the context of this study the project success was definedas: the completion of an office building project within time and budget with a Greencalc+ score of atleast 240 points, an energy label of minimum A+, an above average healthy and comfortable indoorclimate and the application of sustainable materials”. Criteria used in this definition were used tochoose six sustainable office projects for the case study in the first phase of data collection.Studies on critical success factors for construction projects are context and country specific and aredepended on the nature and the structure of the local (Toor and Ogunlana, 2008). Despite thisconsiderable amount of attention given to the CSF approach by both academics and practitioners, theliterature reveals no distinct CSF study in the context of sustainable office buildings. This paper aimsat elucidating the project CSF of sustainable office developments in the Netherlands and explainingtheir importance from the stakeholder‟s point of view.2. The research approachThe research is conducted through two phases of data collection; a multiple case study research andan online multiple-choice questionnaire.The first phase of this research consisted of a multiple case study research. In this case studyresearch, six sustainable office projects in the Netherlands have been analysed and key persons of theinvolved project developing companies have been interviewed (table 1). The results of this multiplecase study research were compared to the existing critical success factors. The comparison hasresulted in a list of 23 variables which can influence the decision making phase of sustainable officedevelopment and subsequently the project success (table 2).519

Table 1: The six sustainable office projects used in the studyCases Location User Area Developing companyTNT Green Office Hoofddorp, NL TNT 5.300 m2 Triodos REDKraanspoor Amsterdam Noord Different tenants 12.500 m2 ING Real EstateAkzoNobel HQ Amsterdam, Zuidas AkzoNobel 12.000 m2 ING Real EstateCross Towers Amsterdam, Zuidas Ernst & Young 30.000 m2 ING Real EstateBaltimore Rotterdam, NL not known 50.000 m2 ING Real EstateBussumse Watertoren Bussum Zuid, NL Different tenants 3.500m2 VOCUS architects bnaTable 2: List of success factors of sustainable office developments for questionnaire surveyNumber Description of the factors1 Commitment to sustainability2 Integral designing3 Early involvement of all stakeholders in project4 Focus on maximizing long term value project5 Clearly defined sustainability goals in project6 Use of LCA tools by PM7 Soft skills PM8 Use of sustainability design tools (Greencalc+, BREEAM)9 High sustainability ambitions10 Willingness user to invest in sustainability11 Active involvement of user in development process12 Innovative financing constructions13 Developer takes responsibility in operation phase14 Use of sustainability policy by stakeholders15 Internal knowledge development by stakeholders16 Focus on long term value creation by stakeholders17 Minimum sustainability requirements by local government18 High sustainability ambitions of national and EU government19 Long term stability in sustainability politics20 Economical situation21 Market competition based on sustainability performance22 Image of sustainability among the public23 Technological product innovations in building parts520

For practical reasons, the numbers of the variables will be used hereafter instead of variablesthemselves.In the second phase, an online multiple-choice questionnaire was conducted, in which the influenceof the 23 factors on the project success was measured. This questionnaire was distributed among 278professionals in the construction and real estate industry with affinity to sustainable officedevelopment; these professionals all attended the sustainability congress at the Dutch PROVADA2008, a real estate congress in The Netherlands.The respondents were asked to rate the influence of the 23 variables on the project success. A fivepoints scale of Likert (5=very high influence, 1=no influence) is used to measure this influence as itis widely used for measuring attitudes, e.g., opinions, psychic and mental dispositions, preferences. Inthis study, the project success was defined as “the completion of an office building project withintime and budget with a Greencalc+ score of at least 240 points, an energy label of minimum A+, anabove average healthy and comfortable indoor climate and the application of sustainable materials”.Greencalc+ is currently one of the most commonly used sustainability assessment tools in TheNetherlands.A total number of 74 people responded (response percentage about 27%), of which 23 projectdevelopers, 17 advisors, 9 designers, 8 builders, 4 clients, 3 investors, 4 researchers and 6 others.Based on their responsibility and role during the development process, the project developers andbuilders are grouped in group 1, and the advisors and designers are grouped in group 2. Otherresponses; clients, investors, researchers, have been neglected due to the relative low response.3. ResultsThe analysis of the collected data consisted of two steps. In the first step, the modes and means ofand the correlation between the variables of the all respondents have been measured collectively aswell as for the both of groups individually (Table 3). The majority of respondents consider variables1, 10, 16, 3, 5 and 4 as highly important (having a mode of 5). Comparing the mode and mean for theboth respondents groups, there are no significant differences between the importance of the factors.By means of a spearman‟s correlation test the correlation between the 23 variables was measuredwith (p=0,01). For all respondents a matrix with all 23 variables added with 3 personal features (workcategory, experience and responsibility during the decision making process‟ variables was created. Inthis correlation matrix a large number of correlations appeared. However, the correlation factors arenot very high. The correlated variables are:Group 1: variables 2, 6, 9, 10, 12, 20, 21, 22, 23Group 2: variables 1, 2, 4, 5, 6, 8, 9, 11, 14, 16, 19521

Table 3: Modes and means of the variables for sustainable office developmentGroup 1 and 2 together Group 1 Group 2factor N Mode Mean factor N Mode Mean factor N Mode Mean1 74 5 4,59 1 31 5 4,71 10 25 5 4,6410 74 5 4,5 10 31 5 4,58 1 25 5 4,442 74 4 4,35 2 31 5 4,42 2 25 4 4,3616 74 5 4,32 16 31 5 4,32 3 25 4 4,329 74 4 4,32 9 31 4 4,32 4 25 5 4,283 74 5 4,24 5 31 5 4,26 9 25 5 4,2819 73 4 4,22 3 31 5 4,23 16 25 5 4,245 73 5 4,21 19 30 4 4,20 19 25 5 4,244 74 5 4,19 4 31 4 4,16 5 25 5 4,1215 74 4 4,08 15 31 4 4,10 17 25 4 4,087 72 4 4,03 11 31 4 4,10 6 23 4 4,046 68 4 4,03 6 27 4 4,00 7 25 4 4,0423 72 4 3,97 7 30 4 4,00 18 25 4 4,0014 74 4 3,96 23 31 4 3,97 14 25 4 3,9611 74 4 3,96 8 29 4 3,90 15 25 4 3,9217 73 4 3,88 14 31 4 3,87 21 25 4 3,9221 73 4 3,81 12 31 4 3,77 23 24 4 3,928 68 4 3,76 21 31 4 3,74 11 25 4 3,8422 73 4 3,71 17 30 4 3,63 22 25 4 3,7618 73 4 3,7 22 30 4 3,60 20 24 4 3,7512 72 4 3,67 20 31 3 3,61 8 24 4 3,6720 73 3 3,58 13 30 3 3,47 13 23 4 3,5713 71 4 3,49 18 30 3 3,37 12 23 4 3,57For a further comparison of groups 1 and 2, a principal components analysis PCA was performed inthe second step. PCA is a statistical technique that is used to examine the underlying patterns orrelationships for a large number of variables and to determine whether several variables can becondensed or summarized into a smaller set of explainable components. The variables with acorrelation (p=0.01) in at least one of these groups were included in the analysis. These are successfactors 1, 2, 4, 5, 6, 8, 9, 10, 11, 12, 14, 16, 19, 20, 21, 22 and 23. The rotated component matrices ofthe PCA are shown in (tables 4).The lower limit of eigenvalues is taken as 0.60 during analysis. Principal component analysisproduced a four factor solution with eigenvalues greater than 0.6, explaining 53% of the variance ofgroup 1, and explaining 59% of the variance of group 2, as shown in Table 4.522

Table 4: the rotated Component Matrix of the principal components analysisGroup 1 Group 2Var.nr.Component*Var.nr.Component**15% 14% 12% 12% 20% 15% 13% 11%1 2 3 4 1 2 3 41 0,88 -0,09 -0,14 -0,07 6 0,76 -0,06 0,17 -0,046 0,74 0,31 0,1 -0,11 2 0,75 0,22 0,28 -0,2816 0,71 0,19 0,23 0,17 4 0,7 0,1 -0,13 0,162 0,67 0,07 -0,2 0,37 11 0,7 0,13 0,12 -0,0423 0,06 0,86 0 -0,06 5 0,63 0,36 0,12 0,4522 0,14 0,82 0,01 -0,21 8 0,06 0,92 0,06 -0,1221 0,07 0,60 -0,06 0,54 14 0,16 0,79 0,23 0,0420 -0,14 0,14 0,89 0,16 1 0,15 0,01 0,87 0,0510 0 -0,15 0,73 -0,28 9 0,1 0,47 0,71 -0,159 0,14 0,07 0,63 0,2 21 -0,14 -0,25 0,01 0,815 -0,11 -0,11 0,09 0,86 19 0,22 0,09 -0,01 0,714 0,42 -0,09 0,01 0,61 23 0 0,09 0,03 -0,1511 0,07 0,11 0,27 0,07 16 0,54 -0,39 -0,1 0,3119 -0,08 0,19 0,2 -0,29 10 0,57 -0,17 -0,23 0,2614 0,08 0,41 0,32 0,19 12 0,12 -0,04 0,26 0,1112 0,09 0,02 0,01 0,09 22 0,23 -0,53 0,49 -0,088 -0,08 0,46 0,19 0,22 20 -0,25 0,17 0,56 0,44* First 4 components: % of variance explained: 53%Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.Rotation converged in 13 iterations.** First 4 components: % of variance explained: 59%Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.Rotation converged in 11 iterations.The Varimax orthogonal rotation of principle component analysis was used to interpret the factorgroupings formed. The four factor groupings and their related factors have been shown in table 5:Table 5: Factor groupings for critical success factorsRelated variables Factor grouping1 Factor grouping2 Factor grouping3 Factor grouping4Group 1 1, 6, 16, 2 21,23, 22 20,10,9 5,4Group 2 6, 2, 4, 11, 5 8, 14 1, 9 19, 21523

4. DiscussionFrom the first analysis, five variables were ranked as highest in the total group of respondents. Theseare the „1-commitment to sustainability by the involved persons‟, ‟10-willingness to invest insustainability by the user‟, ‟16-focus on long term value creation by the stakeholders‟, „3-earlyinvolvement of all stakeholders‟, and „5-clearly defined sustainability goals‟. The variables „20-economical situation‟, ‟13-developer takes responsibility in operation phase‟ and ‟12-innovativefinancing constructions‟ are the least important variables. This result largely corresponds to factorsidentified by (Fortune and White, 2006) which are deducted from an extensive comparative studieson project success factors and their underlying relationships. The results also correspond to a largeextend with other research on sustainable construction (Van Hal, 2000). However, the resultscorrespond limitedly to critical success factors of large-scale construction projects identified by (Toorand Ogunlano, 2008). In their study, where the sustainability aspect is totally not emphasized, factorsrelated to planning, sources allocation, communication and contract are mentioned as very important.The difference with the results of this paper corresponds to the nature of sustainable officedevelopments and the perception that sustainable goals of project can only be achieved on the longterm by a committed management and interdisciplinary design team (Koutsikouri et al., 2008).There are no significant differences between project developers/builders (group 1) andadvisors/designers (group 2), except that group 2 considers the role of the government moreimportant than group 1. This difference between the two groups corresponds to the role and theresponsibility in the design stage of a project, in which group 1 has an executive role and group 2 hasan advisory one.From the correlation analysis we have concluded, that the variables 1, 2, 4, 5, 6, 8, 9, 10, 11, 12, 14,16, 19, 20, 21, 22, 23 have significant correlation with one or more other variables in either one orboth groups of respondents. However, the correlation factors are not very high. Based on the resultsof the PCA we have made four factor groupings. These groupings could be explained as follow:Developers and builders, group 1, consider clearly defined project goals and the use of LCA toolsessential to translate their commitment and long term vision in an integrative design process (factorgrouping 1, variables 1, 6, 16 and 2). The implementation of innovations in the construction industryby companies will improve their image and strengthen their competition position in the market (factorgrouping 2, variables 23, 22 and 21). In addition, they consider the demand for sustainable offices byambitious clients that are willing to invest in sustainability as associated with a flourishing economy(factor grouping 3, variables 20, 10 and 9). Moreover, because of lacking standards caused by in theinstable Dutch sustainability policy, developers need to involve the client more actively in thedevelopment process (factor grouping 3, variables 5 and 4). With these four factor groupings 53% ofthe variance is explained among project developers and builders.According to advisors and designers, the first factor grouping (explaining 20% of variance) has fivevariables (variables 6, 2, 4, 11 and 5). In an integrative design process, it is important to focus on longterm value maximisation. The client should be willing to invest in sustainability and should beinvolved actively in the development process. The sustainability goals need to be clearly defined and524

the project manager needs LCA tools to control these goals. In addition, the „Commitment tosustainability‟ and „High sustainability ambitions‟ of clients are very important to initiate asustainable office development (factor grouping 2, explaining 13% of the variance, variables 1 and9). This view is similar to the developers‟ response. This group considers also that conservativeconstruction industry has to be innovated through maintaining sustainable policies and focusing onmarket competition based on sustainability (factor grouping 4, variables 19 and 21).5. ConclusionThis paper has shown that important critical success factors for sustainable office development are:„Commitment to sustainability by the involved persons‟, „Willingness of the end-user to invest insustainability‟, „Focus on long term value creation by all stakeholders‟, „Early involvement of allstakeholders in an integral design process‟ and „Clearly defined sustainability goals‟. Theconstruction industry faces a great challenge in changing the current way of thinking and doingbusiness. This means a face lift of the current construction process through improving theinvolvement of the stakeholders timely and effectively in the design stage, through defining realisticand clear project goals, through adopting the sustainability in all levels in the organisation. Becauseof the difference in the role, influence and the responsibility during the design process, stakeholdersthink differently over the project success and have different perceptions about success factors for aproject. Project critical success factors are likely different due to the variable nature and districtobjectives of every construction project.ReferencesAshley, D.B., Lurie, C.S. & Jaselskis, E.J. (1987). Determinants of construction project success.Project Management Journal, 18, 69-79.Bordass, W. (1993). Building performance for the responsible workplace. The ResponsibleWorkplace, 78-94.Brown, M.A., Southworth, F. & Sarzynski, A. (2008). Shrinking the carbon footprint of metropolitanAmerica. Washington: Brookings Institution,Brundtland, G.H. (1987). Our Common Future/World Commission on Environment andDevelopment. Oxford University Press Oxford.Chan, A.P.C., Ho, D.C.K. & Tam, C.M. (2001). Design and build project success factors:multivariate analysis. Journal of Construction Engineering and Management, 127, 93Chan, A.P.C., Scott, D. & Chan, A.P.L. (2004). Factors affecting the success of a constructionproject. Journal of Construction Engineering and Management, 130, 153-155.525

Chua, D.K.H., Kog, Y.C. & Loh, P.K. (1999). Critical success factors for different project objectives.Journal of Construction Engineering and Management, 125, 142-150.Clift, R. (2007). Climate change and energy policy: The importance of sustainability arguments.Energy, 32, 262-268.Coffey, B., Borgeson, S., Selkowitz, S., Apte, J., Mathew, P. & Haves, P. (2009). Towards a verylow-energy building stock: Modelling the US commercial building sector to support policy andinnovation planning. Building Research and Information, 37, 610-624.EPA. (2008) Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2006. Washington, DC,Environmental Protection Agency (EPA).Fortune, J. & White, D. (2006). Framing of project critical success factors by a systems model.International Journal of Project Management, 24, 53-65.Gibson, V. & Lizieri, C. (1999). New business practices and the corporate property portfolio: Howresponsive is the UK property market? Journal of Property Research, 16, 201-218.Jefferies, M., Gameson, R., & Rowlinson, S. (2002). Critical success factors of the BOOTprocurement system: Reflection from the stadium Australia case study.Eng.Construct.Architect.Manage., 9, 352-361.Johnson, G., & Scholes, K. (1993). Exploring Corporate Strategy: Text and Cases. HammondManagement Learning.1993; 24: 297-298.Low, S.P. & Chuan, Q. (2006), "Environmental factors and work performance of project managers inthe construction industry", International Journal of Project Management, Vol.24, No. 1, pp 24-37.Koutsikouri, D., Austin, S., & Dainty, A. (2008). Critical success factors in collaborative multidisciplinarydesign projects. Journal of Engineering, Design and Technology, 6,Kwok, A.G. & Rajkovich, N.B. (2010). Addressing climate change in comfort standards. Buildingand Environment, 45, 18-22.Lowes, B., Pass, C., Sanderson, S. (1994), Companies and Markets: Understanding Business Strategyand the Market Environment, Blackwell, Oxford,Lutzkendorf, T. & Lorenz, D. (2005). Sustainable property investment: Valuing sustainable buildingsthrough property performance assessment. Building Research and Information, 33, 212-234.Munns, A.K. & Bjeirmi, B.F. (1996). The role of project management in achieving project success.International Journal of Project Management, 14, 81-87.526

Nguyen, L.D., Ogunlana, S.O., & Lan, D.T.X. (2004). A study on project success factors in largeconstruction projects in Vietnam. Engineering, Construction and Architectural Management, 11, 404-413.Ogunlana, S.O. (2009). Construction professionals perception of critical success factors for largescaleconstruction projects. Construction Innovation, 9, 149-167.Ortiz, O., Castells, F., & Sonnemann, G. (2009). Sustainability in the construction industry: A reviewof recent developments based on LCA. Construction and Building Materials, 23, 28-39.Pheng, L.S. & Chuan, Q.T. (2006). Environmental factors and work performance of project managersin the construction industry. International Journal of Project Management, 24, 24-37.Phua, F.T.T. (2004). Modelling the determinants of multi-firm project success: a groundedexploration of differing participant perspectives. Construction Management & Economics, 22, 451-459.Pinto, J.K., Slevin, D.P. (1988), "Critical success factors across the project life cycle", ProjectManagement Journal, Vol.19, No. 3, pp 67-75Rapson, D., Shiers, D., Roberts, C. & Keeping, M. (2007). Socially responsible property investment(SRPI): An analysis of the relationship between equities SRI and UK property investment activities.Journal of Property Investment and Finance, 25, 342-358.Rockart, J.F. (1982). The changing role of the information systems executive: a critical successfactors perspective. Sloan Management Review, 24, 3-13.Rubin, I.M. & Seeling, W. (1967). Experience as a factor in the selection and performance of projectmanagers. IEEE Transactions on Engineering and Management, 14, 131-135.Sanvido, V., Grobler, F., Parfitt, K., Guvenis, M. & Coyle, M. (1992). Critical success factors forconstruction projects. Journal of Construction Engineering and Management, 118, 94-111.SCFG. (2000). SCFG Towards Sustainability: A Strategy for the Construction Industry. SustainableConstruction Focus Group, Construction Confederation, CIP Ltd,Scrase, J.I. (2001). Curbing the growth in UK commercial energy consumption. Building Researchand Information, 29, 51-61.Songer, A.D. & Molenaar, K.R. (1997). Project characteristics for successful public-sector designbuild.Journal of Construction Engineering and Management, 123, 34-40.Sorrell, S. (2003). Making the link: climate policy and the reform of the UK construction industry.Energy Policy, 31, 865-878.527

Toor, S. & Ogunlana, S.O. (2008). Critical COMs of success in large-scale construction projects:Evidence from Thailand construction industry. International Journal of Project Management, 26, 420-430.Van Hal, A. (2000). Beyond the demonstration project: the diffusion of environmental innovations inhousing. Uitgeverij Aeneas BV.Watson, G.H. (1993). How process benchmarking supports corporate strategy. Planning Review,21, 12-15.528

Sustainable Development in Construction: A Tool toBridge the Gap between Strategic and TacticalPlanningHerazo-Cueto, B.Groupe de recherche if, Faculté de l’aménagement, Université de Montréal(email: bj.herazo.cueto@umontreal.ca)Lizarralde, G.Groupe de recherche if, École d’architecture, Université de Montréal(email: gonzalo.lizarralde@umontreal.ca)AbstractThe adoption of the principles of sustainable development (SD) is increasingly seen as an importantway to align the strategic plan of organizations with the specific objectives and procedures used forproject execution. However, more research is still needed to identify how SD contributes to align thestrategic plan of clients of the building sector with their short-term needs of construction projects(their tactic plans).This article presents the preliminary results of an ongoing research project thathypothesises that SD contributes to bridge the gap between the strategic plan of construction clientsand their project-based tactical planning. It presents a case study of an institutional constructionclient in Canada that has incorporated principles of SD in both project procedures and strategicmanagement. The client currently conducts a project aiming a LEED certification. The key studyfindings are: (i) important changes have been noticed in the tendering process, and (ii) top-downenvironmental management plans and environmental management systems have been implementedunder the pressure of various bottom-up initiatives of environmental responsibility. The principles ofSD now transcend both short-term needs and long term responsibility, potentially facilitating thealignment of the strategic and tactical plans.Keywords: sustainable management, temporary multi-organization, strategic management,sustainable construction, project management.529

1. IntroductionInternational corporations are increasingly using the principles of sustainable development (SD) toalign corporate vision, mission and objectives with day-to-day decision making conducted at the levelof individual projects (Fister, 2009). These organizations (including Saatchi & Saatchi, L’Oreal andYahoo! Inc.) increasingly perceive that the principles that represent sustainable practices (see secondcolumn in table1) contribute to coordinate two hitherto fragmented scales of decision making:strategic and project management. “A good sustainability manager and a strong project managerworking together can make that connection, bringing the business priorities down to the project leveland making sure those metrics are measured” say Christina Page, of Yahoo! Inc (Sunnyvale,California) (Fister, 2009). However, insufficient knowledge still exists on what is the scope of thisinfluence in the building sector.The concept of alignment has gained wide acceptance in management. The term permits to explicitlyexamine the relations between strategies, structure, and planning methodologies within organizations(Reich & Benbasat, 2000). The concept has been largely used in strategic management to describe,for instance, the relationship between business goals and products of information technology.Nogeste (2008) uses the concept of alignment to describe the link between intangible projectoutcomes and tangible project outputs. Similarly, Pulaski (2005) uses it to describe the relationsbetween the objectives of sustainability and those of the construction process.The purpose of this article is to report the preliminary results of an ongoing research project thatexplores the influence of SD in the alignment of strategic planning and tactical project managementin organizations that commission construction projects. The article begins with a review of strategicplanning and tactic management concepts, highlighting the gaps that exist between the twoapproaches. It then presents the principles of sustainable development as a possible link betweenstrategic and project management in design and construction projects. This is followed by theexplanation of the case study approach and other qualitative methods used. It then presents thepatterns found in the case study, the preliminary results of the study and an overview of further stepssill required in this research.2. Strategic and tactic management in constructionStrategic planning is based on the explicit description of the organization’s mission, vision andstrategy (Byars, 1984). The organization’s strategy is often seen as a “top management’s unique planto develop and sustain competitive advantage and superior performance so that the organization’smission is fulfilled" (Parnell, 2008, p. 37). According to Mintzberg (1987), it reflects the results oforganizational learning by incorporating patterns of behaviour that have worked best. Thus, it enablesthe organization to fully concentrate its resources and exploit its skills and knowledge. While themission is the reason behind the very existence (and pertinence) of the organization, and its vision isthe ideal state of the organization in the future, the strategy defines the way to achieve that ideal state(Naaranoja, Haapalainen, & Lonka, 2007). Strategies therefore identify the high objectives of theorganization and dictate the long-term direction of the most important activities (Byars, 1984).530

Strategic management thus refers to a process that includes top management’s analysis of theorganisation’s internal and external environments prior to formulating a strategy, as well as long-termplans for implementation and control (Parnell, 2008).However, urgent problems and some of the needs of organizations must often be solved byresponding to precise objectives in the short term; that is to say, at a tactical level. Projects efficientlyrespond to tactic needs, they are indeed dedicated to the attainment of a specific and measurable goalin conformance with predetermined performance specifications (Gaddis, 1959; PMI, 2008). Eventhough, project management permits to organize and coordinate the activities that respond to a tacticplan, it is often considered as a linear sequence of procedures and methods that is not adequate tomanage the complex situations that modern organisations must now confront (Thiry & Deguire,2007). A number of authors therefore claim that an important transformation of the discipline ofproject management is needed to respond to the dynamic and integrative needs of current projects(Forgues & Koskela, 2009; Koskela & Howell, 2002).The dichotomy between strategic and tactical approaches have led some authors to identify two maintheoretical traditions: "The first tradition with intellectual roots in the engineering science andapplied mathematics, primarily interested in the planning techniques and methods of projectmanagement. The other tradition with its intellectual roots in the social sciences, such as sociology,organization theory and psychology, especially interested in the organizational aspects of projectorganizations" (Söderlund, 2004, p. 185).Some authors have thus identified a gap between the strategic and tactical levels of management(Katsanis, 1998). According to Thiry (2007), "the actual strategy process, in contrast to projectprocesses, is often not planned, linear and rational, but rather ongoing, emergent and enacted" (Thiry& Deguire, 2007, p. 649). However, project management practices influence organisational strategiesand vice versa (Thiry & Deguire, 2007). However, insufficient knowledge exist on how the projectplanning and management influences strategic organisation levels (Thiry & Deguire, 2007).The existing gap between strategic and tactical planning in the building sector is not surprising.Adapting the principles of long-term strategic planning in a project-based industry (like the buildingindustry) is not an easy task. At least four main difficulties arise. First, fragmentation: Theorganizational fragmentation that characterises the building sector (Cherns & Bryant, 1984; Mohsini& Davidson, 1991) reduces the capacity of organizations of design and implement concerted longtermplans (Bryde, 2008). Second, project complexity: Construction projects are becomingincreasingly complex requiring more participants, involving additional stakeholders and rising thelevel of specialization of project actors (Langford & Male, 2001; Ngowi, Pienaar, Talukhaba, &Mbachu, 2005). The linear approaches to construction management are insufficient to fully integrateproject actors (Forgues & Koskela, 2009), let alone to align their objectives and strategies (Maqsood,Finegan, & Walker, 2003). Third, environmental complexity: Strategic management is based on acomprehensive knowledge of the environment, but in project-based businesses, project environmentsare highly dynamic and thus the establishment of a vision is difficult (Naaranoja, et al., 2007).Fourth, the size of companies: The fragility of the project temporary teams (due to their fragmentednature) increases the vulnerability of companies (particularly small and medium-sized enterprises -531

SMEs, which account for 90% of the industry) to fluctuating commercial and financial environments(Davidson, 1988). SMEs cannot easily implement research and development departments orknowledge management procedures, making it difficult for companies to manage uncertainty, shareknowledge and, thus, create strategic approaches (Leslie & McKay, 1995).3. Sustainability in strategic and project managementThe Agenda 21 defined sustainable construction as: "a holistic process in which the principles ofsustainable development are applied to the comprehensive construction cycle, from the extraction andbeneficiation of raw materials, through the planning, design, and construction of buildings andinfrastructure, until their possible final deconstruction, and management of the resultant waste" (DuPlessis, 2002, p. 6). Even though there are many interpretations of sustainable development, acommon consensus exists towards its adoption in the building sector. This, despite of the fact that theconstruction industry has been accused of causing various environmental problems “ranging fromexcessive consumption of global resources both in terms of construction and building operation to thepollution of the surrounding environment” (Ding, 2008).Table 1: Sustainability as bridge link between strategic and tactical planning.Strategic planningSustainabledevelopmentTactical planningBased onVisionMissionObjectives (Byars,1984)Social, economic andenvironmentalresponsibility(Brundtland, 1987)Respect of quality, time andcost (PMI, 2008)ScopeLong-term (Langford &Male, 2001)Short term decisions andlong term effects(Gladwin, Kennelly, &Krause, 1995)Short term (PMI, 2008)Main decisionmakersTop management(Betts, 1999)All levels (López-Fernández & Serrano-Bedia, 2007)Team managers, projectleaders (Raiden, Dainty, &Neale, 2004)Approaches toimplementationStrategic management(Byars, 1984)Sustainable strategicmanagement (Stead &Stead, 2008)Project management (PMI,2008)Means to reachobjectivesMotivation, review ofprocedures,negotiation (Mintzberg,1993)Integrative actions,consultation andnegotiation betweenstakeholders (Hacking &Guthrie, 2006)Programming and control(PMI, 2008)StandardsISO 9000 (Kelada,1996)ISO 14000, GBTool,BEES, LEED, (Cole,2005)Project Management Bodyof Knowledge (APM, 2006;PMI, 2008); Code ofpractice for projectmanagement for532

construction anddevelopment (CharteredInstitute of Building, 2002)FocusThe pertinence andrelevance of theorganization in theenvironment(Mintzberg, 1987)Alignment of short termneeds with long termresponsibilities(Gladwin, et al., 1995)Responding to a need and aclearly identified objective(Gaddis, 1959; PMI, 2008)Approach to controlBased on monitoringchange in theenvironment (Kato,2008)Based on impactassessments (Glasson,Therivel, & Chadwick,2005)Based on controllingschedule, budget and quality(Williams, (1999)Ultimate focusOrganization-focused(Wysocki, 2003)Environment-focused(Stead & Stead, 2008)Project-focused (Walker,2007)In the construction industry, where each project is unique, one of the main challenges is monitoringenvironmental performance over time (Christini, Fetsko, & Hendrickson, 2004). During the phases ofplanning and designing, most architects and consultants now search for new materials and innovationto improve environmental efficiency. However, it is in the management of the project itself wherestrong innovations are now needed to bridge the gap between sustainable objectives and tactical plans(Forgues & Koskela, 2009; Naaranoja, et al., 2007). New approaches have recently emerged toreduce the gap between long-term management objectives and short term management goals.Shrivastava (1993), Parnell (2008) and Stead & Stead (2008) have develop a conceptual frameworksthat merge strategic management, sustainable development and project management. Stead & Stead(2008) call this approach Sustainable Strategic Management (SSM), which proposes “a morecomprehensive global view of the term [strategic management], referring not only to the survival andrenewal of the firm itself, but also to the survival and renewal of the greater economic system, socialsystem, and ecosystem in which the firm is embedded” (Stead & Stead, 2008, p. 73).Table 1 shows the characteristics of strategic planning, tactical planning and sustainable developmentas they have been discussed in the literature. The table illustrates the important differences betweenstrategic and tactical levels and shows how the principles of sustainable development respond tosome of the characteristics of the two approaches.4. Research designThe objective of this research is to identify how SD contributes to align the strategic plan of clientsof the building sector with their short-term needs of construction projects (the tactic plans). Weadopted a qualitative research approach, and more specifically the study case method proposed byYin (2003). Case studies are often “based on interviews, which are used to investigate technicalaspects of a contemporary phenomenon with its real life context; when the boundaries betweenphenomenon and context are not clearly evident; and in which multiple sources of evidence are used”(Yin, 2003 p.3). The research includes the detailed analysis of three study cases. In this article, we533

present the preliminary results obtained from the analysis of the first case, which was used as a pilotstudy of the research.It was important for the study to examine the case of construction clients that simultaneouslyestablish strategic plans and tactical plans. It was also important to identify organizations that haveadopted principles of SD. We therefore decided to examine construction clients that have thefollowing characteristics:1. Experienced clients, as defined by Gameson & Masterman (1994), namely organizations that havegained experience after commissioning more than one construction project. This is important becauseone-off clients do not have the same opportunity as experienced clients to learn from tacticalmanagement decisions to improve strategic management procedures.2. Secondary clients: that is, organizations who require buildings to enable them to house andundertake their own main activities. We therefore omitted primary clients (whose main activityconsists in constructing buildings for sale, lease, investment, etc.) (Nahapiet & Nahapiet, 1985). Thisis important because, contrary to primary clients such as residential and commercial developers,secondary clients establish strategic plans that are not directly focused on improving constructionpractices.3. Institutional clients in Canada, where the term “institutional clients” describes large and complexorganizations that may operate with mixed capital (private and public). We therefore aimed atmedium-size or large-size organizations, deliberately avoiding small enterprises that probably havenot established formal strategic management procedures.These criteria led us to identify institutions that operate in the following sectors: education, financialservices, public health, etc. In other to facilitate access to information, we opted for studying threeuniversities that are currently conducting large construction projects.The first part of the study involved the review of the literature on organizational theory, sustainabledevelopment, knowledge management, project management and strategic planning. A particularattention was given to articles and documents that discussed the relations between strategic andplanning management. The second part of the study included a review of documents and printedmaterial related with the case study. This included: official documents about building policies,contractual documents, project reports, meeting reports, feasibility studies, etc. This second step ofthe study also included conducting an interview with the project manager in charge of thedepartment of building procurement in the organization. The interview has been complemented byseveral informal discussions in order to clarify information and experiences gained from the project.We then adopted the methods of triangulation of information for case study research proposed byProverbs & Gameson (2008). This permitted us to compare written information with data obtainedfrom the interviews. In case of discrepancies between the two sources, validity was given to printedmaterial.534

The third part of the study included analysing the data obtained. This included identifying the projectstakeholders and representing their relations in a graphic manner (see figure 1). It also includedorganizing the information according to the principles and categories previously identified in theliterature (following the structure used in table 1).5. Results of the case studyClient’s strategic plan: The mission of the University of Quebec (UQ) is the advancement oflearning and scientific research, a mission adopted in 1967 (Université de Montréal, 1967). Thecurrent document of strategic planning - called the White Book - was adopted in 2007 and itcomprises the actions to be taken between 2007 and 2010. It was the result of extensive consultationwith the academic community, including units, departments, employees’ unions, student associations,etc. The rector of the university must present every year a report of activities responding to theobjectives of the White Book. This report is presented annually to the community by the Rector in anopen lecture.Client structure: The top management structure of the university includes: the board, the executivecommittee; the university assembly and the committee of studies (Université de Montréal, 1967). Thesecond level of hierarchy includes the rector and vice-rectors, who have are in charge of strategicdecisions but who also influence tactical decision-making. The third level of hierarchy includesfaculties and departments along with the Building Management Office (BMO), a unit in charge ofplanning and procuring construction projects in campus. This unit is accountable to the rector and ismandated to respond to the needs of the academic community and their space requirements, adaptingtime scales, specifications and size of each project according to the needs of faculties or departments.Campus Master Plan: The university undertook in 2007 a consultative process to prioritize spaceneeds, which resulted in a Campus Master Plan adopted in 2008. The Campus Master Plan is adocument that proposes strategic principles, priorities, timelines and a budget for developing thecampus over a twenty year period (Université de Montréal, 2007).Environmental Policy: The university adopted in 2003 a very basic environmental policy,concentrated on three main objectives: 1) the adoption of rational methods to manage resources;including reuse and recycling of resources, reduce of consumption of resources and the preservationof natural resources, 2) ensure the protection of employees to environmental risks and 3) reduce theenvironmental impact of activities conducted by the academic community (Université de Montréal,2003).The path towards the alignment of SD, strategic management and tactical management: Likeother institutions of higher education, the university first developed environmental initiatives andprojects of SD launched by students, faculty and groups of employees. These initiatives appearedbefore SD was adopted at the strategic level (in the White Book, the Campus Master Plan and theEnvironmental Policy). In fact, administrative units started to implement in the early 90s internalprocesses for environmental management without having a strategic plan for the whole organization.535

The BMO, for instance, adopted a program for training its staff in environmental issues. It alsostarted hiring new employees who had knowledge or experience in environmental management inbuildings (Université de Montréal, 2005). The organization adopted a formal environmental policyand an environmental management system on campus following the pressure from: (i) Internalpressure groups, such as the unions, the student associations and research groups; (ii) Policiesenforced by the Ministry of the environment, the Ministry of culture and other provincial legislation;(iii) The regulations imposed by the Municipality and the Borough where the main campus is located.Once SD was adopted at the level of strategic management, the BMO did not have to modify itsorganizational structure, yet it included new requirements of sustainability for consultants andcontractors. This has enabled the BMO to adopt a new environmental policy without increasing itsstaff. The experience and the transfer of knowledge in the processes have been crucial in formalizingtendering procedures within the TMO. For example, standard contracts used by the BMO are oftenreviewed and adapted following the experiences of previous projects. Table 2 illustrates the way inwhich the principles of sustainability have been interpreted and implemented at the levels of strategicand tactical planning.Example of a sustainable project: Now that the university has adopted the principles of SD at boththe strategic and tactical levels, the organisation faces the challenge of implementing the values andprinciples included in the strategic plan in an ongoing and ambitious project of urban development.Based on the Campus Master Plan, the university constantly commissions renovations and newbuildings. However, demand for space recently increased, forcing the university to plan thedevelopment of a secondary campus. Thus, in 2006, the university purchased an ancient railway yard,with the intention of building an extension to its original campus. The university justified its choiceof an extension to the campus based on arguments previously exposed in the Campus Master Plan(Université de Montréal, 2008). An invitation for tenders was then organized, and an architecturalfirm was hired to conduct the general urban design as well as to manage the process of zoningchanging and other modifications to local regulations (see figure 1). The call for tenders put a strongemphasis on the sustainability of the new project and the contract was awarded to a firm that is wellrecognized for its experience in SD, particularly in projects certified LEED.“The University proposes to develop the urban area based on the structure of GlobalEnvironmental Assessment LEED-ND (a LEED certification for neighbourhooddevelopment). This new tool integrates the principles of smart development (smart growth)and green building, promoting higher densities, proximity to public transportation,multipurpose buildings and alternative means of transportation. LEED-ND is a recognizedstandard that identifies and stimulate demand for environmentally responsible buildings andneighbourhoods” (Groupe Cardinal Hardy, 2006).536

Figure 1 Diagram of the TMO of the project conducted by UQ.Despite of the good intentions stated in the initial project documents, one of the most importantchallenges of the project was to explain to local residents and other pressure groups the feasibilityand pertinence of the new campus on the site. In fact, the location of the project in a traditionalresidential neighbourhood generated fierce environmental debates. It was therefore necessary toorganize a participatory process which was led by the Office of Public Consultation (OCPM., 2007).This process forced the university to adopt two important decisions: (i) to develop specialcommunication strategies, including a website, flyers, conferences, special meetings, etc., and (ii) tohire a company specialized on communications and stakeholder management to facilitate the relationsbetween the university, the pressure groups and the control agencies (see fig 1). Stakeholdersparticularly active in the consultation process included local neighbours, teachers, employees, unions,student associations, academic staff, the city of Montreal, local merchants, etc. (Convercité, 2006).During the consultation process a group of participants requested that the intentions and principlesstated by the university in strategic management documents were considered regulatory obligations(OCPM., 2007). Figure 1 shows the participants that were involved in the main decisions at thestrategic level. It also shows the actors that have worked in the project at a tactical level. All of them,however, are already committed to sustainable actions.Table 2: Synthesis of the principles of SD presented in official documents of strategic and tacticalplanning (free translation)SustainabledevelopmentprinciplesLevel Documents ContentEnvironmental Policy Statementof the University (Université deMontréal, 2004)Report presented by the universityto the consultation process onregional sustainability organized“The University wishes to confirm itscommitment to the paradigm of sustainabledevelopment; by encouraging the academiccommunity to endorse the protection of theenvironment, maintaining its integrity andpreserving natural resources.” (p. 2)The university can contribute to regionalsustainable development by “promoting thesustainability of infrastructure and buildings”537

Strategic LevelTactical levelby the provincial governemt.(Université de Montréal, 2005)Statutes(Université de Montréal,1967)Strategic Plan 2010. White Book(Université de Montréal, 2007)Campus Master Plan (Universitéde Montréal, 2008)Statement of principles forinvestment and supply(Université de Montréal, 2003)Campus Master Plan(Université de Montréal, 2008)The university council approved projects ofmajor importance for the development of theuniversityThis document incorporates the results ofconsultations with the academic community.“While the timeframe of previous master planscovered a decade, the new Campus MasterPlan, by its very nature and the scope of theproject behind it, offers a prospect ofinfluencing decisions over a much longerperiod” (p. 4)Policies promote that managers should be“sensitive and attentive to ethical issuesrelated to environment and socialresponsibility in their decisions and activities”(p. 1)The Campus Master Plan “defines aframework and the priorities of the universityfor managing and planning spaces” (p. 49)6. Discussion and further researchThe objective of this research was to understand the relations between strategic planning, tacticalmanagement and sustainable development. The overall research is based on case study methods;however, this article reports only the results of a first case study that has been used as a pilot case forthe research. The case shows that:Principles of SD were first implemented at the level of units and departments and not at a strategiclevel (the principles followed initially a bottom-up approach).Pressure from units and departments and the provincial and municipal legislations ultimately ledthe institution to adopt the principles of SD at the level of strategic management.Following the adoption of SD in the documents produced by the head of the organization, a topdownapproach was implemented.The principles of SD align long-term objectives included in the strategic plan and short termobjectives required at the tactical plan.Principles of SD have translated into requirements for call for tenders and performancespecifications in bidding documents.538

The principles of SD include social responsibility, which forces the institution to adoptparticipatory and integrative methods of project management, aligning in this way the strategicplan of social responsibility and the tactical objective of social acceptability of the project.The findings suggest that more research is still needed to identify the effects of SD in the alignmentof the long-term objectives of organizations and the short-term needs of individual projects. Thefollowing phases in this ongoing research project must address:1. Validating among other case studies the preliminary results presented in this article;2. Creating a model based on the patterns found in the sequence of alignment of strategic and tacticalplanning;3. Testing the model with additional empirical research (including discussing the model in focusgroups with specialists in project management and strategic management in the building sector).This preliminary study has led us to propose the following research questions, which must beaddressed in further phases of the study:1. How are the lessons learned at the tactical level (in project management decision-making)transferred at the strategic level of the organization?2. What are the differences between (i) the values and principles presented in the strategic plan ofinstitutions and (ii) the real interventions and decisions implemented at the tactical level?3. What are the principles of SD that institutions do easily implement and what are the principlesthat they struggle to adopt?ReferencesAPM (2006). APM Body of Knowledge (5th ed. ed.). Bedfordshire: Turpin Distribution.Betts, M. (1999). Strategic management of IT in construction. Oxford: Blackwell Science.Brundtland, G. H. (1987). Report of the World Commission on environment and development : "Ourcommon future.". New York: United Nations.Bryde, D. J. (2008). Is construction different? A comparison of perceptions of project managementperformance and practices by business sector and project type. Construction Management &Economics, 26(3), 315-327.539

Byars, L. L. (1984). Concepts of strategic management : planning and implementation. New York:Harper & Row.Chartered Institute of Building (2002). Code of Practice for Project Management for Constructionand Development (3rd ed. ed.): Wiley-Blackwell.Cherns, A. B., & Bryant, D. T. (1984). Studying the client's role in construction management.Construction Management & Economics, 2(2), 177-184.Christini, G., Fetsko, M., & Hendrickson, C. (2004). Environmental Management Systems and ISO14001 Certification for Construction Firms. Journal of Construction Engineering & Management,130(3), 330-336.Cole, R. (2005). Building environmental assessment methods: redefining intentions and roles.Building Research & Information, 33(5), 455-467.Convercité (2006). Bâtir un consensus. Montréal: Université de Montréal.Davidson, C. (1988). Building team. Encyclopedia of Architecture: Design, Engineering &Construction, John Wiley & Sons, New York, NY, 509-515.Ding, G. K. C. (2008). Sustainable construction--The role of environmental assessment tools. Journalof Environmental Management, 86(3), 451-464.Du Plessis, C. (2002). Agenda 21 for sustainable construction in developing countries. Intnal.Council for Research and Innovation in Building and Construction. Pretoria, South Africa.Fister, S. (2009). The real deal. PM Network. The professional magazine of the Project ManagementInstitute, 23, 30-35.Forgues, D., & Koskela, L. (2009). The influence of a collaborative procurement approach usingintegrated design in construction on project team performance. INTERNATIONAL JOURNAL OFMANAGING PROJECTS IN BUSINESS, 2(3), 370 - 385.Gaddis, P. (1959). The project manager. Harvard business review, 37(3), 89-97.Gameson, R. N., & Masterman, J. W. E. (1994). Client Characteristics and needs in relation to theirselection of building procurement systems. CIB REPORT(175), 79.Gladwin, T. N., Kennelly, J. J., & Krause, T.-S. (1995). Shifting Paradigms for SustainableDevelopment: Implications for Management Theory and Research. The Academy of ManagementReview, 20(4), 874-907.540

Glasson, J., Therivel, R., & Chadwick, A. (2005). Introduction to environmental impact assessment(3rd ed.). London: Routledge.Groupe Cardinal Hardy (2006). Étude des critères écologiques applicables. Montréal: Université deMontréal.Hacking, T., & Guthrie, P. (2006). Sustainable development objectives in impact assessment: Whyare they needed and where do they come from? Journal of Environmental Assessment Policy andManagement (JEAPM), 8(03), 341-371.Kato, S. A., J. (2008). "Learning by doing": adaptive planning as a strategy to address uncertainty inplanning. Journal of Environmental Planning and Management, 51(4), 543-559.Katsanis, C. J. (1998). An empirical examination of the relationships between strategy, structure andperformance in building industry organizations. Unpublished PhD Dissertation, Université deMontréal, Montréal.Kelada, J. N. (1996). Integrating reengineering with total quality. Milwaukee, Wis.: ASQC QualityPress.Koskela, L., & Howell, G. (2002). The underlying theory of project management is obsolete. Paperpresented at the Proceedings of the Project Management Institute Research Conference, Seattle WA.Langford, D. A., & Male, S. (2001). Strategic management in construction (2nd ed.). Malden, MA:Blackwell Science.Leslie, H., & McKay, D. (1995). Managing information to support project-decision making in thebuilding and construction industry. Sydney: National Committee for Rationalised Building andCSIRO Division of Building, Construction and Engineering.López-Fernández, M. C., & Serrano-Bedia, A. M. (2007). Organizational Consequences ofImplementing an ISO 14001 Environmental Management System: An Empirical Analysis.Organization & Environment, 20(4), 440-459.Maqsood, T., Finegan, A. D., & Walker, D. H. T. (2003). A soft approach to solving hard problemsin construction project management. from http://eprints.qut.edu.au/27439/Mintzberg, H. (1987). The Strategy Concept II: Another Look at Why Organizations Need Strategies.California Management Review, 30(1), 25-32.Mintzberg, H. (1993). The Pitfalls of Strategic Planning, California Management Review (Vol. 36,pp. 32-47): California Management Review.541

Mohsini, R., & Davidson, C. H. (1991). Building procurement: Key to improved performance.Building Research & Information, 19(2), 106 - 113.Naaranoja, M., Haapalainen, P., & Lonka, H. (2007). Strategic management tools in projects caseconstruction project. International Journal of Project Management, 25(7), 659-665.Nahapiet, H., & Nahapiet, J. (1985). A comparison of contractual arrangement for building projects.Construction Management & Economics, 3(3), 217.Ngowi, A. B., Pienaar, E., Talukhaba, A., & Mbachu, J. (2005). The globalisation of the constructionindustry--a review. Building and Environment, 40(1), 135-141.Nogeste, K., & Walker, D. H. T. (2008). Development of a method to improve the definition andalignment of intangible project outcomes and tangible project outputs. International Journal ofManaging Projects in Business, 1(2), 279 - 287.OCPM. (2007). Rapport de consultation publique. Gare de triage d’Outremont. Montréal: Office deconsultation publique de Montréal.Parnell, J. (2008). Sustainable strategic management: construct, parameters, research directions.International Journal of Sustainable Strategic Management, 1(1), 35-45.PMI (2008). A guide to the Project management body of knowledge (Pmbok guide) (4th ed.).Newtown Square, Pa.: Project Management Institute.Proverbs, D., & Gameson, R. (2008). Case Study research. In A. Knight & L. Ruddock (Eds.),Advanced research methods in the built environment (pp. 183-192). Chichester, West Sussex, UnitedKingdom ; Ames, Iowa: Wiley.Pulaski, M. H. (2005). The alignment of sustainability and constructability a Continuous ValueEnhancement Process. Unpublished Ph.D., The Pennsylvania State University.Raiden, A. B., Dainty, A. R. J., & Neale, R. H. (2004). Current barriers and possible solutions toeffective project team formation and deployment within a large construction organisation.International Journal of Project Management, 22(4), 309.Reich, B. H., & Benbasat, I. (2000). Factors That Influence the Social Dimension of Alignmentbetween Business and Information Technology Objectives. MIS Quarterly, 24(1), 81-113.Shrivastava, P. (1993). Crisis theory/practice: towards a sustainable future. OrganizationEnvironment, 7(1), 23-42.Söderlund, J. (2004). Building theories of project management: past research, questions for thefuture. International Journal of Project Management, 22(3), 183-191.542

Stead, J., & Stead, W. (2008). Sustainable strategic management: an evolutionary perspective.International Journal of Sustainable Strategic Management, 1(1), 62-81.Thiry, M., & Deguire, M. (2007). Recent developments in project-based organisations. Internationaljournal of project management : the journal of the International Project Management Association.,25(7), 649-658.Université de Montréal (1967). Statuts en vigueur au 1er septembre 1967. Montréal,: Université deMontréal.Université de Montréal (2003). Déclaration de principes aux fins des achats et des placementresponsables. Montréal: Université de Montréal, .Université de Montréal (2004). Énoncé de politique environnementale de l'Université de Montréal.Montréal: Université de Montréal, .Université de Montréal (2005). Mémoire de l’Université de Montréal aux fins de la Consultation surle projet de Plan de développement durable du Québec Montréal: Université de Montréal, .Université de Montréal (2007). L'Université de Montréal: Une force de changement. UdeM 2010Livre Blanc. Montréal: Université de Montréal,.Université de Montréal (2008). Plan Directeur des Espaces. Montréal: Université de Montréal.Walker, A. (2007). Project management in construction (5th ed. ed.). Oxford: Blackweel Publishing.Williams, T. M. (1999). The need for new paradigms for complex projects. Internationa Journal ofProject Management, 17(5), 269-273.Wysocki, R. K. M., R. (2003). Effective Project Management: Traditional, Adaptive, Extreme (3rded. ed.). Indianapolis, Indiana: Wiley Publishing, Inc. .Yin, R. K. (2003). Case study research : design and methods (3rd ed.). Thousand Oaks, Calif.: SagePublications.543

Comparative Study on Project Management System andRole of Clients of Large-scale Development Projects inAsian MegacitiesHan, T.Dept. of Architecture & Architectural Engineering, Kyoto University, Kyoto, Japan(email: cs.serena2305@archi.kyoto-u.ac.jp)Furusaka, S.Dept. of Architecture & Architectural Engineering, Kyoto University, Kyoto, Japan(email: furusaka@archi.kyoto-u.ac.jp)Tsung-Chieh, T.Dept. of Engineering, National Yunlin University of Science & Technology, Yunlin, Taiwan Region(email: tctsai@ce.yuntech.edu.tw)AbstractA global competitive market makes the recently diversified organizations of building constructionprojects. The situation forces the ownership of role and responsibility for clients of project should bemore and more clearly. However, both of roles and responsibility of clients are not completelystipulated by law and legislation. Therefore, it is necessary to discuss the clients should play whatkind of role and should born what kind of responsibility, in order to get better project performanceand to manage the project smoothly. In other word, it is necessary to discuss the scope of governancethat clients should demonstrate in a building construction project. On the other hand, the globalizationaccelerated the communications among Japan, China, South Korea and some other Asian countries,not only in economic exchange but also construction industry. Therefore, in this research, theorganizations of some large-scale development projects in megacities of these countries/regions arecompared to clarify the similarity and the difference of project management system and governanceof those projects. Based on the results of comparative analysis, how the organizational method of theproject team can influence the role and responsibility of the clients will be described. And, what is thedifference in role, responsibility, and management method among different clients in differentprojects will be discussed. Then, how the same client may change his/her role, responsibility, andmanagement method in different projects will be clarified. The major purposes of this research aretried to clarify the issues as following, 1) laws and legislations about the development projects, 2)organization and management of the projects, 3) governance and Mainspring of the projectpromotion, 4) role and responsibility of the clients in the projects. In this paper showed the frontierstudy used two large-scale projects which were organized by the similar client to illustrate thedifferences. These differences also explained when the legal environment changed, how the scope ofclient’s governance could be changed.Keywords: project management, role, client, governance, Asian megacity, large-scale development project544

1. Introduction1.1 BackgroundDue to the globalization, the international developmental projects are becoming more and more.Especially in some Asian developing countries, such as China, in spite of global economic recession,China still remains high speed growth. Therefore, a lot of foreign companies try to benefit frominvestment in China and cooperate with Chinese local companies. However, if the project client wantsto enter a foreign country, the investment environment of this market should be analysed at first.Especially, the difference of legal environment between that foreign country and their own countryshould be clarified.The investment of Japan in China grows year by year since the Reform-Open Policy started in Chinain 1978. The amount of total direct investment from Japan in 2005 is 6.53 billion dollars. Althoughthe Japan direct investment in China was decreasing since 2006, the total investment in 2008increased 1.8% from 2007[1].Therefore, it is necessary to discuss the relation between legal environment and project governancefor the projects invested by Japanese clients. In this paper, the authors chose one Japanese largeconstruction development company (M company) as research object, which has successful experiencein investment of construction projects in China. And two large-scale development projects whichinvested by the client were chosen. One of the projects is an overseas project, Shanghai project. Theother one is a domestic project, Tokyo project.By clarifying the difference of organization, governance and management methods between these twoprojects, how the different legal environment can influent the governance of client will be explained,and how the role and responsibility of client can be changed due to different legal environment andbusiness practice will be clarified.1.2 PurposeThere are three major purposes of this research. Those are as follows.1. To illustrate the concept of governance and clarify the law and legislation about the two projects.2. To clarify the organization and management method of the two projects.3. To analyze the relation of project governance and construction management method and legalenvironment.545

2. About governanceOne of the purpose of this research is to discuss which governance clients should demonstrate andhow the legal environment could influent clients’ governance in a building construction project.Therefore, it is necessary to introduce the concept of governance at first.As shown in Figure 1-1, there are three main stakeholders who are client, architect and generalcontractor in a traditional design bid build project. Under the architect, there are some sub-architects,such as structure engineer, equipment engineer, etc. As well, under the general contractor, there aremany sub-contractors who will do some professional works, such as steel sub-contractor, air conditionsub-contractor, etc.In this paper, governance is defined as follows.Client’s governance means the scope of direct client’s decision and authority. Client’s decision andauthority is including make a contract, instruct the other stakeholders such as a general contractor andan architect, and select sub-contractors, etc. The shaded triangle in Figure1-2 is the scope of client’sgovernance.Architect’s governance means the scope of direct architect’s decision and authority. Architect’sdecision and authority is including make a contract, instruct the other stakeholders such as a structureengineer, etc. The shaded triangle in Figure1-3 is the scope of architect’s governance.General contractor’s governance means the scope of direct general contractor’s decision andauthority. General contractor’s decision and authority is including make a contract, instruct the otherstakeholders such as sub-contractors, etc. The shaded triangle in Figure1-4 is the scope of generalcontractor’s governance.In order to make project progress more reasonably and effectively, stakeholders should keep theirgovernances in good balance. The combination of these stakeholders’ governances is projectgovernance as showed in Figure1-5. The scope of client’s governance, architect’s governance andgeneral contractor’s governance are overlaps with each other in project.In this paper, the project governance in Figure1-5 is deemed to be ideal project governance. In idealproject governance, the overlapped parts of each stakeholder’s governance should be minimized, butno gaps should be appeared in ideal project governance. Because the gap is supposed as the workswhich stakeholders should to do but haven’t done. If gaps appeared in project governance, it meansthat there are some jobs haven’t been done by stakeholders, which may cause some quality problemsor any other problems. And the problems may cause troubles among stakeholders to interfere theproject progress smoothly. Therefore, an ideal project governance should have no gap appearedamong the scopes of stakeholders’ governance.546

In this frontier study, the overlapped parts of each stakeholder’s governance will not be discussed.The further researches about the relation between the overlapped parts and governance will beremained to the future study.CLCLARGCARGCSE SE SC SCSE SE SC SC1. Project organization 2. CL’s governanceCLCLARGCARGCSE SE SC SCSE SE SC SC3. AR’s governance4. GC’s governanceARARGCLCLGGCSE SE SC SC5. Project governanceGCGCL: ClientAR: Architect/EngineerSE: Structural engineerGC: General contractorSC: Sub-contractorCLG: Client’s governanceARG: Architect/Engineer’s governanceGCG: General contractor’s governanceFigure 1: About governanceIn Figure 2, it shows three types of project governance according to the different legal environment.Type1 is the project which is located in the region where rule of central government is completelyapplied and rule of local government is partially applied. Type 2 is the project which is located in theregion where rules of central and local government are completely applied. Type 3 is the projectwhich is located in the region where rule of local government is completely applied and rule of centralgovernment is partially applied.547

There are two main rules which will influent the project governance. Strict central rule means centralgovernment law and legislation and strict local rule means local government law and legislation.There are two shaded circular ring around the strict central rule and the strict local rule, which are thescope of discretion of central rule and the scope of discretion of local rule. In the scope of discretionof central rule and the scope of discretion of local rule, some regulations which were not made clearas law and legislation are still used in project. It is easy to cause troubles among stakeholders in thesescopes. Therefore, if the project located in the scope of discretion of central rule and local rule, clientmust be enlarged his/her scope of governance in order to progress the project smoothly.In this frontier study, the project governance is not obviously changed although the legal environmentis changed. Because the three types of relation between rule and project governance are tried tointroduce into this research at present. And, how the project governance will be changed in practicalwhen the legal environment changed will be discussed in the future study.Strict central ruleStrict local ruleSECLCLCLACLGCLGCLGGA GA GR CR CR CARG SGCGARG SGCGARG SGCGS S SS S SS SEEEC C EC C EC CType 1 Type 2 Type 3Scope of discretion ofcentral ruleScope of discretion oflocal ruleStrict central rule: central government law and legislationStrict local rule: local government law and legislationType1: The project is located in the region where central rule is completely applied and apart of local rule is applied.Type2: The project is located in the region where central rule and local rule are completelyapplied.Type3: The project is located in the region where local rule is completely applied and a partof central rule is applied.Figure 2: Relation between rule and project governance548

3. Comparative of Shanghai project and Tokyo projectAs abovementioned, the concept of governance is introduced. The basic information of the twoprojects and the result of site interview investigation of these two projects [2] are described asfollowing.3.1 Shanghai project delivery systemIn Shanghai project, the client company was established and invested by M company and otherdomestic investors or foreign investors, which showed in thick arrow line in Figure 3. This projectadopted Project Management/Construction Management (PM/CM) delivery system in client team.The Project Management (PM) team included the Quantity Survey (QS) team who was in charge ofcost management, the Construction Management (CM) team who was in charge of constructionmanagement and the Architect/Engineering Supervision & Instruction (ARSI) team who was incharge of supervision and instruction of design. The CM team is constituted by many professionalcompanies which are joined in this project. Although the client hired ChineseArchitecture/Engineering Consultant (ARC), Japanese design companies still took part in the work ofthe programme design, structure design and equipment design and so on [2].The [Jianli] ( 监 理 ) (JL) which showed under the PM/CM team in Figure 3 is a Chinese terminologymeans whose responsibility is supervising the general contractor in quality management, costmanagement and time management according to law and legislation, design document, contractetc[3]. In China, it is necessary to hire a [Jinli] ( 监 理 ) when the project’s cost is over 30 million RMB[4].The general contractor is Joint Venture of two famous Chinese construction companies. Both of thetwo construction companies have many successful experiences in high-rise building constructions [2].In Figure 3, the thin arrow lines represent instruction among stakeholders. And the dotted arrow linesrepresent contract relationship. And the dash-dotted arrow lines represent decision authority amongstakeholders. These dash-dotted arrow lines show the client directly selected some sub-contractors inthis project. According to the definition of governance as abovementioned, the scope of client’sgovernance is reaching to the sub-contractors in the Shanghai project.549

QSIVRCLPMrCMrJLMARSIARCIVR: InvestorM: M companyCL: ClientPMr: Project managerCMr: Construction managerQS: Quantity surveyorARSI: Architect/Engineeringsupervisor & instructorARC: Architect/EngineeringconsultantJL: Jianli company (Supervisor)GC: General contractorAR: Architect/EngineerSE: Structural engineerSC: Sub-contractorSCGCSCARSEInvestmentInstructionContractSelectionFigure 3: Shanghai project delivery system3.2 Tokyo project delivery systemIn Tokyo project, it is totally different with the Shanghai project, M company and the developers oflandlords invested and managed this project together by establishing a redevelopment organization.However, M company as an experienced construction company was mainly responsible formanagement of this project.As shown in Figure 4, the General Contractor (GC) and the Architect/Engineering (AR) should signthe contract with the redevelopment organization. And the Sub-contractors (SC) should sign thecontract with the GC. The Structural Engineer (SE) and the Equipment Engineer (EE) should sign thecontract with M company. Therefore, the scope of governance of the client reached to the generalcontractor.According to the result of site interview investigation, M company also took the work of supervisionand the instruction of the architect/engineering. In the other word, M company played both roles ofclient and architect office in the same time.550

IVRGCMMIVR: InvestorM: M companyGC: General contractorSE: Structural engineerEE: Equipment engineerSC: Sub-contractorInvestmentSCSCSEEEInstructionContractFigure 4: Tokyo project delivery system3.3 Difference of the two projectsAccording to 3.1 and 3.2, the main differences of the two projects are as follows.In Shanghai project, the stakeholder JL occurred as a construction supervisor. However, in Tokyoproject, the AR’s role is not only as an architect office, but also as a construction instructor and asupervisor.There were more stakeholders took part in Shanghai project than in Tokyo project.The scope of client’s governance in Shanghai project is wider than that in Tokyo project.Both of the two projects are used design bid build delivery system. However, in Shanghaiproject, the PM/CM team is included in the client team. On the other hand, in Tokyo project, thedelivery system is simpler than that in Shanghai project.4. Analysis of client’s governanceAccording to the comparison of above section, the scope of client’s governance is different betweenShanghai project and Tokyo project. The following analysis tried to find out the reasons of thedifference of the two projects.In China, the responsibility of JL is to supervise a general contractor in quality management, costmanagement and time management according to law and legislation, design document, contract, etc[3]. And, it is necessary to hire a JL when project’s cost is over 30 million RMB [4]. And the JLcannot do an architect’s job, it has to be as a third party to join in project [3]. On the other hand, thearchitect in China cannot do the JL’s job in the same project. But in Japan, the architect not onlyworks as a designer/engineering consultant, it also works as a supervisor and an instructor.Therefore, stakeholders in Shanghai project are more than that in Tokyo project.As shown in Figure 3, the scope of client’s governance in Shanghai project reached to thesub-contractors. On the other hand, according to Figure 4, the scope of client’s governance in Tokyoproject reached to the general contractor. According to abovementioned, the practical performances ofproject governance in Shanghai project and Tokyo project are showed in Figure 5 and Figure 6. The551

client’s governance in Shanghai project is larger than that in Tokyo project, and the reasons areanalyzed as follows.IVRCLMPMrQSCMrARSIJLARCGCARSESCSCFigure 5: Client’s governance in Shanghai projectIVRMGCMSCSCSEEEFigure 6: Client’s governance in Tokyo projectThe rule of [Jianli] ( 监 理 ) in China which mentioned above is the first reason.The second reason is considered that the Shanghai project is a large-scale development project,the general contractor should have the [Teji] ( 特 级 : highest qualification of constructioncompany permission) qualification to do the job. But there are no Japanese company have got[Teji] ( 特 级 ) qualification in China by now. Therefore, the client has to hire Chinese GC whichhas the [Teji] ( 特 级 ) qualification [2]. However, as everybody knows that, Chinese GC andJapanese GC have a lot of difference in habits, technical abilities, cognitions, etc. Therefore, theclient has to do more to let the project progress smoothly.The third reason is considered the client and Japanese GC normally have mutual trust depend onlong-time cooperation, such as in Tokyo project. However, working situation of the client and552

Chinese GC is not relied on a long-time relationship, it may be need time to build the confidenceeach other.Therefore, it is difficult to avoid occurring of gaps among these stakeholders due to these reasons. Inorder to cover the gaps, the client has to enlarge the scope of governance in Shanghai project. As aresult, the scope of client’s governance in Shanghai project is larger than that in Tokyo project.5. ConclusionIn this paper, the concept of governance was introduced, and the project governance constituted bythose governances of project stakeholders. According to the comparison of Shanghai project andTokyo project, the difference of the legal environment, the number of stakeholders and the scope ofclient’s governance of these two projects are clarified. Finally, the three reasons can be considered tomake these differences.In the future, it is necessary to do some further researches about the relation between the overlappedparts among stakeholders and project governances. And, a project model will be built to analyze howto construct the governance of the client more reasonable and more effective.AcknowledgementThis study is supported with Grants-in-Aid for Scientific Research (A) by the theme of Internationalcomparison of Institutional Framework, Standards and Quality Management System for BuildingProject Administrator among Japan, China, Korea and Taiwan Region.References[1] Global Times (2009) Trends of Investment in China, (available onlinehttp://intl.ce.cn/zgysj/200904/24/t20090424_18899369.shtml [accessed on 8/12/2009])[2] Site interview investigation (2009) during 2009.2 to 2009.11[3] Government of People’ Republic of China (1998) Construction Law of China Article 32 of chapter4[4] Ministry of Housing and Urban-Rural Development of the People’s Republic of China (2001) Thestipulation of the scope and standard of construction supervision553

Identifying Causes of Additional Costs in ToleranceCompliances Failure in BuildingsJingmond, M.Division of Construction Management, Lund University(email: monika.jingmond@construction.lth.se)Lindberg, T.Division of Construction Management, Lund University(email: tobias.lindberg@construction.lth.se)Landin, A.Division of Construction Management, Lund University(email: anne.landin@construction.lth.se)AbstractThis paper discusses the problem of tolerance management in the construction industry. Despiteindustrialized building having increased the demand for higher precision, the problem of tolerancemanagement still occurs. Selecting appropriate tolerances is an optimization problem, where the costof accuracy and the costs due to lack of tolerance need to be balanced. Problems of tolerancemanagement, such as dimensional, aesthetic and functional, cause rework and additional costs. Thepurpose of the paper is to raise the importance of tolerance management and to identify problems. Astudy has been conducted in which representatives from the construction industry gave their viewsabout problems with tolerance management. Based on the interviews, there is need for a deeperunderstanding about tolerances across the industry. The following four factors seem to be ofparticular interest: consequences, deviations, industrialization and management.Keywords: construction, tolerances, industrialization, rework554

1. IntroductionToday, there are methods and systems allowing for an effective building process. Still, however, thereare recurrent problems in production (Josephson and Hammarlund 1998, Forsythe 2006, Johnsson andMeiling 2009). The industrialization of building production increases demand for higher precisionconcerning dimensions: design, assembly configurations and quality of materials. The chance ofsuccess for efficient production requires that all building elements can be assembled properly,regardless of size or type. The higher the degree of industrialization, the more serious is the need toconsider the consequences caused by dimensional errors. All dimensions and part dimensions of abuilding are interdependent. To achieve the coordination between function, safety and aesthetics,these parts need to be synchronised. Requirements regarding the extent to which the actualdimensions are allowed to be different from those shown in design drawings are formulated astolerances and are used to reduce building errors, rework and additional costs (Holm et al. 1987,Ballast et al. 2007,). Selecting appropriate tolerances is an optimization problem, where the cost ofaccuracy is balanced against the cost of the lack of tolerances (Pavitt and Gibb 2003, Adler 2005).In the construction industry, there is a problem of coordinating and assembling the different buildingcomponents on-site due to poor management of tolerances (CMHC 1996, Landin and Kämpe 2007)and a lack of shared awareness about what is “acceptable quality” (Hayton et al. 1995, Forsythe2006). These problems demand attention and the problem needs to be measured and quantified so itbecomes more apparent among the participants in the industry. The objective of this study is toidentify problems associated with tolerance management. Different materials, different tolerancemeasurements and lack of coordination cause errors and are resource demanding. No systematicefforts have been made so far to find appropriate measures to introduce a culture of tolerances thatfacilitates the building process.This paper analyzes the construction industry‟s activities regarding tolerance management. The areaexamined and the theoretical base for the study consists of the theory of tolerance managementdivided amongst the categories: material properties, production systems and management (see Figure1). The problems that occur on building sites concerning tolerances are influenced by the differentbehaviour of different materials, different production techniques in today´s production and themanagement of tolerances. The empirical area is the building process in Sweden. The aim of the studywas to find out which questions are important to investigate, how the respondents define the problemof management of tolerances and to identify which methods to use in further research.555

Figure 1: The problems that occur on building sites concerning tolerances are affected by materialbehaviours, different production techniques and the management of the tolerances.2. Methods and limitationsLiterature has been examined to gain a deeper insight into the area of the research. It is important todiscuss similar results because it gives a stronger validity to the findings and it makes it possible toreach a higher conceptual level.Interviews were conducted for gathering data and the respondents were selected so as to encompassvarious approaches used within the building process; furthermore, the respondents were judged to beat the forefront of tolerance management with considerable and long experience of the Swedishconstruction industry. We looked for people who welcomed change, had a history of success and wereopen to training in personal skills. The interviews were based on open questions to provide qualitativedata because the respondents could not provide quantitative data. The respondents were threearchitects and six project managers and production managers.When analyzed, the data were sorted into key factors. The aim of this approach was to search forpatterns that could describe the activities associated with tolerance management in the buildingprocess in a general way, and make it possible to develop theory for research in the area.3. Background3.1 Production systemsCompared to other industries, the construction industry does not have the same level ofindustrialization techniques. The industry is labour-intensive, site-based, constrained by the weatherand has a singularity and uniqueness of each project which are reasons for the low degree ofautomation in the process (Martinez et al. 2008). When the industry aims for a higher degree ofautomated building system it provides higher quality products because factory tolerances are tighterthan tolerances on-site. The larger and more complex the building becomes, the more coordinatedinputs from a wide variety of sources are required. The challenge for prefabricated building is to556

improve performance in the on-site assembly stages (Gann 1996). Prefabricated components makeeach component cheaper, reduce on-site requirements and speed up the building process (Adler 2005,Johnsson and Meiling 2009).In the 1920s to 1930s, the industrialized building method became popular around the world (Adler2005). The increase in prefabricated production required norms and regulations so that thecomponents could be coordinated. In the 1950s, prefabricated building components were introducedin Sweden (Holm et al. 1987). During the 1960s, prefabricated buildings experienced an upswing andthe tolerances for construction systems on-site were beginning to develop. In the 1980s, there was anew approach to industrialized building. When CAD started to be widely used, it increased theconsistency and accuracy of detailed design but, at the same time, the idea of accepted and specifiedtolerances disappeared (Benjaoran and Dawood 2006). Tolerances became an important issue whenthe need for product efficiency increased. Recently tolerances have also increased in importance inorder to achieve customer satisfaction and to avoid disputes (Adler 2005, Forsythe 2006). In recenttimes, BIM has become a topic of high interest in the construction industry. All information that couldbe carried through the process and follow the facility to the end of the life cycle providesopportunities for the management of tolerances to be handled in an innovative way.3.2 Material characteristics and tolerancesThe more difficult building systems are, the more difficult it becomes to predict the consequences.The building process may suffer impaired performance; the lack of good coordinated management oftolerances can cause thermal bridges, problems with acoustics, water penetration, moisture andtemperature movements. In building, a variety of different materials interact in the finished product.Since each material has its own characteristics, the complexity of the product has increased.The most common building materials in modern buildings, focusing on the structure, are: concrete,steel, wood and glass. The characteristics of these materials includes, among other things, theirtendency to ‟stay in shape„, when subjected to environmental effects, e.g. temperature, humidity or theeffect of time and/or loading. Although we tend to regard most of these materials, with the exceptionof wood, as “dead” materials, there is a certain degree of flexibility in most materials and therefore itis important to include this phenomenon when combining different materials and defining suitabletolerances. Three material parameters mainly affect the geometric shape of a building element: elasticdeformation, creep and volume change (shrinkage/swelling). The form-altering parameters aredefined as follows:- Elastic deformation concerns how much a structural element of a certain materialwill deform under a specific load.- Creep is when deformation due to compression increases over time even thoughthe loading is constant. This mechanism is very much dependent on the level ofhumidity and its variation.557

- Volume change, i.e. shrinkage or swelling, occurs when a building elementevaporates or absorbs water (hygroscopic effect). It could also be due to cooling orheating (thermal effect).Concrete is relatively sensitive to both creep and shrinkage. Depending on the structure and loading,concrete can obtain a creep-related deformation several times greater than the initial deformation(Betonghandbok 1997). In order for concrete, as used in the building process, to be manipulable morewater than needed for the chemical reaction with the cement is added. This excess of water has then todry out (evaporate) (Betonghandbok 1997). For prefabricated concrete elements, it is common to useconcrete C30/37 (Betongindustrin 2009). Table 1Error! Reference source not found. provides asummary of the form-altering material parameters for C30/37.Table 1: Material characteristics for concrete C30/37 (Boverket 2004)Elasticity Creep Volume changeHygroscopicThermal33e9 ~1050e-6 a ~250e-6 b ~10e-6/Ka cc = 0.6f cck , RH=75% → = 2b RH=75%A typical range for the tolerance interval in production regarding prefabricated concrete element isapproximately ±10 mm (Betongindustrin 2009).Steel is insensitive to moisture dependent deformations such as creep and hygroscopic volumechange. Although steel can undergo large deformations for a constant load, similar behaviour as forcreep, when yielding, is not a normal condition. Table 2Error! Reference source not found.provides a summary of the form-altering material parameters for structural steel.Table 2: Material characteristics for structural steelElasticity Creep Volume changeHygroscopicThermal210e9 a - - ~12e-6/K ba (Boverket 2007)b (Lardner and Archer 1994)A typical range for the tolerance interval in production regarding steel elements is approximately ±50mm in length and ±5 mm in cross-section (SS-EN 10 034, 1994).Wood is the most complicated material in this group due to its anisotropic material behaviour. It isalso the material most sensitive to hygroscopic volume change. Table 3 provides a summary of the558

form-altering material parameters for structural wood (index “per” and “par” stands for perpendicularand parallel to the fibres).Table 3: Material characteristics for structural woodElasticity Creep Volume changeHygroscopicThermal10.5e9 a ~920e-6 b ~14000e-6 c -a K24, E par (Boverket 2003)b c = 0.6f ck , RH=75% → ≈ 0.7 (Mårtensson 2003)c MC = 7%, per = 2e-3/MC(Mårtensson 2003)A typical range for the tolerance interval in production regarding wood elements (glued laminated) isapproximately ±5 mm in length and ±3 mm in cross-section (SS-EN 390, 1995).Glass is the most form-stable material. Table 4 provides a summary of the form-altering materialparameters for float glass.Table 4: Material characteristics for float glass (Carlson 2005).Elasticity Creep Volume changeHygroscopicThermal70e9 - - 9e-6/KA typical range for the tolerance interval in production regarding glass elements (t = 6 mm) isapproximately ±5 mm in length and width and ±0.2 mm in thickness (SS-EN 572-2, 2004).Table 5 presents a short summary to give an overview of the span of variation regarding the geometryfor different materials.Table 5: Summary of material characteristicsElasticity Creep Volume change ProductionHygroscopicThermalConcrete 33e9 ~1050e-6 ~250e-6 ~10e-6/K ±10 mmSteel 210e9 - - ~12e-6/K ±50/5 mmWood 10.5e9 ~920e-6 ~14000e-6 - ±5/3 mmGlass 70e9 - - 9e-6/K ±5/0.2 mm559

3.3 The management of tolerancesThere are international standards (ISO), which categorise building tolerances into manufacturing,stacking and assembling.The Swedish ISO standards, SS-ISO, comply with the international standards. SS-ISO contains a listof basic terms and definitions concerning measurement deviations and specifies methods for theindication of tolerances on drawings. SIS develops the SS-ISO standards. SS-ISO 3443-5 (1984)contains tolerances for buildings and deals with different issues of building tolerances such asstatistical basis for predicting fit between components and dimensional inspection and control ofbuilding work. Values for permitted deviations shall be selected in accordance with SS-ISO 3443-5.Eurocodes will replace the SS-ISO standards in 2010.The Swedish “AMA” (Allmänn Material- och Arbetsbeskrivning) is guidance for the preparation ofparticular conditions for building and civil engineering works and building services contracts (HusAMA 08). There are thousands of descriptions of well-proven technical solutions for differentdesigns. These are used to make documentation and communication through the entire buildingprocess more effective.One common reason for tolerance problems is communication between the participants in the buildingprocess (Seymour et al. 1997). The on-site workers fail to achieve the tolerances because of poorknowledge, poor supervision and inadequate controls. These reasons cause ambiguity about thedistribution or responsibilities among the participants (Seymour et al. 1997). It is a problem thatactivities in the building process are divided into different areas which are performed by differentdisciplines: architects, engineers and contractors. The interfaces that exist between these disciplineshave become a potential barrier for effective and efficient communication and coordination inprojects. Information that is inaccurate or delayed is seldom delegated into specific parameters (Loveand Irani 2002).Swedish industrialised building production reveals that production relies on a traditional buildingproject culture characterised by low motivation and poor awareness of building quality. Problems aresolved, but seldom analysed (Adler 2005, Höök and Stehn 2008). It is common to change the detailsto guarantee an acceptable finished view and function, rather than to demolish and rebuilt (CMHC1996, Landin and Kämpe 2007).4. ResultsBased on the interviews, we concluded that there is need for a deeper understanding about tolerancesin the construction industry. The following four key-factors seem to be of particular interest:consequences, deviations, industrialization and management.560

Cost4.1 ConsequencesAll nine respondents agreed that problems over tolerances do exist in the industry and that theparticular problem connected with the management of tolerances mainly caused aesthetic issues,although also influenced the safety and functionality of the building. Even the cost of correctinginstances that do not fit should be presented, making it possible to balance the cost of correctionagainst the cost of precision layout.None of the respondents could give an example of estimated costs for rework or additional costs,although all of the respondents had experience of situations involving non-conformities.4.2 DeviationsHow small can tolerances be and how large could tolerances be? There are those who set strictertolerance requirements than called for in the standards for their own production. However, thedimensions may not be too precise, as it must be possible to build on-site. With a smaller range ofcomponents, it is easier to match the tolerances. In order to develop tolerance levels, we need acompletely different and much better control of tolerances. It is not beneficial to have small tolerancelevels set for each element. A general tolerance system or „a helicopter view‟ is needed. The drawingsshould contain information about how much variation the component can accommodate.4.3 IndustrializationWithin an on-site building project, design is close to 95% complete in the design stage with theremaining 5% finished on-site. A prefabricated building requires that the design is 100% complete. Itis necessary to create an awareness of the importance of quality and to get a balance between the costsof quality and the costs of correction (see Figure 2). Is it economic to have 100% tolerance accuracy?TotalProductionCorrectionLevel of toleranceFigure 2: Costs compared to the tolerance of accuracy.561

Prefabrication is a more streamlined process than that on-site and manufacturers are better able tolearn from their mistakes. Some respondents found it interesting to develop an industrial product inwhich it is possible to learn the entire process.4.4 ManagementAd hoc solutions are commonplace. A better-controlled environment could be a solution. Onesuggestion is to have one employee in the organization or within the project responsible for thedimensions of manufactured components.Suggestions for improvements are to remove everything related to „resolve the problem on-site‟, makestandardize products, provide better feedback, make tolerance issues more attractive and gain moreknowledge about the building tolerances by introducing tolerances as a separate subject in schools.5. DiscussionBased on the study, the participants in the construction industry seem to know that the problem ofmanagement of tolerances exists but do not know how the problem can be solved. It is difficult tocollect the data needed to determine the costs caused by the lack of management of tolerances. If acost can be linked to the errors that are made, the participants should be more interested in eliminatingthe problem. We need to create an awareness of the importance of the tolerance issues. The problemof the management of tolerances is not new in the industry. According to the literature review, theproblem has been discussed in many papers. Various authors have addressed the problem of tolerancemanagement. Models and processes have been developed, but are they really used in the buildingindustry? The experience feedback and deviation management is highlighted in different papers andwithin the industry; even so, the error of tolerances still occur. This raises the question if feedback anddeviation management is entirely effective in the building process.Several case studies have been done to investigate the problem of errors in the industry over somedecades (Love and Irani 2002, Roy et al. 2005, Höök and Stehn 2008, Johnsson and Meiling 2009).These case studies have pointed out that errors occurred due to poor organisation and communication.Some case studies have also pointed out possible solutions to the problem of dealing with themanagement of tolerances. Love et al. (1999) have presented a model that enables designers andproject managers understand better how design errors occur in the building process. The model isdeveloped to reveal why and how rework is needed so it can be prevented. The model identifies anumber of tasks that designers perform and classifies them as correct or incorrect. The factors thataffect errors during design are: schedule pressure, parallelism (analogy), design fee pressure andnormal errors (Love et al. 1999).Roy et al. (2005) presented a process documentation system and discussed the changes needed tocreate a cultural environment to better standardization and communicate the building method. This isa communication tool to provide a framework and to develop process thinking. The authors believethat there is a need for standardisation of the building process, based on good working practices,communication and an accurate building specification for personnel and the contracted workforce562

(Roy et al. 2005). Designers in the industry should design details with enough leeway to allow foracceptable tolerances (CMHC 1996). Is this possible? Poor dimensional tolerances can also be thecause of problems. There are control plans, which include valuable practical advice, but these plansare rarely based on scientifically studies (Josephson and Larsson 2001). Existing tools formanagement of tolerances are different standards, drawings, specifications and building observations.The participants need to communicate accessibility requirements (Ballast et. al. 2007). Details that donot consider tolerances will often lead to improvisation on building sites that can impair futureperformance. There is a need for additional inspection routines to enable reporting of tolerance errorsand facilitate feedback at each step in the process. Who has the skill and who has to pay whencomplications of assembling problems happen?Prefabricated production has a better process than on-site production, since the process leads to betterknowledge and the participants learn from their mistakes. It is important to coordinate the buildingprocess, during the design as well as during production. To achieve coordination between function,safety and aesthetics, the different dimensions and building components need to be synchronised.Participants in the industry should design structures with sufficient dimensional margin to achieveacceptable tolerances. It is also important to determine the tolerance standards for each material sincemovements caused by temperature, humidity or oversized building components can impair thefunction and safety of the building. This requires extended knowledge about how the differentmaterials behave. Interest in the industrialized building method and the use of prefabricated structuralcomponents has increased, but there is lack of standards and routines for process or sharingknowledge and good practice.Errors due to lack of tolerances can never be eliminated, but the errors can be reduced nonetheless.Tolerances need to be considered in the design of all building components that are going to beassembled.5.1 Further researchIt is important to identify the different nature of the principal materials (concrete, steel, wood andglass) to eliminate problems that occur when those materials are assembled. Movements caused bytemperature, humidity, oversized or misplaced construction components can reduce the gaps requiredbetween two components. An important consideration is to make sure that the stated requirements areconsistent with one another. Zero tolerances are not reasonable; it is important to determine thetolerance standards for each material, check if the position or tolerances at each stage are constrainedin previous stages and use adjustable connections to eliminate tolerance overlaps.The main purpose of the further research project is to clarify the tolerance problem. The next stepshould be to make on-site observations with the aim of finding examples of non-conformities. Thesenon-conformities will be tracked back to the cause of the error to create an explanatory model. Ifpossible, the cost of the non-conformity will be estimated.563

ReferencesAdler P. (2005), Bygga industrialiserat, Wallin & Dalholm Boktryckeri AB, SwedenBallast D. (2007), Initiative on Dimensional Tolerances in Construction Surface Compliance DesignIssues AIA, CSI, United States access board, USABenjaoran V. and Dawood N. (2006), “Intelligence approach to production planning system forbespoke precast concrete products”, Automation in Construction, 15 (2006), 737-745Betonghandbok Material (1997), 2 nd ed, Svensk byggtjänst, SwedenBetongindustrin (2009), Bygga med prefab, Betongindustrin, Sweden, (available at URLhttp://www.betongvaruindustrin.se)Boverket (2003), Regelsamling för konstruktion 2003, Boverket, SwedenBoverket (2004), Boverkets handbok om betongkonstruktioner, BBK 04, Boverket, SwedenBoverket (2007), Boverkets handbok om stålkonstruktioner, BSK 07, Boverket, SwedenCarlson P-O. (2005), Bygga med glas, Glasbranchföreningen, SwedenCMHC Canada Mortgage and Housing Corporation (1996), “Construction Tolerances”, MasonryCanadaForsythe P. (2006),”Consumer-perceived appearance tolerances in construction quality management”,Engineering, Construction and Architectural Management ,13(3)Gann D. (1996),“Construction as a manufacturing process? – Similarities and differences betweenindustrialized housing and car production in Japan”, Construction Management and Economics, 14,437-150Hayton G., Garrick J., Schaafsman H., Fishman R. and Stone J. (1995), Management skills in theHousing Industry, Australian Government Publishing Service, CanberraHolm H., Lindberg Å. and Lorentsen M. (1987), Projektera och bygga med toleranser, Svenskbyggtjänst, SwedenHus AMA (2008), Allmänn Material- och Arbetsbeskrivning [Guidance for the preparation ofparticular conditions for Building and Civil Engineering Works and Building Services Contracts].Svensk Byggtjänst, Sweden564

Höök M. and Stehn L. (2008), “Applicability of lean principles and practices in industrialised housingproduction”, Construction Management and Economics, 26(10), 1091-1100Johnsson H. and Meiling J.H. (2009), “Defects in offsite construction: timber module prefabrication”,Construction Management and Economics, 27(2009), 667-681Josephson P-E. and Larsson B. (2001), “Det konstiga är att vi inte upptäckte det tidigare”, RapportFoU Väst, Sveriges Byggindustrier, Göteborg, SwedenJosephson P.E. and Hammarlund Y. (1998), “The causes and costs of defects in construction - AStudy of seven building projects”, Automation in Construction, 8(1999), 681-687Landin A. and Kämpe P. (2007), “Industrializing the construction sector through innovation –Tolerance Dilemma”, CIB, 2007- 387, Cape Town, South Africa.Lardner T.J. and Archer R.R. (1994), Mechanics of Solids, An Introduction, McGraw-Hill, SingaporeLove P.E.D and Irani Z. (2002) “A project management quality cost information system for theconstruction industry”, Information and Management, 40(2003) 649-661Love P.E.D., Mandal P., Smith J. and Li H. (1999), “Modelling the dynamics of design error inducedrework in construction”, Construction Management and Economics, 18(2000), 567-574Martinez S., Jardon A., Navarro J.M. and Gonzalez P. (2008), ”Building industrialization: robotizedassembly of modular products”, Emerald Group Publishing Limited, 2(28), 134-142Mårtensson A. (2003), “Short- and Long-term Deformations of Timber Structures”, TimberEngineeringPavitt T.C. and Gibb A.G.F. (2003), “Interface Management within Construction: In Particular,Building Facade”, Journal of Construction Engineering and Management, Jan/Feb (2003)Seymour D, Shammas-Toma M and Clark L (1997) “Limitations of the use of tolerances forcommunicating design requirements to site”, Engineering, Construction and ArchitecturalManagement, 4(1997), 1,3-22SS-EN 390 (1995), Glued laminated timber – Sizes – Permissible deviations, SIS, SwedenSS-EN 572-2 (2004), Glass in building – Basic soda lime silicate glass products – Part 2: Float glass,SIS, Sweden565

SS-EN 10 034 (1994), I- och H-profiler av allmänt konstruktionsstål – Toleranser för form ochdimensioner, 1 st ed, SIS, SwedenSS-ISO 3443-5 (1984), SIS, SwedenRoy R., Low M. and Waller J. (2005),”Documentation, standardization and improvement of theconstruction process in house building”, Construction Management and Economics, 23 (2005), 57-67566

Performance Indicators of the Companies QualityManagement Systems with ISO 9001 CertificationLordsleem, A. Jr.(Department of Civil Engineering, Polytechnic School, University of Pernambuco)(email: acasado@upe.poli.br)Duarte, C.(Department of Civil Engineering, Polytechnic School, University of Pernambuco)(email: carol-md@uol.com.br)Barkokébas, B. Jr.(Department of Civil Engineering, Polytechnic School, University of Pernambuco)(email: bedalsht@poli.upe.br)AbstractThe performance measurement has been identified as a key issue for quality management. However,despite the need of controlling and monitoring the processes of quality management systems in orderto attend the normative requirements of certification, the use of indicators is not carried throughsystematically in most construction companies. This article aims to present the results of a researchthat has investigated how the construction companies are measuring their performance and what isthe development stage of the indicators system used by them. The study was conducted with 20certified companies in the Brazilian state Pernambuco, from which it was possible to identify theprocesses belonging to the quality management system and the goals, targets and indicators thatsupport the activities developed by the companies. The research also identified a set of 173 indicatorsdivided into 10 different processes. Other important establishments of the research are associated tomonitoring indicators by the company's direction, the dissemination of results and the use ofindicators. There are still a series of problems involving the process of performance measurement,particularly regarding the definition of indicators and establishment of appropriate targets for them.Keywords: performance measurement, indicators, quality management system567

1. IntroductionThe civil construction industry faces a period of changes. According to Lordsleem Jr, Franco andBezerra (2007), there are new forms of organization and performance in the industry, stronglymarked by the increase of market share, geographical expansion and diversification throughpartnerships, joint ventures, perspectives of public investments in habitation, increase in home loansby banks and entrance of foreign capital.In face of this scene, the companies aim to improve their processes and products as a competitivedifferential. As consequence, it is noticed a greater interest in monitoring the performance ofconstruction firms through the implementation of indicators systems, both by the many participantagents of the enterprise, but also by other stakeholders.There is also an important movement in countries around the world for the accomplishment ofinitiatives in order to compare the performance between companies for the implementation ofbenchmarking. The process of benchmarking is identified as a mechanism that aims support theimplementation of the performance measurement, allowing the evaluation of the company'sperformance comparing to the standards achieved by others, and setting new challenges forcontinuous improvement. Moreover, the indicators directed toward benchmarking make possible thegeneration of values of reference for the sector (COSTA et al., 2005)Given the above, this article aims to describe the research carried out through the data collection froma total of 20 (twenty) construction firms with the certification standards NBR ISO 9001:2000 andConformity Assessment System of Civil Construction Services and Works (SiAC) of the BrazilianProgram for Quality and Productivity in the Habitat - PBQP-H (level A), in the State of Pernambuco.2. Theoretical reviewThe measurement of performance has been identified as a key issue for Quality Management. Severalauthors (LORDSLEEM JR., 2002; LANTELME; FORMOSO, 2003; SOUZA, 2005) emphasize theimportance of measuring performance through indicators for achieving efficiency and effectivenessin the various processes that constitute the production system of the companies.The interest for the implementation of systems of measurement in the civil construction wasintensified with the quality programs based on the requirements of the ISO 9000 standards, as well asthe Brazilian Program of Quality and Productivity in the Habitat (PBQP-H). Particularly, the goals ofquality measured and quantified through indicators, allow to express the evolution of a process,product or business of the company, being basic for monitoring the Quality Management System -QMS and, consequently, for the progress of the company.Souza et al. (2005) defines indicators as quantitative expressions that represent specific information,from the measurement and evaluation of a production structure, it processes and/or the resultant568

products.A system of indicators can provide a view of the current performance of a company; for that it mustshow its strengths or weaknesses, or call the attention for its shortcomings. This type of evaluationallows establishing priorities, indicating which sectors of the organization are more important toundergo interventions (Cavalcanti, 2004).The indicators need to have credibility, to be well defined, properly disseminated and systematicallyanalyzed so that can be accepted and become valuable subsidies for decision making. They must beestablished in order to measure not only specific stages of a process, but also to evaluate the overallcompany performance.According Lantelme and Formoso (2003), the civil construction sector in Brazil, already recognizesthe importance of implementing systems for measuring performance. However, the use ofperformance indicators in the construction business has been limited due to many factors, such as:difficulty in establishing and clarifying goals, use of inappropriate measures, and degree ofcommitment of the company to improve the quality, among others.3. Research methodologyThe research methodology used for the achievement of this research was divided into 03 distinctstages, which is:development of operational element (questionnaire) for the identification of performanceindicators and the methodology of data collection inserted in the quality management systemsof the certified construction companies;accomplishment of research with the application of the questionnaire developed in 20construction companies;analysis of the gotten results and assessment of existing indicators.For the initial development of the research, it was carried out to select bibliography of reference forthe necessary theoretical concepts to the subject.4. Data analysis and interpretationThe study involved an investigation using data collection from a total of 20 (twenty) constructionfirms certified under the standards ISO 9001:2000 and Conformity Assessment System of CivilConstruction Services and Works (SiAC) of the Brazilian Program for Quality and Productivity in theHabitat - PBQP-H (level A), in the State of Pernambuco.The analysis of the collected data was sub-divided into three different stages:569

1 – Analysis of Quality Management System (QMS) processes;2 – Indicator management;3 – Objectives, indicators and goals of the Quality Management System.The requirements were to complete a questionnaire for data collection; a macro-flow of thecompanies’ processes; the matrix worksheet of indicators, objectives and goals, and some resultsfrom measuring the indicators.The specific analysis of the indicators was undertaken based on the provision of such information. Itshould be stressed that the majority of the firms did not have all the data necessary for the detailedstudy of the indicators, and five firms - corresponding to 25% of the sample studied - had no data atall.The construction firms participating in the study operate in the construction and incorporation ofbuildings; 100% are certified under the ISO 9001:2000 standard; while 90% have the PBQP-Hcertification awarded by SiAC. The companies without the SiAC certification did not renew theirPBQP-H certification, the earlier version of which was called SiQ-C.4.1 Quality management system processesTable 1 lists what are considered to be the main processes in the macro-flows comprising the QMS ofconstruction firms participating in the research.Table 1: Processes identified in macro-flows of companiesProcessesIndicators by processCommercial 38Human resources 9Production plan 9Design 6Supplies 13Management 4Finance 8Works 62Technical assistance 19Training 5570

In general it was possible to identify 173 indicators, stressing the quantity of 62 indicators relating tothe works process and 38 indicators to the commercial process, the processes being most consideredas indicators.It was also possible to ascertain from the results of the study that two firms had indicators for thesafety and environment management process included in the performance measurement system of thequality management system.This aspect demonstrates, albeit incipiently, the concern of these firms to use the methodologyadopted in the QMS for collecting indicator data for overall business management.Among the companies studied, 20% said that they had unidentified processes in their macro-flows.These processes are shown in Table 2, stressing that all processes unidentified in the macro-flows areconsidered by the companies as support processes, and only four are monitored using performanceindicators.Table 2: Processes unidentified in macro-flows of companiesUnidentified process in the macro-flowsSuppliesTrainingManagement/FinanceControl of quality documents, data and recordsFinanceInternal auditTreasuryAccountingReformsProcess monitored byperformance indicatorsYesXXXXNoXXXXXSome processes in Table 2 had already been listed by other companies, as shown in Table 01, asfollows: supplies, training and finance.The following justifications were listed by the companies for not including them in these processesidentified in the macro-flow of their QMS:the processes only attend to the main processes indicated in the macro-flow;the processes were associated with all other processes;571

the processes were not processes directly linked to quality.In the general analysis about processes of the quality management system, it is worth mentioning: thehigh quantity of indicators for monitoring some processes (works and commercial) in detriment toother processes (namely, the design process); the difficulty of companies to rate the process as a mainor support process, and the existence of indicators for processes considered by the companies assupport.4.2 Management of quality management system indicators4.2.1 Follow-up of indicators by company administrationConcerning the administration’s follow-up of the results of the indicators, 55% of the firmsparticipating in the survey stated that all indicators are periodically accompanied by theadministration. However, 20% of the firms mentioned that only some indicators are accompanied bythe management.Figure 1 shows the percentage of follow-up frequency of indicators by the administration of thecompanies.Figure 1: Follow-up frequency of indicators by company administrationThe results in Figure 1 demonstrate that the hierarchy of following up the indicators by the companyadministration is as follows: every month, every six months and weekly/quarterly/annually.4.2.2 Disseminating the construction firm resultsThe main forms of disseminating indicator results by the companies to the collaborators of eachprocess are listed below:monthly meetings with office employees and onsite administration team;e-mailing monthly reports, when in the office, and onsite by fixing them to a wall panel forthe indicators;572

e-mailing the results;weekly issue of report to each collaborator;use of the quality wall panel;networking availability (intranet);holding weekly and/or monthly meetings.The above indicated alternatives reveal which media are mainly used by the companies for internalcommunication of the indicators.In general, it is apparent that the companies are concerned with disseminating the indicator results,making them more accessible to the collaborators.4.2.3 Use of indicators by construction firmsThe study with regard to the use of performance indicators by the companies showed that 15% ofthem already use indicators even before adopting a Quality Management System. The absolutemajority of the firms, that is, 75%, only began using indicators after adopting the QMS.In terms of comparing the results, Figure 2 shows the percentage values of the alternatives relating tothe comparative analysis of the indicators by the companies.Figure 2: Comparative analysis of indicators by companiesThe graph in Figure 2 shows that most companies (55%) compared the results of their indicators withtheir own company’s historic indicators and indicators available in the market, while 40% of thecompanies compared them only with the results existing in their own company.573

4.2.4 Decisions based on indicatorsThe company administrations took the following decisions as a result of monitoring the resultsobtained using the indicators:change in procedures in order to reduce waste;technical staff enhancement;periodical monitoring of appropriations;need to create new indicators and change in collection methodology of existing indicators;marketing actions based on the result of the Sales Velocity Indicator (SVI);alteration in designs to make improvements;change suppliers.The decisions relate to the different processes identified in the firms’ macro-flow. It should bepointed out that the decisions were taken within a context experienced by the construction firm at acertain time, and this must be understood in order to be adopted as a benchmark for other companies.As a general analysis on the management of indicators of the companies’ quality managementsystem, emphasis is given to analyzing the compatibility of the indicator’s speed of response with thedecision taken by the administration, the relevance of the indicators to the administration, and eventhe need for monitoring them by the companies.4.2.5 Objectives, indicators and goals by processes of quality management systemFrom data provided by the companies participating in the study, the results relating to the objectives,indicators and goals were organized by processes in order to synthesize the collected information. Itshould be mentioned that the data was provided by a group of 15 out of the 20 companiesparticipating in the survey.We found that some companies do not define their indicators by process. Therefore, it was necessaryto undertake a specific analysis of each macro-flow provided in order to properly fit these indicatorsto one of the processes relating to the quality management systems of the companies.A total of 173 indicators in 10 different processes were identified, and the structured collected datastructured closely to those provided by the participating construction firms.Chart 01 shows some objectives, goals and indicators of the works process, organized and set out foreasier analysis of the indicators.574

Chart 1: Objectives, goals and indicators of the works processNº Objective Indicator Goal1To reduce future problems withtechnical assistanceFinal works inspectionSeven (7) defective itemsper unit in inspectionperiod2To reduce waste in the worksand increase productivityChecking sub-floor thicknessTo reach averagethickness of 3 cm3To reduce waste in works andincreased productivityChecking thickness of externalcoating in a single massTo reach averagethickness of 4 cm4To minimize mortarconsumption per m² and checkbrick consumption per m²Checking bricklaying servicesMortar consumption (toreach 12 kg/m²); brickconsumption (to reach 25bricks per m²)5To create a better workingenvironmentEmployee satisfaction levelTo achieve an internalsatisfaction rate of 80%6 To add new technology Number of new technologies ≥ 1 per year7To reduce ratio betweennumber of errors found andnumber of items inspected inchecking services of thoseperformed by bricklayers(Number of items rejected/number of items inspected) * 100To achieve a 10% ratio orless8To reduce waste of structuralconcreteTotal volume used in paving/totalvolume calculated in blueprintTo reduce by half waste ofstructural concrete inworks in the pastChart 1 presents a sample of eight indicators identified in this work. It was possible to observe someaspects:some indicators do not meet the goals they were set, as is the case for indicators 2 and 3,which aims to reduce waste in the construction and increase productivity. Both the indicatorand the target were defined only for measuring the thickness, so not measuring productivity;in some cases, the targets presented are broad, or even defined. This is the case of indicator 7presented in Chart 1, which aims to monitor the productivity of services through the RUP -Unitary Reason of Production, however without a goal set.575

Chart 2: Objectives, goals and indicators of the Supplies processNº Objective Indicator Goal1Control number of nonconformitiesfound in materialsper monthAnalysis of non-conformitiesverified in the Materials receivedformKeep directors informedmonthly2Getting a better qualification ofsuppliersSuppliers EvaluationOnly 5% of the suppliersevaluation consideredunsatisfactory3Reduce the amount ofpurchased materials[(R$ total budgeted - R$ totalpurchased)x100]/Total budgetedReduce 5%4 Deadlines purchase Check the time table supply No delay56 -Control the number ofequipment repaired in themonth-Number of requests out of date /number of requests in the monthKeep directors informedmonthlyRequest for 95% of thematerials within the timelimitsChart 2 presents some goals, indicators and targets of the suppliers process. Some flaws in themeasuring performance systems could be also identified, for example:there is no target set appropriately for the indicator 1, which aims to control the number ofnon-conformities found in materials in a month;there is also an inadequate characterization of some indicators, including the failure to defineit (goal 5 of Chart 2);indicators defined without a specific goal, such as the indicator 6 (number of requests out ofdate / number of requests in the month).In the same way, it was ordered and subsequently analyzed all 173 indicators divided in the tenprocess identified by the survey. Chart 1 and 2 show a small sample of all indicators examined,depicting important aspects identified in the whole sample of indicators.It is important to note that the full details of this survey will be available in the document beingedited by the Union of Construction Industry in the State of Pernambuco (Sinduscon / PE).5. ConclusionThe article herein shows the results of the survey designed to discover how civil construction firmsare measuring their performance. From this study it was possible to collect and process key data576

elating to the performance indicators used by certified construction firms in the State ofPernambuco.From the detailed analysis of the collected indicators, it was possible to ascertain that mostcompanies in the study are concerned to establish indicators for each process relating to their qualitymanagement systems. We also found that there was an initiative, albeit by the minority of thecompanies under study, to use indicators defined in specific bibliographies and reference values forcomparing performance.Some problems were found in the performance measurement systems analyzed, such as, for example,problems in aligning indicators with their objectives and fitting them properly in their processes.One of the main failures in the indicator systems under analysis concerns the inadequatecharacterization of the indicator itself. In many cases, not only was there a lack of definition inperiodicity for collection but also of clear goals.The following aspects were found in an overall analysis relating to the collected indicators:the existence of similar indicators included in different processes. On the other hand, thereare also similar objectives, but with different indicators;it is necessary to analyze the suitability of some indicators to the objectives, since they didnot reflect the set purpose;some very open goals which need to be more clearly demarcated.Lastly, it is worth mentioning that the research was able to collect, process and organize key datarelating to the indicators used by certified construction firms in the State of Pernambuco. After beinganalyzed and properly used, the result will be a modification (quantitative or qualitative) in theunderstanding of the information system of the companies.6. ReferencesCAVALCANTI, R.F.V. (2004) Uma investigação sobre medidas de desempenho utilizadas pelasempresas de construção civil, subsetor edificações, na região metropolitana de Recife. Dissertação(Mestrado) - Programa multiinstitucional e inter-regional de Pós-Graduação em Ciências Contábeis,UnB, UFPB, UFPE, URFN, BrazilCOSTA, D.B. et al. (2005) Sistema de Indicadores para benchmarking na construção civil: manualde utilização. Federal University of Rio Grande do Sul, Brazil.LANTELME, E. M. V., FORMOSO, C.T. (2003) Conceitos, princípios e práticas da medição dedesempenho no setor da construção civil. In: FORMOSO, C. T.; INO A. (ed.) Inovação, gestão da577

qualidade & produtividade e disseminação do conhecimento na construção habitacional. Rio deJaneiro, ANTAC, v.2: 255–281.LORDSLEEM JR., A.C (2002) Metodologia para capacitação gerencial de empresassubempreiteiras. Tese (Doutorado) - Escola Politécnica, University of São Paulo, Brazil.LORDSLEEM JR., A.C.; FRANCO, L.S.; BEZERRA, N.M. (2007) Tecnologia construtiva daalvenaria de vedação em edifícios de múltiplos pavimentos: avaliação e análise de resultados.Recife, Brazilian Portland Cement Association (ABCP).SOUZA, R.; MEKBEKIAN, G.; SILVA, M.A.C.; LEITÃO, A.C.M.T.; SANTOS, M.M. (1995)Sistema de gestão da qualidade para empresas construtoras. São Paulo, Editora Pini.SOUZA, U.E.L. (2005) Como reduzir perdas nos canteiros. São Paulo, Editora Pini.578

Management Processes Standardization: A PracticalStudy Case in ColombiaVargas, H.Universidad de los Andes(email: hvargas@uniandes.edu.co)Paez, H.Universidad de los Andes(email: hpaez@uniandes.edu.co)Prieto, J.Universidad de los Andes(email: japrieto@uniandes.edu.co)Mesa, H.Universidad de los Andes(email: ha.mesa905@uniandes.edu.co)AbstractProject management standardization processes for a young development division within a largeColombian construction firm were based on conceptual frames, firm´s experience and collaborativeefforts. A best practices survey under project life cycle process mapping was conducted to integrateproject manager functions, guide linkages between operational areas and external clients, enhanceentrepreneurial learning from project developments and lead to a project management supportiveinformation system. Emphasis on early structuring and planning project phases responds to legal andfeasibility issues. Reviewed working breakdown structures and scopes have been built out of newproject types and overall corporate standards.Keywords: standardization, processes management, best practices, entrepreneurial learning andproject life cycle.579

1. IntroductionA well recognized forty year old Colombian construction firm searching for new businessopportunities has recently evolved from public and private contracting and project managementservices to promote new prospects from its conception down to its operation and useful life end.Within this context, this recent organizational structure has to incorporate a management model tocarry new processes and develop new activities to integrate the whole life cycle in its projects. A firststep to consolidate this scheme of integrated management was to understand and standardizemanagement processes associated to every stage in project developments. This becomes of utmostrelevance when, though considering real estate situations, managerial processes tend to be regular andrepetitive and thus offering a high potential for its standardization within the firm.From this need a proposal was made for standardization of management processes inside one of thebusiness units charged of promoting commercial and institutional (public and private) prospects,providing promotion, management, building and marketing services. Apart from its fitting to presentoperation and best practices inside the Unit this offering looks for strategies towards continuousimprovement as a part of a work directed into sustained activities for organizational learning.2. Processes in the project management frameConsidering experiences in project development and evolution in project management models severalorganizations have adapted their entrepreneurial structure to include stages in its life cycle accordingto management principles set by project management. This is presented consequently as an ensembleof processes in charge of the project manager to harmonize stage developments and ensure actorsparticipation from different functional project areas to reach performance goals according to needs orbusiness opportunities originating it.In this sense, the starting point for process standardization is the adoption of a common glossary toserve as shared terminology to support project stakeholder communications, an analysis of theparticular life cycle inside the organization and the convenient level of processes to be standardized,discarding efforts in those unable to be done regularly to save resources.Life cycle corresponds to the project temporal development from its initial need identification oropportunity up to the final disposition as a useful infrastructure. This time line in building projectsusually involves conception, planning, execution and operation phases parallel to its evolution andmaturity.In this context, in the case study unit, there were life cycle and project stages non unified definitionswhose diversity was originated in types, scales and complexity of projects in process and projectmanager in charge experiences. However, a first proposition towards a consensus suggests the580

following stages, as most frequently recognized: pre-feasibility, feasibility, building, buildingdelivery, related in a linear and simple sequence.Relating to maturity levels found in projects, based on performed analysis and references fromproject management maturity models (Crawford, 2007), there is an uneven maturity in projectmanagement within the unit, where most of its areas are concentrated on initial maturity levelcontrasting with the firm´s technical area who acknowledges larger evolution partly due to largeprojects experience for decades. This supports the existent need to level all knowledge areas withinthe unit to reach a second maturity level, where the main purpose is to standardize managerialprocesses.Proposes process standardization for project management is basically oriented by Salford Universitywork with seven enterprises from 1995 to 1998 named Process Protocol and Project ManagementInstitute publications from 1983 to 2008 where there has been a continuous update on projectmanagerial processes.3. Best project management practices diagnosisBest practices identification is bases on systematic analysis of existing processes in projectmanagement. Considering the unit organizational features a methodology was implemented to orderlyreview all information from interviews and documentation. Figure 1 shows this general procedure.Figure 1: Case study general procedure581

3.1 Project management statusInterviews to unit members allowed to know relevant information on actual project managementpractices, firm functional areas, and external participants involved in projects. Most consultedpersons are in charge of management responsibilities and were interviewed according theirexperience and project stage they were directing, according life cycle stages previously identified.This chronological order offered a structured and progressive flow of information needed for thestandardization proposal.Through documentary evidence it was possible to consult informs, formats, designs, proposals,contracts and records as part of recently finished projects. Equally, some projects in its planningphase were studied. Additionally, the firm quality system document Sistema de Calidad de laOrganizacion (SGI) offered a valuable frame due to its structure and detail.3.2 Information analysisDocument analysis and review concluded with its classification according their relevant project stageconnections. In general, all these documents, for different projects and even for the same project,show a low level of standardization, have evolved and change according personal experience of unitmembers away from any project manager organizational learning. Based on this information, bestproject management practices inside the unit are identified and grouped in conception, pre-feasibility,feasibility, planning and detailed design, building and construction control and operation delivery,following Project Stages (PS) shown at figure 2.Figure 2: Project stages582

3.3 Best practicesProject life cycle definition through the mentioned stages of conception, prefeasibility, feasibility,planning and detailed design, building and construction control, and operation delivery is the essenceof the standardization proposal considering, as it will be explained forwards, that it includes a seriesof management processes (MP), activities, deliverables and documents that allow project evolutionfollowing a logic sequence in stages and processes.Both order and terminology used in project life cycle have a generic character. An objective was tofind a generic life cycle abele to be applied to any type of developed project and easily adjustableaccording to characteristics, internal and external contexts particular of any project.Management processes basic structure in every stage corresponds to present project managementknowledge best practices and experiences in the unit. This is obtained from individual analysis ofprocesses in every stage and life cycle global analysis as a result of unit consensus. With the firstanalysis key process in every stage are located. Under second analysis stage relationships areconfirmed to reach a project management integrated cycle.As there are scarce published sources related to the conception stage or project starting pointspecified sequences and activities identified in this study for this phase offer a novel component fortraditional project life cycle. This is derived from given emphasis on managerial action locating,planning and valuating risks of project alternatives before setting a portfolio of them and finallyselecting a next project option to be developed.4. Integrated standardization proposal4.1 Integrated process flowchartAn integrated process flowchart is a graphic depiction that shows different PS conforming project lifecycles. Every PS is formed by a set of internal processes located along the flow, following a logicalrelationship among them, and articulated to other process external to the unit. Conventions forrepresenting these processes follow definitions by PMBOK ® Fourth Edition (PMI, 2008)considering that they embody variables and deliverables for many of proposed MP.Connections between MP are of two types: main liaisons and integration links. The connectionbehaviour across the flow is represented with functions that link resulting information from MP inone directional form, in the case of main liaisons. In the case of integration links, these integrateinformation flow dynamically.Special conventions were used in the integrated flow to represent graphically some MP as the onesplaced within MP limits. These processes are named double function connectors articulating a PSending with next one beginning. Examples of these are the multiple variations common along the583

project that noticeably mark PS limits. Another special MP is the one defined for information storagebanks, strategically located along the PS, whose function is to build organizational consulting sourcesand historical record. Figure 3 shows a general scheme on types and MP conventions.Figure 3: General scheme of types and MP conventions4.2 Integrated process mapIntegrated process map represents other important graphic dimension of MP interactions across PS. InFigure 4 stages from the integrated process flow are shown, intersected by management areas placedin main rows as management knowledge areas within project life cycle.Figure 4: General scheme of integrated process map584

Integrated process map is a matrix representation similar to Project Management Process Group(University of Salford - Process Protocol, 2001) and Knowlegde Areas Mapping (PMI, 2008). This isan important resource especially within firms having matrix organization, as it occurs in this studycase, where project management is supported in different functional areas to properly develop itsprocesses.Every area of integrated process map is explained below:Integration management: Refers exclusively to managerial functions and activities, related toorganize, lead, control and group every action connected with the project to guarantee itsobjectives.Technical management: Involves planning, coordination and execution of project technicalactivities. This management should accomplish goals in terms of scope, cost, time andquality.Legal management: Includes all activities tending to guarantee legal and contractualconditions required for the project.Commercial management: Refers to promotional, commercial and marketing activities forproject success.Financial management: Refers to assure and managerial of the financial resources for projectdevelopment and success.4.3 Deliverables standardization on MP entry and outputsAs a product of “deliverables standardization on MP entry and outputs” inputs and outputs arerepresented in detail corresponding to a series of documents and/or records to feed every stage inproject life cycle. Deliverables mean an advance in terms of information formalization to be managedby the unit in a standardized and uniform way by all project managers. Thus, MP documentation ishomogeneous and independent from those human resources having developed it, improvingtraceability and documentary records.5. Organizational learningA proposition without precedents is the optimization of information use through information banksincorporated along the integrated map of process flow. With these tools a valuable organizedhistorical record to implement knowledge management is proposed for the unit.585

Knowledge management, based on information organization and standardization, allows to have closecontrol of new experiences in projects, keeping and updating records so as to make it a permanentand useful resource.Process standardization means additional tasks to support organizational learning considering how tomonitor work structure, working breakdown structures, control and follow-up criteria, and learningafter innovative proposals conductive to managerial change y MP maturity model.This increase in MP maturity has to include a uniform availability and use of information technologymeans. This implies that the firm will require to adopt conceptual assimilation processes andinformation flow design processes to go forward checking and validating MP flow.6. ConclusionsProcess standardization for project management within a maturing firm has to start from recognitionof its best practices. Documentation and information analysis of internal and external facts is a basicstep to know relevant issues on functional operation and organizational maturity from managerialperspective offering basis for information organization, valuation and connecting it withstandardization stages and processes.Integrated Project Management is structured around its life cycle definition, based on associatedstages and processes. Combining available tools for integrated project management and best practiceanalysis two types of diagrams with different specific uses are stated. First, integrated process flowestablish connections and time relationships between PS and MP. Secondly, integrated process mapdistributes processes into different management responsibility areas (Integrated, technical,commercial, legal and financial).Process standardization implementation also permits to standardize a uniform documentarymanagement across types of projects and project managers in order to facilitate control over advanceand results in current projects.Another benefit from standardization in MP documentation is in front of certification processesoriented to include project management as a certified element of the entire organization quality.Finally, taking into account the larger added value offered by integrated management due to its focuson early stages of life cycle, this model is recommended to be used to improve project managerpersonal abilities at the unit, stimulating early project planning.586

ReferencesPMI (2008) A Guide to the Project Management Body of Knowlegde (PMBOK® Guide) FourthEdition, Project Management Institute.University of Salford (2001) Process Protocol (available onlinehttp://www.processprotocol.com/homepage.htm [accessed on 03/04/2009])Aouad G, Cooper R, Kagioglou M, Sextom M (2002) The Development of a Process Map for theConstruction Sector, (available online http://www.processprotocol.com/homepage.htm [accessedon 25/03/2009])Aouad G, Hinks J, Cooper R, Sheath D, Kagioglou M, Sexton M (2002) An IT Map for a GenericDesign and Construction Process Protocol, (available onlinehttp://www.processprotocol.com/homepage.htm [accessed on 03/04/2009])Aouad G, Kagioglou M, Cooper R, Hinks J, Sexton M (2002) Technology Management of IT inConstruction: a Driver or an Enabler, (available onlinehttp://www.processprotocol.com/homepage.htm [accessed on 03/04/2009])Castro R (2008) “Optimización de los Procesos de Gerencia de Proyectos dentro de una CompañíaConstructora de Vivienda, a través de la utilización del PMBOK”, Trabajo de grado no publicado.Universidad de los Andes, Colombia.Crawfor K (2007) Project Management Maturity Model, Aurbach Publications, New York.University of Salford (2009) Generic Disaster Management and Reconstruction. Process Protocol.Consultative Guide. The School of the Built Environment, University of Salford, UK.Hinks J, Aouad G, Cooper R, Sheath D, Kagioglou M, Sexton M (2002) IT and the Design andConstruction Process: A Conceptual Model of Co-Maturation, (available onlinehttp://www.processprotocol.com/homepage.htm [accessed on 27/03/2009])Kagioglou M, Cooper R, Aouad G (2002) Performance Management in Construction: A ConceptualFramework, (available online http://www.processprotocol.com/homepage.htm [accessed on22/03/2009])Kerzner H (2004) Advanced Project Management Best Practices on Implementation. New Jersey,2004.Lee A, Cooper R, Aouad G (2002) Do Construction Based Document Management System Reducethe Cost of Posting and Printing Project Document, (available onlinehttp://www.processprotocol.com/homepage.htm [accessed on 25/03/2009])587

Williams T (2007) Post-Project Reviews to Gain Effective Lessons Learned, Project ManagementInstitute.588

Improving Construction Design and Project Deliverythrough a More Considered Off-Site StrategyZimina, D.Loughborough University(email: d.zimina@lboro.ac.uk)Pasquire, C.Loughborough University(email: c.l.pasquire@lboro.ac.uk)AbstractThe incorporation of off-site production into construction projects can offer many benefits. Howeverit has become clear that this approach can conflict with traditional management of construction processes,double design work, poor sizing and thus material waste, failure to take into account interdependenciesbetween preassembled and site elements and processes are just some of problems appearingin the project delivery. It is proposed that the true value of an off-site strategy can only be fullyrealised when the decision to use it is taken before design commences. In this way design and constructionprocesses can be developed together to enable the benefits to be maximised. The applicationof Lean production methods in the off-site manufacturing combined with the use of a Lean projectdelivery system on site can provide a further step towards to improvement. This paper will identifyelements of the design process, Lean project delivery and offsite strategy that need to be integratedand propose a conceptual framework within which this can be achieved. The paper argues that thisframework introduces a new approach converting traditional construction into a process of modernassembly which can help to reduce uncertainty and variability of outcome and adds a new classificationof “kitting” as a category of pre-assembly.Keywords: off-site, kitting, lean construction, design for life cycle589

1. IntroductionIn 2004 the UK market for off-site technologies was estimated as £2.2bn, or 2.1% of total UK construction(Goodier, Gibb 2007). Such small figure can partially be explained by the resistance of clientsand contractors to off-site partially caused by lack of information to assist objective decisionmaking.In common with other industries, decisions made in construction are often highly subjective,based on emotive and irrational elements rather than evidence based (Edge et al. 2002).The main concerns expressed by representatives of the construction industry about off-site technologieswere its high cost, limited design opportunities and the negative image of prefabricated elements(Goodier, Gibb 2007, Edge et al. 2002, Venables, Barlow & Gann 2004). Using current cost comparisonmethods the direct cost of off-site products is often higher when compared to the traditional constructionsolutions. However a judgment based on direct costs only hides the bigger picture of expenditureinvolved in the project and product life cycle. Narrow approach to cost estimating dictatedby current commercial management practices excludes from the calculations the advantages the offsitestrategy bears, such as higher quality, reduced waste, time benefits, labour savings etc. It also failsto see the project as a whole or to capture benefits for the following activities in the project deliverysequence. For example BuildoffSite case study of a commercial office building describes the positiveeffect on workflow in the fitting of the traditional pipe branches that arose as a result of installation ofservices modules produced off-site. Significant savings achieved could easily be overlooked if traditionalcost comparison was applied (BuildOffSite).There is a general belief that the off-site market capacity is limited. However Goodier, Gibb (2007)mention that suppliers themselves do not see any obstacle for expansion of production capacity apartfrom constraints in demand. The Manufacturing Excellence survey shows that suppliers involved inthe off-site business are working on 70% of their capacity only and have room for significant growth(Venables, Barlow & Gann 2004).The biggest barriers for wider utilisation of the off-site manufacturing lie in the inadequate organisationof the project delivery process. Uncertainty in off-site elements production and delivery timesmake the probability of delays in projects higher increasing contractor and client reluctance to use offsite(Goodier, Gibb 2007). At the same time poor supply chain management and poor briefing accompaniedby the inability to freeze design at the optimal stages are highly troublesome for suppliers.Manufacturers face difficulties with establishing production schedules and protection from the risk ofcapacity loss as a result of the late arrival or frequent change in design information, and constantmodifications of installation timing and sequence (Ballard, Arbulu 2004). They attempt to stabilisetheir production processes and protect themselves from variability of demand with contingencies suchas setting up longer lead time, double booking of capacity, designing and fabricating in advance tobuild up stocks (ibid). In turn such mass production methods create waste (duplicated design, inventory,waiting, etc.) boosting the price unnecessarily high and increasing lead time. Hence poor productionsystem organisation reduces the reliability of the supplier, which in turn burdens the customerwith increased risk.590

Problems in project delivery often have their roots in design that fails to consider construction processesexacerbated by the traditional planning and management used to design and control the on siteactivities. Organisation of the design process is limited by the dominant preference of bespoke solutionsand traditional procurement methods. Design activity distributed among separate teams givesrise to poor co-ordination. With each team focused on their own product such matters as the impact ofusing particular components or modules on the remaining building structure and fabric elements areout of their consideration (Pasquire, Connolly 2003). As long as none of the project teams volunteerto take responsibility for the project as a system its delivery indicators can only keep deteriorating.The problems with project delivery are hidden mostly in the interface between the design engineerand the specialist contractor as well as insufficient work structuring (Miles, Ballard 2002). Commonproject delivery practice is devoted to monitoring of performance against the preliminary set of specificationsas well as enforcement of contractual commitments of the specialist teams involved. In caseof deviation from the plan (which is always the case) management introduces corrective actions (firefighting)and tracks results in order to identify which party is at fault. Thus project management focuseson ensuring that production units do their job ignoring how this work is being done (Ballard,Howell 1998). Both parts of the described problem originate from the lack of a well-considered strategywhich treats the project as a system implemented via clear tactical steps.1.1 DefinitionsOff-site manufacturing (OSM) is defined by Gibb (1999) as a set of contemporary construction techniquesin four levels: 1. simple sub-assemblies (door furniture, ceiling grilles, windows etc.); 2. nonvolumetric(e.g. frame units, above ceiling services modules, cladding systems); 3. volumetric (e.g.plant rooms, service riser shafts); 4. modular building (e.g. houses, hotels, restaurants). OSM includesprefabrication and pre-assembly which have been separately defined as:“Prefabrication is a manufacturing process, generally taking place at a specialised facility, in whichvarious materials are joined to form a component part of the final installation”“Pre-assembly is a process by which various materials, prefabricated components, and/or equipmentare joined together at a remote location for subsequent installation as a sub-unit” (Tatum 1986, citedin Gibb 1999, pp.1).In this paper a further distinction is added to the definitions of Gibb and Tatum and that is the additionof pre-assembly in the form of “kitting”. Kitting is packing of related materials, components and toolstogether before delivering them to the place of installation thus assembling a complete “kit” of partsrequired for the installation. Kitting places a special implication on the supply chain to streamline theprocurement of materials over and above the manufacturing processes involved in prefabrication.The kitting function may take place in a consolidation centre (on- or off-site) but is more useful if undertakenas a function of supply chain management. The assembly of the kits may be a simple collectionof required resources in the required quantities without jointing or it may involve an amount oftemporary jointing such as loosely attaching connectors which are subsequently removed and re-fixed591

on permanent connection to the building. Such temporary jointing forms a system for avoiding errorsin the collection of materials allowing omissions to be easily seen prior to final packaging. It is alsopossible for prefabricated items to be supplied with associated fixing and sundry materials and this isa form of kitting.1.2 Definition of lean constructionPulling elements of lean thinking derived from the Toyota production system and product development.The essence of these used here are:systematic approach,work flowJust in TimeThis paper does not directly address the definition of value although this is the starting point for leanthinking. Improvement in performance (time, cost and quality) is the initial goal and forms a contributionto the delivery of value.2. Developing a conceptual framework to optimise off-sitestrategy using lean thinkingConstruction is a complex process, its behaviour is uncertain and final results (in terms of cost andtime) difficult to predict. In the traditional approach the process is managed relying on contingencyreserves of money, materials, workers, time, etc. Two methods for better predictability are summarisedin Bertelsen (2004). The first one is to reduce the complexity to a manageable level through thetransfer of a major part of the work off site and limiting on site works to assembly only. The secondone accepts construction as a complex system and dedicates effort to the elaboration of new managementmethods. However, not all projects are suitable for extensive use of off-site manufacturing. Forinstance the majority of refurbishments are restricted in the application of off-site fabrication and haveto rely on more traditional craft-based construction methods. Similarly, few projects are formed entirelyoffsite. Consequently a combination of complexity reduction and new management methods isrequired.The ultimate goal of construction design is to create a facility which is functional, within the budgetand able to satisfy criteria of buildability and maintenance throughout the life-cycle. The Lean ProjectDelivery System developed by Lean Construction Institute US (The American Institute of Architect2007, Ballard 2008) emphasises the necessity for a “project definition” stage when client and the projectteam can work together to define clearly the project value “linking purposes and values, and linkingvalues and engineering specifications/design criteria” (Ballard 2008, pp.5). It is assumed that earlyincorporation of the off-site strategy considered from an overall project perspective will allow maximisingbenefit from it (Gibb 1999).592

By analogy with manufacturing concepts design for manufacture and assembly (DFMA) and life cycledesign we introduce design for life cycle (DFLC) terminology in construction. These conceptsrevolutionised manufacturing industry in the 1980s. The simple understanding that the design teamshould consider factors determining the behaviour and performance of the product over its entire lifecycle from the first phases of development (Giudice, Ballisteri & Risitano 2009) resulted in changesin the design process. This allowed smoother processes, improved quality, considerable savings intime and cost, not least due to the reduction of corrective interventions at the later stages of design(ibid).In much the same way as DFMA, DFLC is an embodiment of the next customer principle and acknowledgementof the design stage as a concordant part of the construction process, not a value initself. DFLC can be split into a set of sub-activities, which reflect main stages of construction productcreation and existence. Thus we distinguish between design for manufacturing (DFM), design forconstruction (DFC), design for installation (DFI), design for maintenance (DFMn), and design fordecomposition (DFD). Each of these sub-activities has its own set of requirements against which thedesign of the product (building, prefabricated elements) has to be examined.DFM is a function of the manufacturing processes and applicable only to the immediate manufacturingengineers. DFI serves as a link between the factory floor and the construction site where the offsiteelements will be assembled and incorporated in the construction structure. This should at leastinclude coordination of dimensions and tolerances, ways of transportation and details concerning installation.The exercise prevents clashes on the interfaces of different elements of the building so theywill not be discovered unexpectedly later when corrections are costly or not possible. DFC includestraditional design activities with the difference of designing to clients’ value. It also considers howprefabricated elements will fit into the overall structure. DFMn and DFD work to optimise futuremanagement of the facility and decomposition process, encouraging a continuous dialogue betweendesigners, facility management providers and decomposition specialists.When splitting the design process into the stages the general picture should not be forgotten. Customer’svalue which is assumed to be defined on the project definition stage is the thread that has tobe passed through the whole construction process.2.1. Collaborative approach to the designAn integral part of the DFLC strategic development is involvement of manufactures in the designprocess on the early stage. Heavy reliance on collaborative work makes it easier to approach the projectsystematically, taking into account interfaces between structural elements of the construction andworking teams (The American Institute of Architect 2007). Generally such organisational integrationbrings better results in terms of costs, time and quality (Konchar 1998). The project also benefits fromthe improved communication and prevention of potential conflicts on the work place.Building Information Modeling (BIM) is the technology capable of facilitating significantly and supportingthe collaborative design. It allows smooth flow of information into downstream processes bygiving the preference to direct digital exchange and elimination of arbitrary gates and handoffs be-593

tween different teams BIM enables early and direct input on the design from the fabricators to increasefabrication and pre-assembly efficiencies (Khemlani 2009).Project stagesConcept Criteria DetaildesignWhatWhoHowDocumentationFinalsignoffsConstructionBuildClose-outRegulatorsClientLead DesignerOther designers/engineersLead ConstructorSpecialist contractorsFigure 1: Integrated Project Delivery (adopted from Lichtig, 2007; cited in Mossman, 2008)2.2. Modularisation for the “leaner” off-site strategyRecently many manufacturing companies adopted clustering method which turned into an importantsource of competitive advantage. Clustering is based on decomposition and compilation and its mainidea is to arrange elements of the product architecture into clusters that become the building blocksfor a product or family of products. This process requires consideration of the numerous elements andtheir multitude of relationships and design (or dependency) structure matrixes are employed to representand analyse the architecture of individual systems (product, process, or organisation) (Danilovic,Browning 2007). In construction a building is created from separate elements and basic materialswhich require skilled craftsmen to join them together. Thus making it fit decisions are made at thevery moment of joining. OSM opens opportunity for clustering in construction as these decisions aretaken away from the site. Building can be decomposed into separate elements followed by the deepanalysis of connections and interdependencies between these. Clustering in this way has advantages insimplicity of assembly and flexibility in the long-term (easy to be substituted, moved, etc). Althoughclustering and the application of DSM for building design is still a new area of research, it has potentialof bringing construction to a new stage of development, through facilitation of the design for preassemblyand enhancing long-term functionality.594

2.3. Design of the production systemThe production system has to be designed in parallel with the product design. Excellent organisationof logistics and joining parts into a kit before delivery onsite can be an easy as well as an effectiveway to improve project delivery and facilitate flow on site. According to Ronen (1992) who introducedthe complete kit concept in manufacturing, some benefits of kitting include: 1) less work inprogress, due to less waiting for additional components to arrive; 2) shorter lead time and reducedvariance in delivery schedule; 3) easier control1 as less effort is required to ensure everything is readyfor work to proceed. In addition kitting helps to enhance productivity, which is the advantage of offsitestrategy, and facilitate just-in-time as elements and modules can be installed immediately afterdelivery.However Forza (1996) claimed lean organisation of the supply chain via just-in-time, next customer’spull and kitting might reveal to be too fragile in usual for the industry environment of uncertainty.Lean system makes provisions for such situations: an intermediate stage for buffering adds to evennessof the flow and reliability of the system. Court et al (2009) shows that delaying of final assemblyuntil a customer order is received and pulling the elements through the system only after a signal isplaced (kanban) can deliver better responsiveness, predictability and reliability from the supply chain.This complemented with kitting function makes just-in-time and increase efficiency of the projectdelivery possible.On-siteinstallationLevel 4.Modular*PrefabricationPre-assemblyLevel 2 & 3Non/volumetric*KittingLevel 1 components*Figure 2: Off-site process for constructionOther*frommaterialsGibb 1999The construction process should be designed in order to create flow. It requires coordination of on-siteactivities with delivery of modules and components produced off site, design of operations, managementof labour and resources. Planning using short and mid-short-term schedules reviewed constantlyto differentiate what should be done from what can be done (see, for example, Last Planner TM ) increasethe reliability of the project process. It has been shown on multiple projects that regular plan-1 Can be attributed to on site control in construction595

ning activity with shorter time spans is an effective way of coping with uncertainty (Formoso, Moura2009, Friblick, Olsson & Reslow 2009). The principle also applies to the work where small batchsizes increases reliability of performance giving the opportunity to plan work in measurable terms,making it easier to manage, levelling and stabilising the work flow.3. ConclusionsDespite the fact OSM can result in numerous benefits on organisational and project levels in terms ofcost, higher quality, time, manageability and reduced complexity of on and off-site activities(BuildOffSite), it potential remains underused. Poor organisation of supply chain, inability to treat theproject as a holistic value delivery process and late consideration of off-site strategy are among themain factors explaining its relatively low use.Construction is a complex process and it requires vigorous management abilities and brilliant processdesign to ensure successful project completion. A well-considered off-site strategy is the one thatbases on lean construction principles: delivers customer value through DFLC, uses lean organisationof work on the project (early contractor involvement, truly cooperative work, set-based thinking, etc.)as well as takes care of the production system design. Delivery and installation of pre-assembledblocks has to be coordinated with other on-site activities and incorporated in the project delivery planto make the best use of it. Excellent organisation of logistics and joining parts into a kit before transportationon site can be an easy as well effective way to improve project delivery and facilitate workflow on site.Many factors contribute to the success of the off-site strategy within a project. First of all it has tomatch with the long-term strategy of the company undertaking it. The off-site strategy is not alwaysable to reveal its potential in the short term due to several reasons: 1) the necessity of initial investment(excluding the constructors relying on outsourcing of prefabricated elements) which the companymight find it infeasible for a single project; 2) benefits of standardisation spread across otherprojects; 3) learning curve and building on own experience. Persistency in following the same strategybrings vast prospects for efficiency and productivity improvement in the projects and the whole organisationopening a way to the process of constant perfection, which is one of the basis conceptionsof the lean theory.Movement towards DFLC would also call for adoption of commercial management practices alternativeto traditional. As the changes are systemic, they will concern all elements of the project deliverysystem, and commercial relationship is an integral part of it. Pan et al (2008) note that adhesion toconventional procurement methods represents a considerable obstacle for the off-site strategy able topreclude or minimise the benefits it bears. Ballard and Arbulu (2004) refer to the traditional paymentsystem as the one closer to the mass production principles, promoting long production runs and earlydelivery of the pre-assembled orders.Effective design requires contribution of all parties into the process and comprehensive understandingof the value being delivered. Alternative ways of procurement can help in establishing long term relationshipthat will be supportive to DFLC, for example, in facilitating collaboration process due to pre-596

vious experience of joint work. It might be also necessary to adopt different approach to accounting.The dominance of the design stage in the proposed system will naturally entail greater initial expenses,e.g. due to early involvement of contractors, whose contribution needs remuneration, buteventually the project is more likely to be delivered cheaper, faster and in better quality. The studyconducted by Gransberg et al. (2007) concluded that the design fee should be treated as an investmentwhich is done on that project stage when the ability to influence the final outcome in terms of cost isthe highestNo enterprise can be successful without a strong guidance of a leader, someone with enthusiasm formaking things better, enough charisma to inflame others, clear goals and rejection of determinism.Good management is necessary but not enough to make a success story. Leaders and managers havedifferent functions in the project. Bennis (1989) drew distinctions between the two groups describingmanagers as those who administer, accept the status-quo and rely on control. In contrast leaders innovate,challenge the status-quo and inspire trust. There is no reason to believe that the client is the onlyone capable initiating innovation in the industry. It is understood that construction is a market withexceptional purchaser power; naturally it is easier for client to introduce new rules for the project.However contractors and subcontractors can use their expertise to persuade the client to pursue analternative way of project delivery in the negotiation process.ReferencesBallard, G. 2008, "The Lean Project Delivery System: An Update", Lean Construction Journal, pp. 1.Ballard, G. & Arbulu, R. 2004, "Making prefabrication lean", Proceedings of 12th Annual Conferenceof the International Group for Lean Construction, pp. 3.Ballard, G. & Howell, G. 1998, "Shielding production: essential step in production control", Journalof Construction Engineering and Management, vol. 124, no. 1, pp. 11-17.Bennis, W. 1989, "On becoming a leader", Reading, Massachusetts.Bertelsen, S. 2004, "Lean Construction: where are we and how to proceed?", Lean ConstructionJournal, vol. 1, no. 1, pp. 46-69.Court, P.F., Pasquire, C.L., Gibb, G.F. & Bower, D. 2009, "Modular Assembly with Postponement toImprove Health, Safety, and Productivity in Construction", Practice periodical on structural designand construction, vol. 14, no. 2, pp. 81-89.Danilovic, M. & Browning, T.R. 2007, "Managing complex product development projects with designstructure matrices and domain mapping matrices", International Journal of Project Management,vol. 25, no. 3, pp. 300-314.597

Edge, M.C., Abort, A., Hargreaves, L., Scott, A. & Scott, J. 2002, "S.(2002) Overcoming client andmarket resistance to prefabrication and standardisation in housing", Robert Gordon University, Aberdeen.Formoso, C.T. & Moura, C.B. 2009, "Evaluation of the Impact of the Last Planner System on the Performanceof Construction Projects", Proceedings of 17th International Group for Lean ConstructionConference, Taipei, Taiwan.Forza, C. 1996, "Work organization in lean production and traditional plants", International Journalof Operations & Production Management, vol. 16, no. 2, pp. 42-62.Friblick, F., Olsson, V. & Reslow, J. 2009, "Prospects for Implementing Last Planner in the ConstructionIndustry", Proceedings of the 17th International Group for Lean Construction Conference, Taipei,Taiwan, pp. 197.Gibb, A.G.F. 1999, Off-site fabrication: prefabrication, pre-assembly and modularisation, Wiley.Giudice, F., Ballisteri, F. & Risitano, G. 2009, "A Concurrent Design Method Based on DFMA-FEAIntegrated Approach", Concurrent Engineering, vol. 17, no. 3, pp. 183-202.Goodier, C. & Gibb, A. 2007, "Future opportunities for offsite in the UK", Construction Managementand Economics, vol. 25, no. 6, pp. 585-595.Gransberg, D.D., PE, M., del Puerto, C.L. & Humphrey, D. 2007, "Relating Cost Growth from theInitial Estimate to Design Fee for Transportation Projects", Journal of Construction Engineering andManagement, vol. 133, pp. 404.Khemlani, L. 2009, "Sutter Medical Center Castro Valley: Case Study of an IPD Project", AECbytes"Building the Future", (available onlinewww.aecbytes.com/buildingthefuture/2009/Sutter_IPDCaseStudy.html [accessed on 1/11/2009])Konchar, M. 1998, "Comparison of US project delivery systems", Journal of Construction Engineeringand Management, vol. 124, pp. 435.Miles, R. & Ballard, G. 2002, "Problems in the interface between mechanical design and construction:a research proposal", Journal of Construction Research, vol. 3, no. 1, pp. 83-95.Mossman, A. 2008, "More than materials: managing what’s needed to create value in construction”,the 2nd European Conference on Construction Logistics, Dortmund (available online www.lciuk.org/downloads/Lean_Construction_Logistics.pdf[accessed on 15/11/2009])Pasquire, C.L. & Connolly, G.E. 2003, "Design for Manufacture and Assembly", Proceedings ofIGLC 11th Annual Conference, Blacksburg.598

Ronen, B. 1992, "The complete kit concept", International Journal of Production Research, vol. 30,no. 10, pp. 2457-2466.Tatum, C.B., Vanegas, J.A. & Williams, J.M., 1986, "Constructability Improvement Using Prefabrication,Pre-assembly and Modularisation", Construction Industry Institute, Stanford University, California,Technical Report No297, November.The American Institute of Architect 2007, "Integrated project Delivery (IPD), Guide" (available onlinewww.aia.org/ipdg [accessed on 1/11/2009].Venables, T., Barlow, J. & Gann, D. 2004, "Manufacturing Excellence: UK Capacity in Offsite Manufacturing",The Housing Forum, London.599

Marketing Functions in Croatian ConstructionCompaniesButković, L.L.University of Zagreb, Faculty of Civil Engineering, Croatia(email: llovrencic@grad.hr)Katavić, M.University of Zagreb, Faculty of Civil Engineering, Croatia(email: mariza@grad.hr)AbstractCroatian construction industry has always had a significant influence on the entire economy and itsshare in the GDP grew each year. However, the development of the construction industry wasaffected by special conditions, such as the huge destruction during the war in 90‟ties, the restorationprocess which followed and the fact that the state has a great share in the total investments. There hasalways been enough work for the construction industry and therefore Croatian constructioncompanies did not require a clearly defined business and marketing strategy. Today, when the globalcrisis has greatly affected the real estate market and the public investments in Croatia have beenhalted, the question arises: How to get out of the crisis? One of the ways is certainly a well definedmarketing strategy which has yet to be fully accepted by Croatian construction companies. This isevident from the research conducted in 2009, the results of which will be presented in the paper.Keywords: marketing strategy, construction industry600

1. IntroductionIn the second part of the 20 th century, many companies found themselves in a more dynamic, complexand insecure environment in which the influence of proper business strategy (having and executingone) had a key influence on their development, success and survival on the market. Strategicmanagement of the company has been created as a result of that fact and it includes management ofthe organization so as to avoid the many dangers from the surroundings and simultaneously takeadvantage of all opportunities. Accordingly, many business strategies have been developed, that ledthe companies to fulfil their goals.Business strategy of a company has an impact on the choice of organisational structure of thecompany. The analysis of one of the probably most common organisational structures, organisationalstructure by function, shows that the company usually has 5 key functional areas (Figure 1).Figure 1: Organisational structure by functionSource: made by the AuthorEach of these functional areas develops its own strategies which aim to achieve the long term goals ofthe company in accordance with the main business strategy.One of the 5 functional areas is marketing (Figure 1). Speaking of marketing, the easiest way todescribe it is finding out what the consumer wants and then trying to satisfy those needs in the mostprofitable way (Moore, 1984), while marketing strategy, as a part of a larger strategy of the company,is responsible for defining the needs of the consumers and the potentials of the company to achievemarket advantage (Windy, Robertson, 1983).Today, marketing is viewed as a business philosophy; the philosophy of survival and success of thecompany in the long run. Unlike other stages, where marketing had only a tactical role and where it601

was present only as one of, more or less equal, functions in the running of the company (such asfinance, production, accounting, supply, personnel) (Vranešević, Vignali, 2004).That having a good marketing strategy pays off was evident from research done on more than 400different companies in USA in 1996 which proved that marketing business strategy has an important,positive impact on different indicators of business success such as: Investment return; Sales levelincrease and New products development. (Walker 1996).The question arises from this paper: Are construction companies familiar enough with the term„marketing‟ and do they, in their organisational structures, have a fully implemented function ofmarketing? Emphasis is on Croatian construction companies since construction, specific as it is, is animportant part of the Croatian and any other national economy. Due to that, a concise structureanalysis of Croatian construction companies as well as the results of research conducted on the use oftheir marketing strategy and its tools will be presented further on.2. Analysis of Croatian construction companiesIn every country, construction is the basis for the development of national economy, but also anindicator of economic stagnation and crisis, which indicates that the situation in the constructionindustry is closely linked to the economy of the entire country. In Croatia, that was very obviousbecause after the war the construction industry had a strong influence on its development and theshare of construction in total GNP constantly increasing (in 2007 was about 6 %).Analysis of the participation of 9063 construction companies in the overall economy of Croatia led tothe following insights. In 2007, builders, via 9063 companies, employed 11.4% of the total number ofemployees, who achieved total revenue of 8.8% of total income of Croatia and participation in theoverall profit, profit before tax of 7.5% (Table 1) (Lovrenčić, Katavić, 2009).Table 1: Basic financial results of civil engineering in 2007DESCRIPTION 2007.Number ofcontractorsNumber ofemployeesIndex of civilengineering areaIn millions kn, shares in %, index 2006=100.0Index of Croatia9,063 111.4 106.4 10.8102,328 109.0 106.1 11.4Total incomes 57,951 111.3 113.6 8.8Profit before3,295 102.6 119.8 7.5taxationSource: Financial Agency, FINA (2008)Share in Croatianeconomy602

In the realization of the total income of Croatian economy in 2007, as in previous years, the mostcommon are large-scale entrepreneurs who achieved 48.3 % of its amount (Anušić, Pogačić, 2008).But this is not the case in construction where a significant reduction of the share of large companiesin the realization of the total revenue is obvious. Among construction companies, the most importantis a group of small businesses whose share in total revenue in 2007 in the area of constructionamounted to 41.9 %.In total earned income of construction business, in 2007, small companies participated with 41.9 %,medium companies with 24.0 %, and large achieved 34.1 % of the total revenue which follows thetrend already present in 2006 in the entire economy, which is a significant reduction in the share oflarge companies in the realization of the total revenue.The number of active construction companies has significantly increased since 1990: from 819companies in 1990 this number climbed to 4975 companies in 1996. Since then, the number isfluctuating, only to have a mild increase in the last few years. In comparison with 2006, the numberof active companies in 2007 increased by 12.1 %.During the whole period since 1991, when Croatia became independent, till today, a general trend ofsmall and middle- size companies‟ growth is noted, while the number of large companies isconsiderably reduced. This was caused by change in the socio-economic system at the beginning ofthe 90‟s, when the reconstruction of construction companies occurred, as shown in the followingtable (Lovrenčić, Katavić, 2009).Table 2: Number of construction companies – according to the sizeYear 1990 .... 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Total Nrof constr.comp.Small(0-50)Middle(51-250)819.....572 .....133 .....Big (251-)114 .....Source: FINA (2008)4975 5266 5261 5134 4931 4800 5612 5979 6416 7159 8084 90634798 5055 5041 4916 4701 4548 5319 5634 6039 6713 7878 8845144 173 187 186 191 205 232 265 290 345 169 17733 38 33 32 39 47 61 80 87 101 37 41The current trend of restructuring the construction business is in accordance with European trendswhere small and medium businesses adapt more easily to market demands (Anušić, Pogačić, 2008).The structure of companies according to size was used as the basis for the development of a samplefor a survey conducted by the authors in Croatian construction companies. The questionnaireconsisted of 20 questions and SWOT analysis and was sent to more than a hundred addresses.603

3. Results of the survey on implementation of market strategyin business activities in Croatian construction companiesResearch on the application of marketing strategies in Croatian construction companies wasconducted as a survey using a questionnaire in 100 leading Croatian construction companies. Thesurvey questionnaire consists of 3 parts: the first part consists of 15 questions on general business andmarketing of the company, the second part has 10 statements on which the respondents gave theiropinion and the third part is SWOT analysis.The completed survey was returned by 30 construction companies, which are here grouped accordingto size. The main criterion for the size of the company is the number of employees so that a smallcompany has 0 to 50 employees, a medium one from 51 to 250 employees, big 251 or more. Therewere 37 % of small, 37 % of medium and 26 % of big companies in the analyzed sample (Table 3)(Lovrenčić, Katavić, 2009).Table 3: Size of Croatian construction companies in a sampleSize of companyNumber ofcompanies ina sample%Number ofconstructioncompanies inCroatia in 2007%Small 11 37 8,845 98Medium-sized 11 37 177 1.5Large 8 26 41 0.5Total 30 100.00 9,063 100.00Source: FINA, The author‟s research, Zagreb (2009)When analyzing the results of the conducted research, it is important to emphasize that the sampledoes not match the structure of the basic set, but it is only an indicator of the situation in the Croatianconstruction industry. Namely, in 2007, out of 9063 registered construction companies, 41 were big(0.5 %), 177 medium-sized (1.5 %) and the rest were small businesses, 8845 of them (98 %). It isinteresting to know that out of these 8845 small business, almost half do not have even one employee,and about 35% of them have one to nine employees.Therefore, it is clear that the opinions and information obtained from small businesses are relativelyunimportant, because they do not have the means or the need to hire marketing experts and set up amarketing sector. Big companies have the need to define and develop a marketing strategy andtherefore, their experience is much more important for the present study.604

Furthermore, this paper will present companies that have a built-in marketing function in theirorganizational structure as well as the thoughts and attitudes of managers of surveyed companies onthe understanding and use of marketing.Only 10 construction companies from 30 respondents have a Marketing Department, which amountsto about 33.33%. Out of these, 5 are large companies, 2 medium and 3 small. Only one company thathas no marketing department uses outsourcing. (Lovrenčić, Katavić, 2009)Table 4: Croatian construction companies that have marketing departmentsSize of companyHavemarketingdepartment%Small 3 30.00Medium-sized 2 20.00Large 5 50.00Total 10 100.00Source: The author‟s research, Zagreb (2009)The large construction companies have had marketing departments for a long time, in one companyeven since 1992. Two medium-sized companies with marketing departments formed them in 1995,and 2008, while in small companies these departments were formed relatively late (2007 and 2008).The number of employees in the marketing department of all companies ranges from 1 to 5, exceptfor two large companies, which have 47 and 43 employees in marketing. However, in these cases,employees from that department aside from the marketing activities also work on offers andcontracts, preparation of plans and calculations, and most of them are in charge of sales. Majority ofemployees in the marketing department are college graduates, fewer are high school graduates. Thereis only one Master of Science who works in the marketing department.If we observe functions performed by employees in the department of marketing, the situation is asfollows:Table 5: Functions performed by marketing department employeesFunctions of marketingSmallMediumsizedLargeTotalSale 2 1 4 7 70.00%Market research 3 1 5 9 90.00%Price analysis 3 1 4 8 80.00%New product development 1 1 2 4 40.00%605

Promotion activities 3 2 4 9 90.00%Other 0 0 1 1 10.00%Source: The author‟s research, Zagreb (2009)Most common tasks performed by employees in the department of marketing are market research andpromotional activities, in as much as 9 out of 10 companies. They are followed by price analysis andsales while the least common is working on development of new products. One big company hasindicated under „other‟ that the employees of the marketing department work on offering andcontracting new deals, creation of operational plans, monitoring and analyzing execution of plans(Lovrenčić, Katavić, 2009).A very interesting part of the study was a part where respondents expressed their views, indicatingthe answers with „do not agree‟, „partially agree or disagree‟ and „I agree‟, with the appropriatestatements, as shown in next table.Table 6: Level of agreeing with the statements about marketing and the need for marketing1234567For successful business it isimportant that the company hasa clear business strategy.Marketing activities should bepart of the strategy ofconstruction companies.In the construction industrythere is a need for marketing.Croatian constructioncompanies do not use (apply)marketing enough.Companies that have built-inmarketing function achievebetter business results.Our company is recognized inthe market.Potential customers recognizeour logo (visual identity).small medium large totaldo not agree 0 1 0 1 3.33%partially agree 3 2 0 5 16.67%I agree 8 8 8 24 80.00%do not agree 0 0 0 0 0.00%partially agree 5 7 1 13 43.33%I agree 6 4 7 17 56.67%do not agree 1 0 0 1 3.33%partially agree 3 6 1 10 33.33%I agree 7 5 7 19 63.33%do not agree 2 0 0 2 6.67%partially agree 5 7 5 17 56.67%I agree 4 4 3 11 36.67%do not agree 2 2 0 4 13.33%partially agree 6 5 4 15 50.00%I agree 3 4 4 11 36.67%do not agree 1 1 0 2 6.67%partially agree 4 2 2 8 26.67%I agree 6 8 6 20 66.67%do not agree 1 1 0 2 6.67%partially agree 7 5 2 14 46.67%I agree 3 5 6 14 46.67%606

89Our company is investingenough in marketing.There is a positive trend ofinvestment in marketing in ourcompany.do not agree 4 3 1 8 26.67%partially agree 4 7 7 18 60.00%I agree 3 1 0 4 13.33%do not agree 5 4 2 11 36.67%partially agree 4 3 3 10 33.33%I agree 2 4 3 9 30.00%Using marketing activities, do not agree 0 0 1 1 3.33%10Croatian constructioncompanies could more easilypartially agree 5 4 2 11 36.67%penetrate into new markets. I agree 6 7 5 18 60.00%Source: The author‟s research, Zagreb (2009)Most of the companies analyzed, 80.00% of them, agree with the first statement, that for successfulbusiness it is important that the company has a clear business strategy.About 63.33% of companies think that there is a need for marketing in construction industry, while60.00% believe that the use of marketing activities can ease foreign market penetration.Equal number of respondents, 36.67%, believe that Croatian construction companies use marketinginadequately, but also that companies that have built-in marketing function achieve better businessresults.As much as 66.67% of construction companies believe that their company is recognized in themarket, that is, 46.67% of them think that their customers recognize the logo, whereas only about13.33% of companies sufficiently invest in marketing, and in 30.00% of them there is a positive trendof investment in marketing.4. ConclusionIt is evident that the functions of marketing and the use of marketing activities are the least expressedof all activities in the construction industry. In Croatia, it is probably the result of constant growth inconstruction jobs and of construction as an industry. There has always been work for engineers andthere was no need for defining and implementing a clear marketing strategy as part of the entirebusiness strategy, nor to use the marketing function.However, the crisis that began in early 2008 in the United States and quickly spread to Europe,started the first slowdown in construction sector in the last seven years in Croatia. The real estatemarket is stagnating with a large number of unsold apartments, and commercial banks increasedinterest rates on housing loans. All of this poses a new challenge for Croatian construction companieswhile being a matter of survival. (Lovrenčić, Katavić, 2009). Are Croatian construction companiesaware of that?607

We believe that they are and despite of all, research results give hope that the developers are aware ofthe need for the marketing function. Due to insufficient knowledge of marketing concepts ofoperations further supported by the real estate market and government investment crisis as well as byreduced funding opportunities they are losing market share and business success.Time will tell which construction companies can survive the crisis because marketing, if defined andused well with all its functions and tools, could be of great help. The purpose of implementing amarketing approach is to build and strengthen the organization as a going concern. From this form ofassessment and in devising “a strategic standpoint” the result from a marketing point of view is tocombine what the organization is good at, together with how it can be best presented to the client(Pettinger, 1998).ReferencesAnušić, L., Pogačić, Ž.: Stanje u gospodarstvu i tržište građevinskih usluga, Sabor hrvatskihgraditelja 2008, Cavtat, 6.-8. studenoga 2008., str. 508.Lovrenčić, Lana; Katavić, Mariza: Marketing Strategy in Croatian Construction Companies, CivilEngineering Management, Brno, Brno University of Technology, 2009., pp. 91-94Lovrenčić, Lana; Katavić, Mariza: Results of the Survey of Implementation of Market Strategy inBusiness Activities in Croatian Construction Companies, CIB Joint International Symposium 2009,Dubrovnik, Croatia, 27.Sept. – 01.Oct 2009.Moore A B (1984) “Marketing Management in Construction, A Guide for Contractors”, ButterworthsVranešević, T., Vignali, C., Vrontis, D.: Upravljanje strateškim marketingom, Accent, Zagreb, 2004.,str. 25.Windy, Robertson S T “Marketing Strategy, New Direction for Theory and Research”, Journal ofMarketing, Spring 1983, str.12.608

Design-Bid-Build versus Design-Build: The Client’sChoiceFavié, R.Eindhoven University of Technology(email: r.favie@tue.nl)Sijbers, J.Eindhoven University of Technology(email: jobsijbers@hotmail.com)Abdalla, G.Eindhoven University of Technology(email: g.abdalla@tue.nl)Maas, G.Eindhoven University of Technology(email: g.j.maas@tue.nl)AbstractThe aim of the procurement process in construction is to acquire the construction work that meets theclient‟s needs. One of the steps in this process is the functional grouping. The functional grouping ofa project is the way in which tasks, responsibilities, liabilities and risks are divided among theconstruction participants. There are several types of functional groupings for construction projectsthat are commonly used like Design-Bid-Build or Design-Build. For a client, the choice for a type offunctional grouping that fits his needs is difficult to make. In this paper, insight is given inpossibilities the client has in the decision making process for choosing a suitable functional groupingfor his project. Next to that a comparison is made between the traditional Design-Bid-Build and themore integrated Design-Build. Data has been collected by interviewing construction experts. Theseexperts were clients as well as contractors.Keywords: design-bid-build, client, decision making process, design-build, functional composition.609

1. IntroductionOver the last decades, the Dutch construction sector has been price oriented. This has led to aconstruction industry in which the participants distrust each other and the several disciplines arehighly separated (Maas and Van Eekelen, 2003). The last few years, a structural transition is goingon. Programs have been developed, such as the PSIBouw program, that focused on alternative, moreintegrated procurement strategies in contrast to the more traditional ones. Although the price orientedtraditional construction procurement strategy in many cases does not suffice, many large clients stillchoose for this strategy. As a consequence the client will often not get value for money.It has become increasingly evident over recent years, that an appropriate choice of procurementsystem, while necessary for project success is not sufficient to ensure it. But appropriate procurementstrategies are needed to help to achieve optimal solutions in terms of cost, time and quality(Kumaraswamy and Dissanayaka, 1998). The functional composition, which helps dividing the tasks,responsibilities and risks among participants, is considered to be the most important and leadingsubsystem of the procurement system (Luu et al., 2005). Therefore it is important for clients tochoose the right functional composition.Over the years many different functional compositions have been developed, which makes it difficultfor clients to make a considerable choice. A model, developed at the University of Eindhoven (Maasand van Eekelen, 2003) has been taken as a starting point for this research.The functional compositions for construction projects can be divided in more traditional and moreintegrated functional compositions. To help the client in making a decision for a specific functionalcomposition it is important to get insight in the specific project situation and which type of functionalcomposition fits best for that situation. Therefore the aim of this study is to create insight into theclient‟s considerations for a functional composition by analyzing the factors that influence theclient‟s decision making process and give insight in the differences between two functional groupingsin order to guide the client through this process.In paragraph 2, the different steps of the procurement strategy will be explained further in order topresent the relationships between these steps (and the functional composition in particular) moreclearly.2. The procurement strategyMany parties are involved in a construction project. The division of roles, tasks and responsibilities isa very important step in the construction process. In literature, the type of organization that followsfrom the choice of this division is called the functional grouping (Kumaraswamy & Dissanayaka1998). The names of commonly used functional groupings often refer to the roles and tasks that areoutsourced by the client to a contractor. Functional grouping is one of the steps in the wholeprocurement route that has to be followed for each construction project.610

Kumaraswamy and Dissanayaka (Kumaraswamy & Dissanayaka 1998) state that a procurement routeexists of 5 parts. In order to develop a certain procurement route, the next choices have to made:Work packagingFunctional groupingPayment modalitiesForm of contractSelection methodologiesIn paragraphs 2.1 - 2.5 the 5 procurement route steps will be discussed.2.1 Work packagingThere are several reasons for a contractor to cut a large project into a number of smaller projects orjust leave the project as it is. For example, one project might be too big or too complex to be executedby one contractor. That can lead to cutting the project into several work packages with each their owncharacteristics. Work packaging describes the type of project, the size of the project, the function andthe location of the project.2.2 Functional groupingThe functional grouping is the result of strategic and tactic considerations concerning the economicalfunctions in the construction process and the division of roles and tasks for the different parties. Thefunctional grouping relates the different construction process phases and relates the different partiesthat cooperate in the process. The choice for a certain type of functional grouping forms the structureof the project organization consisting of functional and contractual relations and the division of theresponsibilities, liabilities and risks.There are a lot of different ways to set up the functional grouping of a construction project. Thetraditional Design-Bid-Build process (DBB), in which a contractor is contracted based onspecifications and drawings is very segmented. After finishing the design, the client hires a contractorwho builds the project according to the client‟s detailed specifications. This means there are twoseparate groups involved; the design group and the construction group (Ling 2004b) and the processfunctions designing and building are strictly separated. This means that the client is responsible forthe development of the final design including the detailed construction specifications. Thesespecifications are the basis for the selection of the contractor. During the construction of the projectthe client normally does the supervision or quantity surveillance to make sure that the contractorexecutes his tasks properly.611

Nowadays, more integrated delivery approaches are more and more often used by all types of clients(Regieraad Bouw, 2007 / Pakkala et al, 2007). In the Netherlands, one of the biggest public clients,the Ministry of Transportation, even prescribes the use of Design-Build (DB) contracts for new andreconstruction works (RWS, 2007). DB is a so-called integrated procurement route. This concept hasdeep historical roots. In ancient times, the „master builder‟ had full responsibility for all phases of theproject. Nowadays in the DB approach, it would involve a multidisciplinary team (Palaneeswaran &Kumaraswamy 2000). This type of procurement routes, in which one company or consortium ofcompanies is responsible for the design and execution of a project, requires a totally different attitudeof the contractor as well as the client.The above-mentioned contractual forms differ from one another in the division of responsibilities,tasks and roles and functions. Next to that, they also differ in the moment on which the contractor iscontracted. In the DBB process, the signing of the contract is just before the starting of the realizationphase. In a DB contract, the contractor also develops a part of the design. In that case, the contracthas to be signed earlier in the process. These shifts in the moment of contracting mean that each timedifferent kind of performances are demanded of the client and the contractor. Therefore, in everysingle case, an other division of the roles and responsibilities is necessary.2.3 Payment modalitiesAn important part of the procurement process, that is closely related to the choice of a certainfunctional grouping, is the choice of a payment modality. For example, the contractor can be hiredbased on a lump sum, but the client can also choose for a cost-plus-fee payment. An other choice thathas to be made is the timing of the payments: per month or when certain milestones are reached.The choice of a payment modality determines, to a large extent, how the client and the contractorcooperate. Working with a lump sum and specifications and drawings that are specified on a highlevel will be very different than working with paying after the important milestones of the client areachieved. This is also linked largely to the functional grouping and the selection methodology.2.4 Form of contractIn the construction sector, there are a lot of contractual standards that can be used as the basis ofevery construction project. Internationally, there are the FIDIC contracts. In the Netherlands, the“Uniforme Algemene Voorwaarden” (UAV) and the UAV for integrated contracts (UAV-gc) areusually used.Next to that, choices must be made on which type arbitration will be used in case of problems.612

2.5 Selection methodologiesIf a client has made all the above mentioned choices, then he has to make the choice for the tenderprocedure. The tender procedure consists of 3 important levels:Tendering procedureSelection and awarding criteriaDecision modelling (scoring, weighing)3. MethodologyIn order to achieve the goal that is set, the following research questions must be answered:Which factors influence the client‟s decision making process for a functional composition?What are the distinctive features of the functional compositions DBB and DB?Which criteria determine the difference between the functional compositions DBB and DB?What are the distinctive differences between DBB and DB on these criteria?The research is descriptive and explorative. On the one hand literature survey has taken place in orderto find the answers on the first two research questions. On the other hand 12 interviews with expertshave taken place to answer the third and fourth question. Information from these interviews has beenanalyzed. Based on this information a list of differences has been developed, which is the answer tothe last research question.The literature review can be found in paragraph 4. This survey has given a broad view on factors thatinfluence the client‟s choice for a functional composition. By means of a Cause-and-Effect Diagramthese factors are gathered as shown in Figure 1. Furthermore this review has been used to get insightin distinctive features of both DBB and DB. Based on this literature survey a theoretical frameworkhas been designed for the second part of the research: the interviews.The theoretical framework has been converted to a research model that can be used for gathering andanalyzing data from expert-interviews. By gathering and analyzing data it is examined which criteriadetermine the difference between DBB and DB. Based on these results a list is constructed to guidethe client in his decision making process. This list helps clients choosing a more traditional or moreintegrated functional composition. The interview results can be found in paragraph 5. In paragraph 6the results of both the literature review and interviews are combined.613

4. Literature review4.1 Factors that influence the choice for a functional compositionFactors that influence the choice for a functional composition are shown by the Cause-and-EffectDiagram in Figure 1. Mainly based on Kumaraswamy and Dissanayaka (1998) the factors in thisdiagram are divided in four categories: The functional composition, the procurement system, thespecific project and process situation and project results. These features directly influence the choicefor a functional composition.The procurement system consists of four subsystems, work packaging, functional composition,contractual arrangement and team selection (Kumaraswamy and Dissanayaka, 1998; Luu et al.,2005). The functional composition is leading and once the choice for a certain functional compositionhas been made the choice of the other subsystems will become apparent (Luu et al., 2005).Project and process features in specific project and process situations can be divided in foursubcategories; external context, internal organization, project characteristics and client‟s goals andpriorities (PSIBouw, 2005; Luu et al., 2005).The last category, project results can be described in terms of costs, time, quality, client‟s satisfactionand a rest category (Chan, 2002).614

2. Procurement system4. The project resultsWork packagingCostsContractualarrangementQualityTimeDivision of rolesTeam selectionExternal contextRest categoryProject characteristicsInternal organizationDivision of tasks,responsibilities and risksGoals and prioritiesSatisfactionInsight in the severalcategories of factors thatinfluence the decisionmaking process of theclient1. Functional composition3. Specific project andprocess situationFigure 1: Cause-and-Effect Diagram; Factors that influence the decision making process4.2 Distinctive features of functional composition DBB and DBThe distinctive features of the functional composition can be divided into primary and secondaryfeatures. These primary and secondary features are shown in Figure 2.The primary features are features of the functional composition. These are shown in Figure 1. Basedon these subcategories five distinctive primary features have been formulated based on Dorée (1996),Kumaraswamy and Dissanayaka (1998) and Regieraad Bouw (2006). These five primary distinctivefeatures are:Procurement method (Dorée, 1996; Kumaraswamy and Dissanayaka, 1998)Moment of transferring responsibilities (Dorée, 1996)Composition of the design team (Dorée, 1996)615

Primary objectives of client and (main) contractor (Regieraad Bouw, 2006)Structure to control the process (Dorée, 1996)Primary featuresFUNCTIONAL COMPOSITIONDIVISION OF TASKS, RESPONSIBILITIES, RISKS AND ROLES1: Procurementmethod2: Moment oftransferringresponsibilities3: Composition ofDesign team4: Structure tocontrol the process5: Primaryobjectives clientand contractor(afstemmingPROCUREMENTSYSTEEMpartijen)Secondary featuresWork packaging Contractual arrangements Team selectionProject descriptionIncentives and contractconditionsSelection criteriaFigure 2: Primary and secondary features of a functional compositionThe secondary features are features of the procurement system. As shown in Figure 2 theprocurement method leads to the secondary features of the functional composition. These secondaryfeatures are: work packaging, contractual arrangements and team selection (Kumaraswamy andDissanayaka 1998; Luu et al., 2005).4.3 Criteria that determine the difference between DBB and DBBased on Luu et al. (2005) and Ng et al. (2002) criteria are defined that determine the differencebetween functional compositions. Several interviews with experts in the Dutch Construction Industrycompleted this list of 16 criteria (see table 1). These criteria are divided into three categories: (1)project results, (2) process specific situation and (3) project specific situation.5. InterviewsBased on the criteria from paragraph 4.3 twelve interviews with experts were held in order todetermine differences between DBB and DB. Due to the amount of relations in the research modelthese interviews were semi-structured. One part was a survey in which experts had to give a value torelationships between criteria and functional compositions. The other part consisted of open616

questions in which experts were asked to declare these relationships. These experts were experiencedproject managers from contractors (2), from consultants (3) and from public clients (7).In table 1, differences between DBB and DB can be seen. The criteria and experts‟ input arediscussed in paragraphs 5.1.1 – 5.1.14.5.1.1 Time certainty11 experts state that time certainty is much higher in DB projects. The main reasons for this are themoment of contracting a contractor (which is earlier in a DB project) and close cooperation betweendesign team and realization team.5.1.2 Total time (preconstruction time and construction time)10 experts state that the total time in a DB project is in most cases shorter. Better cooperation withina Design and Build firm and the contractor‟s objective to spend as little time as possible are the maindrivers for this. Looking at preconstruction time and construction time separately shows the sameresults.5.1.3 Costs certainty8 experts state that costs certainty in a DB project is higher than in a DBB project. As with timecertainty, costs certainty is also better because of the moment of contracting a contractor (which isearlier in a DB project and therefore the amount of money that a client has to spend is known andfixed earlier). Next to that, close cooperation between design team and realization team will makesure that coordination between these two teams will go smoother and faster.5.1.4 Construction costs6 experts state that construction costs in a DBB contract are always lower. Three experts state that theconstruction costs in a DBB are only lower in the right economical phase and 3 state that theconstruction costs in a DB project are lower. The construction costs in a DBB project are lowerbecause of the price oriented way of tendering. Opposite to that is the fact that total constructioncosts in a DB project might become lower because of the good cooperation between design andconstruction teams.5.1.5 Maintain and operate costsExperts‟ opinions are miscellaneous. Most experts agree that the client‟s influence on specificationsin a DBB project is higher and can therefore lead to better specifications on the field of maintenance.On the other hand, a client can also do this in a DB project.617

5.1.6 Quality guarantee4 experts state that DBB can better guarantee quality. 4 experts state that DB can better guaranteequality and 2 state that both can guarantee quality on an equal level. The influence of a client in DBBcan make sure the quality is better guaranteed. Opposite to that, the cooperation in a DB firm canoptimize quality.5.1.7 Price/quality ratio5 experts state that DB can lead to a better price quality ratio. 2 state that DBB leads to a betterprice/quality ratio. 3 experts say there is no difference and one states that it depends on the extent inwhich the contractor is able to use an innovative solution: if that is possible, DB leads to a betterprice/quality ratio. The last expert states that it depends highly on the economic situation.5.1.8 Risk for the client10 experts state that risks for the client are better manageable in a DB project. One says that they arebetter manageable in a DBB project. One states that it depends on the extent in which partners areable to manage risks. Main reason for this difference is the fact that a client has the possibility toallocate more risks with the contractor.5.1.9 Flexibility of the client8 experts state that the flexibility for the client (to change parts of the design) is bigger in a DBBproject than in a DB project. This is because the higher level of influence that a client has during theproject.5.1.10 Knowledge of the clientExperts‟ opinions are miscellaneous. The knowledge that is needed from a client in a DB project isconcentrated in a short period in which his contribution of high level knowledge is big. In a DBBproject, knowledge is needed during the whole project.5.1.11 Capacity of the clientThe capacity that a client needs to deliver is closely related with the knowledge that is needed.5.1.12 Client’s influence on the project10 experts state that the client‟s influence is bigger in a DBB project. This is because of his designresponsibility.618

5.1.13 Product complexity10 experts state that a DB contract is more suited for projects with high complexity. Main reason forthis is that coordination between design team and construction team is easier in a DB contract. Nextto that, risks in a complex project are high. These risks can easier be allocated with the contractor inDB contract.5.1.14 Process complexityAll experts state that complexity related to coordination between the different stakeholders Can betterbe managed in a DB contract. Next to that, all experts also agree that complexity on the field of theproject‟s environment (e.g. licenses) can better be managed by the client.6. Results and discussionThe results of this research are combined in table 1. Clients can use this as a first step or a guide inmaking a choice for a certain functional composition.Compared to the model of Maas and Van Eekelen (2003), in this paper only two functionalcompositions have been compared. Therefore a client can only conclude that a more traditional or amore integrated functional composition suits a specific project and process situation.The results from this research are not valid in all situations. This means that some factors not takeninto account in this study can strongly influence the differences between DBB and DB. The resultsthat are shown are only valid under „normal‟ circumstances.This guide for clients has been designed, based on literature and research in practice. The list itselfhas not been validated yet. Therefore this list must still be validated by experts or by means of a fewcase studies.Clients still lack insight into the complexity of a construction process and are not able to choose theright functional composition. Research at this subject is still needed to give different insights into thiscomplexity and thereby helping a client in making the right choice.619

Table 1: Differences between Design-Bid-Build and Design-BuildCriterion Variable D-B-B D-BTime Time Certainty - ++Total Time - +Preconstruction Time - +Construction Time - +Costs Costs Certainty - ++Construction costs + -Maintain and Operate costs +/- +/-Quality Quality guarantee +/- +/-Price/quality ratio +/- +/-Risk Risks for the client - ++Process Flexibility of the client ++ -Knowledge +/- +/-Capacity +/- +/-Influence + -Project Product Complexity - ++Process complexity /Uncertainty+/- +/-7. ConclusionThis research gives clients insight in factors that influence the decision for a certain functionalcomposition. It helps clients in making the first steps in the decision making process.Besides that, this research shows what factors influence the project results. Based on the criteria inthis research insight is created in differences between more traditional and more integrated functionalcompositions. Thereby the first steps of the decision making process have been made transparent.This list can be used in every type of project. However this research is limited to those situationswhere only the Design phase and Construction phase will be considered when choosing the mostsuitable functional composition.620

ReferencesChan, A.P.C. et al. (2002), “Framework of success criteria for Design/Build projects”. Journal ofManagement in Engineering, 18 (3), pp. 120-128.Dorée, A.G. (1996), “Gemeentelijk aanbesteden: een onderzoek naar de samenwerking tussendiensten gemeentewerken en aannemers in de grond-, weg- en waterbouwsector”. Enschede:Universiteit Twente.Kumaraswamy, M.M. & Dissanayaka, S.M. (1998), “Linking procurement systems to projectpriorities”. Building Research & Information, 26 (4), pp. 223 – 238.Ling, F. Y. Y. (2004), "How project managers can better control the performance of design-buildprojects". International Journal of Project Management, vol. 22, no. 6, pp. 477-488.Luu, D.T. et al. (2005), “Formulating procurement selection criteria through case-based reasoningapproach”. Journal of Computing in Civil Engineering, 19 (3), pp. 269 – 276.Maas, G.J. & Eekelen, B. van (2003), “Reisgids naar de „Future Site”: inleiding in debouwprocesleer”. Eindhoven: Technische Universiteit Eindhoven.Ng, S.T. et al. (2002), “Fuzzy membership functions of procurement selection criteria”. ConstructionManagement and Economics, 20, pp. 285-296.Pakkala, P.A., De Jong, W.M., Aijo, J. (2007) “International Overview of Innovative ContractingPractices for Roads”. Finnish Road Administration, Helsinki.Palaneeswaran, E. & Kumaraswamy, M. M. (2000), "Contractor selection for design/build projects".Journal of Construction Engineering and Management-Asce, vol. 126, no. 5, pp. 331-339.PSIBouw (2005), “Overwegingen bij uitbestedingsstrategieën”. Gouda: PSIBouw Programmabureau.Regieraad Bouw (2006), “Beter aanbesteden in de bouw”. Gouda: Regieraad Bouw.Regieraad Bouw (2007), “Opdrachtgevers aan het woord – meting 2007”. Gouda: Regieraad Bouw.Rijkswaterstaat (2007), “Handreiking Systeemgerichte Contractbeheersing – versie 2007”. Utrecht:Rijkswaterstaat.621

Structural Equation Modelling for Small ConstructionOrganizational SystemChen, Y.College of Technology, Purdue University(email: Evachen@purdue.edu)Lasker, G.C.College of Technology, Purdue University(email: glasker@purdue.edu)AbstractUnlike the majority of industries, the construction industry is not only saturated with a multitude ofsmall young companies, but also has one of the highest failure rates of all industries in the UnitedStates. The critical success factors (CSFs) of construction companies have been widely studied.However, most of previous studies about the CSFs were concentrated on project level. Even if therewere some on organizational level, due to the complex nature of organization success, there is noconsensus as to how it should be analyzed. The research community and organizational managementpractitioners need a scientific and systematic framework of indexes that is based on a commonaccepted theory while testified by practical data. So the scope of this study is to investigate the mostsignificant organizational success factors with focus on small construction organizations. This paperaims at determining most CSFs, and to develop a model based on these CSFs. Based on the systemengineering theory, three major dimensions are identified; time, space and knowledge. To enhanceframework, these conceptions were further reduced to detailed CSFs. In this respect, a framework ofcritical success factors in construction companies was developed and tested empirically by thetechnique of structural equation modelling. The correlation of these three dimensions in constructioncompanies are significant and close, with the coefficients of 0.76, 0.86 and 0.87 for time dimension,logic dimension and knowledge dimension, respectively. These support the statistical fit of theproposed framework in construction companies. The empirical results suggested that all threedimensions are of almost equal importance in the success of construction companies.Keywords: construction, organization, system, structural equation modelling, critical success factors622

1. InstructionUnlike the majority of industries in the United States, on one side, the construction industry is highlyfragmented, consisting of a multitude of small firms operating locally; according to the U.S. CensusBureau (2007) more than 3 million construction firms existed, 75% of that total were composed ofself-employed workers with no paid employees, and only 1% had 100 or more employees. On theother side, the majority of those companies were only in business for less than five years; only649,602 were still in business in 2006 of the 850,029 construction companies in 2004, the failure rateof which is 23.6%(Duke, 2008). The contractor failure rate of new start-up companies is even higherat 34.4%, a rate that is second only to the failure rate of food service companies. The followingquestions arise:”What is the cause of the failure? Is there a relationship between the age and maturityof a company that accounts for this failure rate?” So the purpose of the research is trying to answerthis question -- to establish a list of critical success factors essential to construction business survival.This paper analyzes several industry specific factors and attempts to establish a guideline foremerging construction companies to follow. This paper reports a three-stage study for this purpose.The logical process is: (1) Reviewing related studies from literature; (2) Proposing a Framework ofCSF in construction companies; (3) Testing of the proposed Framework.2. The study2.1 Stage one: review on related studiesOrganization as a term has many different definitions. It is defined according to the AmericanHeritage College Dictionary (1993) as: “An organization is a structure through which individualscooperate systematically to conduct business.” Aldrich (1979) defined the organization as: “Goaldirected boundary-maintaining activity systems.”Morphology refers to the study of structure and form. Morphological analysis, a term coined byZwicky (1962), means to decompose a general problem or system into its basic variables, eachvariable becoming a dimension on a morphological box. When the values that each variable canassume are found, a set consisting of one value of each variable defines a solution to the problem or aspecies of the general system. Based on the technique of morphological analysis, Hall (1969)proposed a model of systems engineering that generally may applied to large complex engineeringorganization or management problem of large scale, complex structure and multi variables. Themodel is composed of three fundamental dimensions which are as follows: the time dimension, thelogic dimension and the professional dimension.Critical success factors as a concept and their application to business are not new; it dates back to1960s by Daniel (1961). CSFs appeared first in information system industry to identify executiveinformation needs by Rockart (1979). Ahmed and Dye (1994) addressed the common essentialattributes of business organizations throughout an extensive organization performance, including623

usiness experience, personnel and financial factors. Camp (1995) gave a list of the most importantinternal business processes that might be considered when evaluating firm’s performance againstother competitors.In construction, Jaselskis el al. (1996) considered safety as a performance success factor in achievingexcellence in construction. Caballero and Dye (1999) developed a fuzzy-based expert system modelto help individuals, agencies, or general contractors to rank and classify the capability of competingconstruction organizations to perform a certain project. Abraham (2002) proposed a list of CSFs bycombining quantitative and qualitative methods. The quantitative survey was conducted by Pollaisand Frieze (1993) to isolate categories before the study undertaken as precisely as possible, while thequalitative interview was lead by Rockart et al (1996) to expect the nature and definition ofcategories to change in the course of a project. However, different people have differentunderstanding. Due to the complex nature of organization success, there is no consensus as to how itshould be analyzed. Even Abraham (2002) combined the two methods together in order to benefit andcapture the advantages of both. It lacked a common accepted foundation to establish or support acomprehensive list of CSFs. More significantly, the updates to CSFs should be considered as theCSFs can be changed by time according to environmental issues, transformation of industry,variations in competitive strategy, and advancement in technology. Stage two of the study aims toachieve this research gap.2.2 Stage two: proposing a framework of critical success factors inconstruction organizationsAccording to the definition above, the construction organization can be understood as a specificsystem. So in order to understand the system, we need to decompose it into its basic variables. Inorder to combine the advantage and benefit of qualitative method and quantitative method, the twomethods will be combined. On one hand, Hall’s 3D morphology of system engineering will beintroduced to analyze the system of construction organization. Figure 1 gives a simple 3D structure ofsystem engineering. On the other hand, structural equation modelling will be employed to testify thevalidity of the analytic framework.The dimensionof knowledgeThe dimensionof timeThe dimensionof logicFigure 1: 3D Structure of System Engineering (Hall, 1969)624

2.2.1 The dimension of timeThe time dimension is segmented by major decision milestones. The intervals between thesemilestones can be called phases, and they define a coarse structure depicting a sequence of activitiesin the life of a project from inception to retirement.2.2.1.1 Program PlanningProgram planning meant conscious activity in which an organization strives to discover the kinds ofactivities and projects it wants to pursue into more detailed levels of planning. Planning involvesseveral different aspects of the construction business. The way this was presented to the participantswas at any organization level plan that was formally implemented. It could include competitive,strategic, growth, or succession planning. The assumption was made that if an organization places animportance on any type of formal planning that it will also place the same importance on all aspectsof its business plan. The importance in planning progresses as the company size increases is presentdue to the fact that the need for planning becomes increasingly necessary as more people are involvedin the everyday operations.2.2.1.2 Project PlanningProject planning is distinguished from program planning by interest focused on just one project of theoverall program. A company establishes its identity by marketing and determines what kind ofprojects it pursues and the best way to differentiate its services from those of another company.2.2.1.3 ConstructionConstruction, when the system must be produced in place, refers to all those activities needed to givephysical embodiment to the wanted system. For a new building, the general contractor executes thearchitect’s plan, using the detailed plans and specification provided by him and his consultants.2.2.1.4 DistributionNext follows distribution of the product to ultimate consumers. This may involve all kinds ofdistribution facilities, sales organizations, applications, and sales engineering. The product ofbuilding may have a very long life.2.2.1.5 OperationOperation is the reason for all forms of systems engineering. Many problems arise during this phasethat are not of a design nature, such as those relating to optimum utilization.625

2.2.1.6 RetirementFinally, the system (Construction Company) may be retired, or more generally, phased out over aperiod of time while some new system takes its place.2.2.2 The dimension of logicThe logic dimension models a problem solving procedure, the steps of which may be performed inany order, but each of which must be performed no matter what the problem. The flow of logic, nottime, can be understood as dimension of space. In construction, it is common fact that all activitiescan be broken down into three roles: project management, field management, and administrativetasks. To simplify the results the list of activities was further narrowed down to six key activities orfactors: marketing, estimating, pricing, selling, contracting, and bonding.2.2.2.1 MarketingThe marketing of a company designates the beginning stages of a project. This is where a companyestablishes its identity and determines what kind of projects it pursues and the best way todifferentiate its services from those of another company. It is indicated that smaller to mid-sizecompanies put a larger emphasis on marketing than do larger companies. This can be attributed to theestablishment of a smaller company in a new market or niche. A larger company may rely on publicbid invitations and already established relationships to gain projects.2.2.2.2 EstimatingEstimating and pricing demonstrate little relationship to the size of a company. While estimatingaccuracy is consistently ranked as an above average concern across the board, one may see more of avariation in the importance of pricing.2.2.2.3 PricingPricing also has little relationship to the size of a company. The reason why one emphasize on pricingmore than estimating, may attributed to several factors, including the concept that as the size of acompany grows, the size of projects grow as well, and with larger projects come smaller profitmargins.2.2.2.4 SellingJust as marketing, selling is another aspect of a company designates the beginning stages of a project.2.2.2.5 ContractingContracting and contracting terms were consistently ranked as being of above average importance toall companies, with the leading cause being erroneous contract terms. Larger companies ranked it626

slightly higher. The most common explanation was unfair payment and retainage terms and penaltyclauses. With larger, longer products this can be especially critical.2.2.2.6 BondingBonding ranks lower with smaller companies primarily due to the types of projects. As a companygrows, so does the importance of their bonding capacity.2.2.3 The dimension of knowledgeKnowledge can be translated from information. Knowledge, such as track record, organizational roleand financial status, reveals the consistency, competence as well as integrity of the individual ororganization. In a company, there are all types of different information. Based on the nine areas inPMBOK and eleven CSFs revealed by Abraham (2002), eight areas of knowledge were abstracted.2.2.3.1 Human Resource ManagementHuman resource management (HRM) is the strategic and coherent approach to the management of anorganization's most valued assets - the people working there who individually and collectivelycontribute to the achievement of the objectives of the business. The HRM of a construction companyincludes two team, the project team and functional team. Both teams are comprised of the people whohave assigned roles and responsibilities for completing tasks.2.2.3.2 Scheduling ManagementScheduling has to be a combined effort between both project management and field management.Finding the right balance between cost, time, and quality is critical to the success of any constructioncompany. It is essential to identify any material procurement issues early on to avoid schedulingdelays. The key to successful scheduling is the ability to properly forecast available resources withexpected demands. It is necessary to be diligent in updating the schedules and in monitoring theprogress as compared to the initial baseline.2.2.3.3 Quality ManagementQuality has to be non-negotiable. It plays an important part in establishing a company’s identity. Asstated above, quality is one of the three factors that must be taken into consideration when balancingit with cost and time. Establishing the expectation for quality of work is critical when starting out. Ina very visual industry such as construction, it can be the greatest differentiating factor betweencompanies.2.2.3.4 Safety ManagementSafety is one of the few factors that can have such a huge impact on all aspects of an organization. Itaffects everything from cost (both direct and indirect), schedule, and quality. Two of the largest627

expenses for a contractor are workers’ compensation and general liability insurance, both of whichare directly related to a companies’ safety record. A companies “experience modification rating” haslong term effects on a companies’ profitability, and a credit rating of less than one is that which acompany should strive to achieve. Each company that participated in the research identified having aformal safety plan as a leading factor in a company’s overall safety and rating.2.2.3.5 Communication ManagementCommunication defines the channels for interactions within an organization and betweenorganizations. Such interactions can be identified as either close or distant contacts. Meetings,workshops or visits are examples of close contacts while emails, telephones, and teleconferencing areexamples of distant contacts. According to Gayeski (1993), trust can be enhanced through a clearlydefined system of communication procedures and approaches. Not only does it facilitate convenientand speedy communications, it also reduces arguments that may arise due to distorted interpretations.As suggested by Zaghloul and Hartman (2003) and Wong and Cheung (2004), a good communicationsystem mitigates risks and increases reputation of all concerned parties. An efficient communicationsystem is therefore another indicator of successful organization.2.2.3.6 Financial ManagementFinancial management deals with the concepts of time, money and risk and how they are interrelated.It also deals with how money is spent and budgeted. By developing an understanding of businessfinances, the owner/operator can then avoid the mistake of concentrating simply on the current bankbalance and will be better able to evaluate the company’s overall financial performance and to makesound decisions based on the future instead of immediate needs.2.2.3.7 Risk ManagementRisk Management includes the processes concerned with conducting risk management planning,identification, analysis, responses, and monitoring and control on a construction company; most ofthese processes are updated throughout the process. The objectives of risk management are toincrease the probability and impact of positive events, and decrease the probability and impact ofevents adverse to the company.2.2.3.8 Technology ManagementTechnology management is a very importance source of keeping competitive advantage. Typicalconcepts used in technology management are technology strategy, technology mapping, technologyroad mapping, technology project portfolio and technology portfolio. The role of the technologymanagement function in an organization is to understand the value of certain technology in theorganization, which is to argue when to invest on technology development and when to withdraw, aslong as there is a value for the customer, continuous development of technology is valuable.628

HRMFinanceRiskSafetySchedulingQualityTechnologyCommunicationMarketingEstimatingPricingSellingContractingBonding2.3 Stage three: testing of the proposed frameworkThis stage of the study aims to test the underlying constructs of the proposed 3D success frameworkof construction companies. Firstly, data was collected through a questionnaire survey withconstruction practitioners. With these, a structural equation modelling analysis was then conducted.2.3.1 Questionnaire survey – data collectionThe attitude to the critical success factors in construction companies was collected through aquestionnaire survey. The questionnaire was designed based on the proposed 3D success frameworkas described in Stages one and two of the study. Twenty-three critical success factors were longlisted.There are arranged in Figure 2. This stage of the study is important in establishing theempirical bases, thus enhance the authenticity of the framework. The analytical results will alsoprovide insight in the roles played by various factors.Life-cycleprocessKnowledge90RetirementOperationDistributionConstructionProject PlanningProgram Planning9090InformationManagementLogicTimeSpacemanagementFigure 2: 3D Success Framework of Construction CompaniesThe respondents were asked to assess the degree of agreement on a seven-point Likert scale againsteach of the twenty-three factors. A higher score represents a higher level of agreement. In this study,a total of 300 questionnaires were sent to or presented via interview to executive-level individualsfrom smaller companies who were responsible for organization-level concerns. 158 of themresponded to the survey, which represented a response rate of 52.7%. Companies were broken downinto three categories based on the size of the company. To categorize the company by size it wasdecided to use the number of employees as the classification. This is mainly due to the fact thatusually the number of direct employees corresponds to the size and amount of work completed. Thisprofile is shown in Table 1.629

Table 1: Profile of respondents (by number of employees)Number of employees Percentage (%)5-10 employees 31.0111-50 employees 53.8050+ employees 15.19Total 1002.3.2 The framework constructsThe construct of the 3D success framework is tested by a structural equation model (SEM). Thistechnique seeks to determine whether the number of factors and the loadings of measured variable onthem conform to what is postulated in theory (Hair, 1998). With this method, each equation in theSEM model represents a causal link rather than an empirical association (Joreskog, 1982).Furthermore, Goldberger (1973) presented three situations to demonstrate the advantages of SEMover traditional multiple regression model. In this connection, appropriate goodness-of-fit indices ofSEM are used to confirm the “fitness” of the framework. Model fit indicators include relative chisquare( /df)0.80 (Maskarinec, 2000),Comparative Fit Index (CFI)>0.80, Tucker-Lewis coefficient (TLI)>0.80 and Root Mean SquareError of Approximation (RMSEA)

Success of0.99ConstructionCOmpanyeTTimeDimensioneKKnowledgeDimensioneL111LogicDimensionerrors20L6Figure 3: A structural equation model of 3D success framework in constriction companies1111T1T2T3T4T5T6K1K2K3K4K5K6K7K8L1L2L3L4L511111111111111111111errors1errors2errors3errors4errors5errors6errors7errors8errors9errors10errors11errors12errors13errors14errors15errors16errors17errors18errors193. DiscussionThe dimension of knowledge describes the knowledge related with the company and project.Financial management is crucial to the success of a business. According to the United States SmallBusiness Administration, the financial problem is one of the top causes of small business failures.The smaller companies that participated in the study recommended that the key to financial success isto use an accountant familiar with the construction industry; of equal importance, it was understoodthat the company owner/operator should be very involved with the finances. In order to bestunderstand the primary goals of accounting, the owner/operator must have useful data regarding thefollowing: track job costs, estimate new projects, analyze cash flow, insurance audits and tax returns.Safety is one of the few factors that can have such a huge Impact on all aspects of an organization. Itaffects everything from cost (both direct and indirect), schedule, and quality. Two of the largestexpenses for a contractor are workers’ compensation and general liability insurance, both of whichare directly related to a companies’ safety record. A companies “experience modification rating” haslong term effects on a companies’ profitability, and a credit rating of less than one is that which acompany should strive to achieve. Each company that participated in the research identified having aformal safety plan as a leading factor in a company’s overall safety and rating. Moreover,631

communication forms the bridge for daily information exchanges, because working members have torely on what they have been provided, which enables trust building. It is therefore not surprising thatkeeping good communication contributes to the success..76Success of .87ConstructionCOmpany.86eT.57TimeDimensioneK.76KnowledgeDimensioneL.74LogicDimension.53.61.57.67.64.71.69.42.20.78.59.74.84.66.82.72.75.85.84.68T1T2T3T4T5T6K1K2K3.29.38.32.48.18.04.45.40.50.61K4.34K5.54K6.70K7.44K8.67L1 .52L2.56L3.72L4.70L5.46L6errors1errors2errors3errors4errors5errors6errors7errors8errors9errors10errors11errors12errors13errors14errors15errors16errors17errors18errors19errors20.42.38-.61Figure 4: Output of the path analysisThe dimension of logic has the second highest path coefficients. Its attributes: selling, contracting,marketing and pricing, are also having high path coefficients with logic dimension. The selling andmarketing aspects of a company designate the beginning stages of a project. Due to the fact that theconstruction industry is highly price competitive, selling may be one of the most important factors. Itcan be the sole basis on the selection of a firm. In construction, a contract documentation thatincludes conditions of contract, specification, bills of quantities and contract drawings details therights and obligations of the contracting parties. This is also instrumental in facilitating success,because the systems are stipulated in the contract.632

The dimension of time is comparatively the least influential among the three dimension of success.Nonetheless, its attributes of construction and project planning are comparatively high pathcoefficients. Both of these attributes are grounded on project. Because construction companies makedirect profit from construction project, it is not surprise that the planning and construction contributeto the success of companies.4. ConclusionSuccess is the main aim of any organization. However, construction is one of the riskiest businessventures in the country; the contractor failure rate of new start-up companies is even higher, at34.4%, a rate that is second only to the failure rate of food service companies (Dunn & Bradstreet2007). Achieving success is based on many factors which have direct effect on the performance ofconstruction organizations. In construction organizations, it is difficult to measure performance dueto the diversity and complexity of construction organizations. Most of previous studies concentratedon determining critical success factors at the project level.This study aims to further the understanding of success in construction companies. First, relatedliteratures were reviewed. Base on system engineering theory, categorization was then developed toput these conceptions in dimension. A 3D success framework in small construction companies wasthen developed. The constructs of the framework was then tested empirically through the techniqueof structural equation modelling. The study identified three dimension of success: knowledgedimension, logic dimension and time dimension. The knowledge dimension deals with knowledgeneeded to do related work. The logic dimension deals with space while the time dimension deals withtime. The empirical results suggested that all three forms are of almost equal importance in success ofconstruction companies. The three dimensions co-exist and in factural are mutually dependent. Asystem is only as good as its weakest point; hence a manager must be able to install robust system.The framework thus enhances our understanding how success can be achieved in constructioncompanies.ReferencesAHMAD, I. and DYE, J. (1994) Development of a Database of MBE/DBE Firms and Decision Modelto Determine their Capacity for the Florida Construction Industry. Department of ConstructionManagement, Florida International University.ALDRICH, H. (1979) Organizations and Environments. Organization Studies, 9 (1), 18-25.GOLDBERGER A.S. (1973) Structural equation models: an overview. (Structural equation modelsin the social sciences) New York: Seminar Press.CAMP, R. (1995) Business Process Benchmarking: Finding and Implementing Best Practices.Milwaukee, WI.633

U. S. BUREAU OF THE CENSUS. (2007) 2007 Economic Census, U.S. Department of Commerce.Washington, D.C.: Bureau of the Census.GAYESKI, D. (1993) Corporate communications management: the renaissance communicator ininformation-age organizations. Boston, MA: Focal Press/Heinmann.DANIEL, D. (1961) Management Information Crisis. Harvard Business Review, 39 (5), 111-116.ABRAHAM, G. (2002) Identification of Critical Success Factors for Construction Organizations inthe Architectural/Engineering/Construction (A/E/C) Industry.) Atlanta, GA, USA., Georgia Instituteof Technology.HAIR J.F, ANDERSON. R.E, TATHAM R.L, and BLACK. W.C (1998) Multivariate data analysis.Englewood Cliffs, NJ: Prentice Hall.HALL, A. D. (1969) Three-Dimensional Morphology of Systems Engineering. IEEE Transactions onSystems Science and Cybernetics, 5, 156-160.CABALLERO, A. and DYE, J. (1999) Comparison of Construction Firms Based on Fuzzy Sets.Journal of Construction Education, 4 (3), 313-320.JASELSKIS, E., ANDERSON, S. and RUSSELL, J. (1996) Strategies for Achieving Excellence inConstruction Safety Performance. J. of Construction Eng. And Mgmt, 122 (1), 61-70.JORESKOG, K. (1982) Recent developments in structural equation modeling. J Market Res, 19 (4),404-416.MASKARINEC G, NOVOTNY, R. and TASAKI, K. (2000) Dietary patterns are associated withbody mass index in multiethnic women. J Nutrition 2000, 130, 3068-3072.POLLALIS, Y., FRIEZE, I. (1993) A New Look at Critical Success Factors in IT. The Executive’sJournal, 10 (1), 24-35.ROCKART, J. (1979) Chief Executives Define their Own Data Needs. Harvard Business Review, 38(1), 43-55.ROCKART, J., EARL, M. and ROSS, J. (1996) Eight Imperatives for the New IT Organization.Sloan Management Review, 38 (1), 43-55.WONG SP, CHEUNG S.O. (2004) Trust in construction partnering: views from parties of thepartnering dance. Int J Project Manage, 22 (6), 437-446.ZAGHLOUL R, H. F. (2003) Construction contracts: the cost of mistrust. Int J Project Manage, 21(6), 419-424.ZWICKY, F. (1962) Morphology of propulsive power. Society for Morphological Research.634

Cooperation in Project Alliancing: The Service ProfitChain Approach in Building InterorganisationalRelationshipsShe, L.Y.The University of Melbourne(email: l.she@pgrad.unimelb.edu.au)Aibinu, A.The University of Melbourne(email: aaibinu@unimelb.edu.au)Johnson, L. W.The University of Melbourne(email:l.johnson@mbs.edu)AbstractThe construction industry is highly reliant on relationships, however it is also results oriented andhighly adversarial. Project success requires full cooperation, coordination as well as communicationfrom the project team to work together harmoniously. Research has highlighted the lack of trust, jobdissatisfaction, and resistance to change as issues surrounding successful project relationships. Factorsnecessary for team success have been identified, however little has been done on the social andpsychological aspects of interorganisational teamwork. Relatively few studies have examined therelationship between employee satisfaction and service quality within the building industry. TheService profit chain is a management philosophy which enhances internal service quality (equippingemployees with the skills and power to serve customers), raising employee satisfaction, which fuelsemployee loyalty and productivity and boosts external service value which then increases customersatisfaction and loyalty. The Service profit chain attempts to examine the impact of employeeattributes on business performance. The model will be adapted to form the Service performance profitchain and applied to organisational effectiveness in project alliancing with an attempt to understandthe link between job satisfaction, relational trust and interpersonal loyalty as well as the impact ofthese conditions (stimuli) on the interorganisational cooperative behaviour (reaction) between theclient (customer) and main contractor (service provider). The encouragement of behaviour-basedversus outcome-based contracts and mitigating the adversarial tension between contractual partieswill produce satisfied clients and in turn produce satisfied contractors (satisfaction mirror) and viceversa leading to better performance. This paper presents a review of the current methods ofinterorganisational teamwork, the original framework of the Service profit chain and a conceptualframework of the Service performance profit chain that we propose. This study is important as itattempts to understand interorganisational cooperation in construction which will assist managers inpredicting the quality of project performance.Keywords: service profit chain, cooperation, relationships, job satisfaction, relational trust.635

1. IntroductionCooperation can be defined as whether or not people act to promote the goals of the group or harm theinterest of the group (Tyler & Blader, 2000).Cooperation is a behaviour as well as attitude required forsuccessful interorganistional teamwork within complex construction projects. Most definitions ofcooperation focus on the process by which individuals, groups and organisations come together,interact and form psychological relationships for mutual gain or benefit (Smith et al 1995). However,Ring and Van de Ven (1994) have made the definition of cooperation more dynamic by including thewillingness of individuals to continue a cooperative relationship (Smith et al 1995). Phua (2004) andKumaraswamy et al (2005) have addressed the importance of socio-psychological factors thatdetermine an individual‟s cooperative behaviour in construction (Anuvur and Kumaraswamy, 2006),however few studies have been conducted. Partnering and alliancing are two common methods ofcooperative contracting used for aligning together goals, objectives and differing commercial interestsfrom two parties to generate profit and mitigate risks. With partnering and project alliancingcooperative teamwork, people are the drivers of action and results. For this research, cooperation willinclude all actions, behaviours and processes which have an impact upon the coordination of theproject.This paper presents a review of partnering and project alliancing within interorganisational teamwork,the original framework of the Service profit chain and the potential to adapt the model into a proposedversion as the Service performance profit chain with psychological determinates of cooperativebehaviour including relational trust, job satisfaction and interpersonal loyalty within the project teamto improve interorganisational cooperation.The paradigm for cooperative contracting has continued to evolve from traditional procurement topartnering and now to project alliancing. Each of the procurement contracting models is a riskmanagement strategy and an attempt to mitigate adversarial attitude between project participants. Inthe traditional model, owners try to transfer as much of the risk as possible to others (Ross,1999). Forthis research the focus is on interorganisational teamwork, therefore only partnering and projectalliancing will be reviewed in context.Moore (1999) suggests that partnering is about management of relationships that are trust-based.Successful partnering requires mutual trust, effective communication, commitment from seniormanagement, clear understanding of different parties‟ roles, consistency of objectives and flexibilityto change (Cheung et al, 2003). Factors which hinder the successful use of partnering are:non-compromising tendering process, poor perceptions of the partnering process, lack of knowledgeand skill to adopt partnering as well as non-commitment of parties (Cheung et al, 2003). Unbalancedrisk allocations in traditional contract provisions create adversarial relationships between projectparticipants (Cheung et al, 2003). Contract provisions are often rigidly interpreted without taking intoaccount of parties‟ needs and construction difficulties (Cheung et al, 2003; Piper, 2001). Whenliability is uncertain, responsibilities are allocated to parties on the basis of administrativeconveniences which can hinder problem solving and the tendency for parties to revert to theircontractual positions (Cheung et al, 2003). For the reasons stated partnering may not be the bestprocurement option due to the inherent conflicting objectives of the contracting parties (Cheung et al,636

2003).Project alliancing is used to deliver large complex projects in the field of resources, infrastructure andbuilding (Ross, 1999). Complex projects have higher uncertainty in risks, diverse stakeholder interests,changing business, political influence and rapid technological change. These circumstances cannot besmoothly dealt with by the traditional risk-transfer contracting models including Public-Privatepartnerships (PPP) (Ross, 1999). However, in an alliancing arrangement, cost overrun risks are sharedevenly by the project participants instead of allocation of responsibility, accountability and liability asit is with the traditional model of contracting used in partnering (Ross, 1999; Chew, unpublishedworking paper). Under this incentive, there is no mis-alignment of commercial interests created by the“win-lose” risk transfer model which creates an adversarial environment where key objectives of theproject are jeopardised by differing party interests (Ross, 1999).Cooperation among construction professionals is critical for project success. Essentially, this researchis exploring how employee satisfaction from the client‟ s side and main contractor‟s side can improveinterorganisational cooperation among parties in delivering complex construction and infrastructureprojects.2. Previous studies and gaps in the literatureCooperation is cited for good or bad performance in the delivery of construction projects (Anuvuur &Kumaraswamy, 2006). Performance indicators (time, cost and quality) are currently used as levelsof cooperation. However, these performance measures provide information about the past and cannotassist project managers in making proactive decisions to influence the outcomes of their projects(Anuvuur & Kumaraswamy, 2006). Research has found that trust is a core concept in partnering aswell as cooperation in general (Kadefors, 2003). However, research has not explored the directrelationship between job satisfaction and the mechanism of trust. The issue of mistrust in partneringhas been identified in successful team work (Cheung et al, 2003). Project alliancing is designed tomitigate mistrust through the equal bearing of cost overruns. However, can project alliancingrelationships change the current adversarial culture which has always dominated the nature of theindustry?Human relationships (whether they are personal or work relationships) are greatly affected by humaninteraction involving both rational logic and gut reactions. Weinberg‟s (2003) research on malepersonal relationship issues has identified that males operate on the basis of “gut reactions” whenassessing whether their needs are being met. Research in work relationships have identified factorsnecessary for team success and job satisfaction but research has not identified factors which mayinduce negative gut reactions and how the gut reactions may affect the individual‟s perception ofteamwork and job satisfaction. Feelings such as confidence, competitiveness, pride, spite,vengefulness and jealousy can instigate negative gut reactions nullifying the perception and act ofloyalty by both parties.637

Research in job satisfaction has concentrated on the effect and relationship of job satisfaction onorganisational commitment (Curry et al, 1986), intention of job turnover, absenteeism, trust in theirsupervisor (Aryee et al, 2002) and intraorganisational cooperation (Moorman, 1991). Fairness isfundamental to trust as cooperation between parties cannot eventuate if parties do not consider theiroutcome relatively equitable to the other party (Kadefors, 2003). Current research in the field oforganisational justice and job satisfaction has concentrated on pay, benefit satisfaction and attitudestowards organisational citizenship behaviour and commitment. There is a belief that incentives canencourage employees to perform and achieve results. However, no studies have examined thesimultaneous effect of job satisfaction factors and job dissatisfaction aggravators experienced byemployees and the effect on cooperation.Turner et al‟s (2009) research on work-life conflict in the construction industry highlights theimportance of job support issues such as flextime, job sharing, part-time work, tele-work and homebased work in job satisfaction. Certain factors such as relocation to project site, long working hoursand tight project deadlines involving overtime are inevitable in complex construction projectmanagement. Therefore the focus of this research is on the job support issues that directly impactupon the execution of the job such as communication system and channel, organisational policy,autonomy in decision making, managerial control, and HR training. Job dissatisfaction aggravatorswill initiate certain dimension of distrust suspicion which hinders sincere open communication,mitigation of risks, honesty, and timely creative problem solving. Motivation theories have not beenable to explain how to identify the difference in motivation level with the same job satisfaction factoramong different employees (Johns and Saks, 2005). Furthermore, no studies have examined theimpact of job dissatisfaction tolerance level versus incentives for organisational outcomes. Oftenincentives can motivate the desired outcome by the organisation but at the same time, createcompetition and inflict higher levels of adversarial attitude towards both internal management andexternal parties. Adversarial attitude affects positive motivation for cooperative behaviour. Itaggravates the perception of distrust and lack of confidence on the other party.Social identity can be considered one dimension of incentive which creates both negative and positiveattitudes towards cooperation. For the reasons above, procedural justice and job support satisfactionsuch as autonomy, trust in decision making from supervisors, perception of employee treatment, voice,control and perception of giving versus getting will be the focus of research instead of purelyconcentrating on tangible factors such as pay, promotion and benefits satisfaction.3. Service profit chainThe Service profit chain is a management philosophy which enhances internal service quality(equipping employees with the skills and power to serve customers), raising employee satisfaction,which fuels employee loyalty and productivity and boosts external service value which then increasescustomer satisfaction and loyalty (Heskett et al, 1997). The Service profit chain model attempts toexamine the impact of employee attributes on business performance. Applying the service profit chainto the organizational effectiveness in building organizations will attempt to understand whether thereis a strong link between job satisfaction, relational trust and interpersonal loyalty as well as the impactof these conditions (stimuli) on the interorganisational cooperative behavior between the client and638

main contractor relationship in the alliancing project. In the context of construction, the service profitchain is applied to improve cooperation in adversarial relationships. In proposing the cause and effectof the Service performance profit chain, adapted from the Service profit chain, three stimuli (jobsatisfaction, relational trust and interpersonal loyalty) should create a psychological reaction whereparties will cooperate in a satisfactory manner for the mutual goal of successful project performancewhilst competing for profit.The satisfaction mirror is a term used by Heskett, Sasser and Schlesinger (1997) to explain a causalrelationship derived from the service profit chain: “employee satisfaction leads to customersatisfaction and business results”. Customer satisfaction is defined to be a response that reflects thecustomer‟s overall evaluation of a good or service post-consumption (Giese and Cote, 2000). Jobsatisfaction is considered to be a measure of an individual employee‟s satisfaction with his or herwork and can be multi-dimensional in nature (Arvey et al, 1989). In construction, both the customer(client) and service provider (main contractor) need to be mutually satisfied with project outcomes inorder to renew the business relationship for the next project.There are two broad perspectives that can be used to examine the satisfaction mirror: agency theorywhich will examine the mirror from the clients‟ perspective, and a combination of theories from socialpsychology that will examine the mirror from the main contractors‟ perspective. Agency theory isconcerned with the relationship between the principal and an agent of the principal. Essentially, itinvolves the cost of resolving conflicts between the principal and agent and aligning interests of thetwo groups. Eisenhardt (1989) explored risk sharing among individuals or groups. Risk sharingproblem arises when parties have different attitudes toward risk. The agency problem occurs whencooperating parties have different goals and division of labour. The source of this moral hazard arisesas each party is unable to observe and have an identical understanding of the other‟s action (Ellis,Johnson & Gudergan, 2009). The service arrangement design determines the level of customersatisfaction with the employee and also affects overall customer satisfaction (Ellis, et al, 2009).Within agency theory, there is a second dyad which the employee is involved in with the organisationthat employs the individual (Ellis, et al, 2009). The job satisfaction level which the employee has withthe organisation affects the level of positive correlation in the satisfaction mirror which the employeehas with the customer (Ellis, et al, 2009).Balance theory (Heider 1958) suggests that customer-employee relationships will only last when theyare balanced which means that the customer is satisfied with the employee and the employee issatisfied with the work environment associated with the service provision (Ellis, et al, 2009).When therelationship becomes unbalanced, customers and employees are assumed to interact in order tore-establish the balance (Homburg and Stock, 2005). The degree and nature of customer-employeeinteraction can be conceptualised by utilising social identity theory (Stets and Burke, 2000),interactional psychology (Endler and Magnusson 1979) as well as social impact theory (Latane,1981).639

Service can be provided to both external customers and employees of service-providing organisations,that is staff members (Ellis, et al, 2009). Wangenheim, Evaschitzky and Wunderlich (2007) provideevidence for the existence of the internal satisfaction mirror showing that customer-employeesatisfaction mirror exists for both customer facing (satisfaction 1) and non-facing employees(satisfaction 2) though it is weaker for the satisfaction 2 dyad . This means that the employee who isproviding external services can also be the internal customer of services within the organisation (Ellis,et al, 2009).The external customer in the project alliancing relationship would be the client and the externalservice provider would be the main contractor or builder. The internal service provider would be theforeman who supervisors the construction works of subcontractors.In the agency relationship the principal (client) delegates work to another the agent (main contractor),who performs that work. The agency problem arises when the desires or goals of the principal andagent conflict and it is difficult or expensive for the principal to verify what the agent is actually doing(Eisenhardt, 1989). The principal cannot verify that the agent has behaved appropriately. The clientand main contractor/builder may prefer different actions because of different risk preferences.In the second dyadic agency relationship, the principal (main contractor/builder) delegates work toanother the agent (foreman) who performs that work. The builder and foreman may prefer differentactions because of different interests and stakes. The foreman has a critical relationship withsubcontractors who determine the quality of construction works.InternalEmployeeEmployeeProductivityExternalCustomerCustomerRevenueGrowthServicesatisfactionServiceSatisfactionLoyaltyQualityEmployeeRetentionValueProfitabilityFigure 1: The Service Profit Chain as proposed by Heskett, Sasser and Schlesinger (1997)As illustrated in figure 1, employee satisfaction has a direct impact on intraorganisational loyaltywhich in turn has an impact upon the productivity and quality of service being provided to thecustomer. Heskett et al (1997) define internal service quality as five components: (1) the latitude todeliver results to customers, (2) a clear expression of limits within which frontline employees arepermitted to act, (3) excellent training to perform the job, (4) well-engineered support systems such asservice facilities and information systems and (5) recognition and rewards for doing jobs well,determined at least in part by the levels of customer satisfaction achieved. The service profit chain (asrepresented by the arrows) demonstrates the link between intraorganisational employee satisfactionand customer satisfaction with a positive impact upon revenue growth and profit.640

In the context of construction, profit is dependent upon project performance. Whilst there is no directrelationship between performance and growth, there is a relationship between good performance andprofit. Performance is dictated by three variables and varies dependent on contract terms: time, qualityand cost (Rusch, 2008).The Service profit chain model combines relationship marketing with HR management in aligningexternal service value as perceived by the customers. This strategic approach has a long termrelationship building focus through the satisfaction mirroring effect. As discussed earlier, cooperationcan be a dynamic process where individuals are willing to continue in a cooperative relationship (Ringand Van De Ven, 1994) therefore the job satisfaction mirroring effect should also have an impact oncooperative behaviour. The loyalty satisfaction mirroring effect has not been examined. It may be thecause of building relational trust between organisational personnel. In examining these potentialdyadic constructs, the model can be extended and slightly modified to form the Service performanceprofit chain.EmployeeProductivityRevenueInternalEmployeeExternalCustomerCustomerGrowthServicesatisfactionserviceSatisfactionLoyaltyQualityEmployeeretentionvalueProfitabilityRelationalTrustPerformanceCooperationFigure 2: The service performance profit chain for complex project would be the model in the contextof project alliancingIn the project alliancing relationship, the customer would be the client of the project, and the front lineemployee would be the project manager representing the main contractor /builder‟s side. In thecontext of construction, the service profit chain is applied to improve cooperation for projectperformance.The theoretical foundation has not been developed for the satisfaction mirror therefore the followingfive dyads will be investigated:641

(The mirroring of employee loyalty (main contractor) and customer (client) loyalty requiresmutual relational trust from both sides in order to cooperate with the highest level ofcommitment.The mirroring of overall employee job satisfaction and customer satisfaction will improve theoutcome of project performance.The mirroring of employee satisfaction (main contractor) and customer (client) loyalty willencourage cooperation from both sides.The existence of relational trust will enhance cooperation and in effect increase projectperformance in construction.Cooperation from both sides itself will increase project performance.The three main research questions proposed are:4. Proposed research questions1) Is job satisfaction important for interorganisational cooperation? If job satisfaction does not havea direct impact upon interorganisational cooperation, what are the relative importantorganisational issues and individual issues which affect cooperation at the project level?2) What are the effects of job dissatisfaction on perception of distrust suspicion, unfairness, andother factors which determine the cohesiveness of group work such as respect, integrity,determination, openness, commitment and enthusiasm?3) Can the client and main contractor‟s project performance satisfaction be mirrored through theapplication of the Service profit chain in an alliancing relationship? If so, does this satisfactionmirror increase levels of cooperation?5. Conceptual relationship modelsThere will be two conceptual relationship models tested to understand if the Service performanceprofit chain model can be sustained to improve interorganisational cooperation. Model 1 will explorethe relationship between job satisfaction and intraorganisational cooperation and the impact ofrelational trust as a mediator to the dyad. Model 2 will explore the relationship between jobsatisfaction and interorganisational cooperation and the impact of relational trust on interpersonalloyalty between the client and main contractor. Essentially, it is testing if acts or perceived acts ofconsistent loyalty by the other party can improve or create relational trust and whether the affect ofloyalty is a mediator or a moderator to the overall dyad.642

In construction management, the perception of fairness will affect how builders perceive theforeman‟s behaviour and coordination of the subcontractors on site as being fair and satisfactory andvice versa. There is often a conflict of interest and risk sharing perception between the builder andforeman in the management of subcontractors as the majority of experienced foreman will usesubcontractors within their network of business contacts whilst being employed to act on behalf of thebuilder‟s interest. If unfairness is perceived by the foreman, some (especially the contracted foreman)may take a long term strategic decision to side with the subcontractors when liaising as the middleman between the builder and subcontractors as projects have limited time of employment. Currentresearch has not focused on investigating the effect of job satisfaction on interorganisationalcooperative behaviour. The issue with job dissatisfaction is that it enhances distrust, adversarialattitude, and uncooperative behaviour. Frequent turnover creates a perception for the employers thatemployees are disloyal and unworthy of the effort to satisfy. The vicious cycle has a contagious affecton the attitude towards client service. The chain service profit chain philosophy encouragesemployees to be someone before doing something on behalf of the company (Heskett, et al, 1997).Based on these, the following propositions are:Proposition 1: the higher the job satisfaction of employees, the higher the intraorganisationalcooperation.Proposition 2: the higher the job satisfaction of employees, the higher the interorganisationalcooperation.Research has found that trust is a core concept in partnering as well as cooperation in general(Kadefors, 2003). Relational trust arises between individuals who repeatedly interact over time.Whilst contractual incentives and close monitoring of contractor performance may induceopportunism, relational trust would diminish feelings and perceptions of “vulnerability” and“betrayal” hence improve project performance through higher levels of cooperation (Kadefors, 2003).Relational trust is also important in the client-main contractor relationship as some builders with atrade background dislike long and clearly defined contract terms. Completely explicit terms, if notfully comprehended by the main contractor, can aggravate the perception of potential traps and pitfallsnot envisaged. The perception of “higher risks” will encourage the contractors to seek a higher returnon investment (Chew, unpublished working paper).Proposition 3: the higher the relational trust between employee and organisation, the higher theintraorganisational cooperation until it reaches to the extent where relational trust has a minoreffect on intraorganisational cooperation.Positive job satisfaction experienced by employees should facilitate higher levels of relational trust,both intraorganisational and interorganistional cooperation between parties, as trust is a“psychological construct, the experience of which is the outcome of the interaction of people‟s values,643

attitudes and moods and emotions” (Jones and George, 1998; Cheung et al, 2003).Proposition 4: the higher the job satisfaction experienced by employees, the higher the levels ofrelational trust that should facilitate both intraorganisational and interorganisational cooperationbetween parties until it reaches to an extent where job satisfaction has a minor effect on relationaltrust.One of the core reasons for improving employee job satisfaction is the cost of turnover and theproductivity benefits of organisational loyalty (MacIntosh and Doherty, 2009). In construction, it isthe actions of individual organisational personnel which determine how parties cooperate.Interpersonal loyalty is the act of faith between two parties which fosters sincerity, honesty and asecure feeling of worthiness. In a complex project environment where so many factors are uncertain,parties often rely on gut instincts to make judgements of another party‟s creditability therefore actsand perceived acts of interpersonal loyalty has an impact on job satisfaction.Proposition 5: the higher the acts and perceived acts of interpersonal loyalty by the other party, thehigher the job satisfaction experienced by employees, which has a positive effect oninterorganisational cooperation.Relational trust is a psychological construct (Kadefors, 2003). Acts of good faith should trigger apositive gut reaction towards trust. In construction, organisational loyalty between businesses does notdictate the success of a project partnership (even if the businesses have collaborated before) as eachproject is unique in scope, conditions and specifications. Rather, it is the successful workingrelationship between particular key organisational personnel which determines the outcome of theproject performance. Hence, there should be a direct relationship between interpersonal loyalty andrelational trust.Proposition 6: there is a direct positive relationship between acts and perceived acts of interpersonalloyalty by one party to another with the effect of triggering positive gut reaction towards relationaltrust by both parties.6. Research design and analytical approachIn terms of methodology, this research is endeavoring to undertake a longitudinal study as well ascross sectional study in exploring relationship constructs over a phase. Cross sectional studies arefrequently used in construction for a summary of employee attitudes towards organisational issuesrelating to cooperation. Longitudinal studies in construction management are risky measures ascomplex project uncertainties can create the potential pitfall of personnel being retrenched in themiddle of project which can disrupt the smooth flow of the data collection. However, individual issuesbetween people to people require a period of time to conclude the relative importance of factorsmediating and moderating the relationship between variables and constructs.644

The Delphi method may also be used for this research. The interactive forecasting method is based onresults from a structured group of experts producing more accurate results than those fromunstructured groups or individuals.7. ConclusionThis paper introduces a conceptual framework incorporating the Service profit chain model into thecontext of project alliancing within the construction industry. Relational trust, interpersonal loyaltyand job satisfaction are the psychological stimuli being introduced into the model to improveinterorganisational cooperation between the client and the main contractor with a series of dyadicsatisfaction mirrors being proposed for testing.ReferencesAnuvuur, A & Kumaraswamy M M (2006) “Cooperation in Construction: Towards a Research”,COBRA conference, 7 th -8 th September.Aryee S, Budhwar P S and Chen Z X (2002) “Trust as a Mediator of the Relationship betweenOrganizational Justice and Work Outcomes: A Test of the Social Exchange Model”, Journal ofOrganisational Behavior, May, 23 (3): 267-285.Arvey R D, Bouchard T J, Segal N L, and Abraham L M (1989) “Job Satisfaction: Environmental andGenetic Components.” Journal of Applied Psychology 74 (2): 187-192.Cheung S-O, Ng T S.T., Wong S-P and Suen H C.H. (2003) “Behavioral Aspects in ConstructionPartnering”, International Journal of Project Management 21: 333-343.Chew A (undated) Relationship-based contracting in public-private partnerships: Better value formoney for government, unpublished working paper.Curry J P, Wakefield D S, Price J L and. Mueller C W (1986) “On the Causal Ordering of JobSatisfaction and Organizational Commitment”, Academy of Management Journal, 29 (4):847-858.Eisenhardt K M (1989) “Agency Theory: An Assessment and Review”, Academy of ManagementReview, 14 (1): 57-74.Ellis R S, Johnson L, and Gudergan S (2009) “ Reflections on the Satisfaction Mirror,” unpublishedworking paperEndler, N S and Magnusson D (1976) “Towards an Interactional Psychology of Personality.”Psychology Bulletin 83:956-974.645

Giese, J L. and Cote, J A (2000) "Defining Consumer Satisfaction." Academy of Marketing ScienceReview [Online] 2000 (01). Available: http://www.amsreview.org/articles/giese01-2000.pdfHeider F (1958) The Psychology of Interpersonal Relations, New York: Wiley.Heskett,J L, Sasser, Jr W S, and. Schlesinger L A (1997) The Service Profit Chain: How LeadingCompanies Link Profit and Growth to Loyalty, Satisfaction and Value, New York: Free PressHomburg C & Stock R M (2005) “Exploring the Conditions Under which Salesperson WorkSatisfaction can Lead to Customer Satisfaction”, Psychology and Marketing 22 (5):393-420.Jones G & George J (1998) “The Experience and Evolution of Trust: Implications for Cooperationand Teamwork, Academy of Management Review, 23 (3):531-548.Johns G & Saks A M (2005) Organizational Behavior: Understanding and Managing Life at Work( 6 th Ed), USA; Pearson Prentice Hall.Kadefors, A (2003) „Trust in Project Relationships-Inside the Black Box”, International Journal ofProject Management 22:175-182.Kumaraswamy M M, Ling F Y Y, Rahman M M and Phng S T (2005) “Constructing RelationallyIntegrated Teams”, Journal of Construction Engineering and Management, October, 131:1076-1086.Latene B (1981) „The Psychology of Social Impact”, American Psychologist 36 (4): 343-356MacIntosh E W & Doherty A (2009) “The Influence of Organisational Cultural on Job Satisfactionand Intention to Leave”, Sports Management Review, April, 1-12.Moore M (1999) Commercial Relationships, UK: Tudor Business Publishing.Moorman R H, (1991), “Relationship Between Organizational Justice and Organizational CitizenshipBehaviors; Do Fairness Perceptions Influence Employee Citizenship?”, Journal of AppliedPsychology, 76 (6):845-855.Piper B J (2001) “Partnering: A Dream?” Newsletter of the Hong Kong Institute of Surveyors,8(10):22-3.Phua F T.T, (2004) “The Antecedents of Co-operative Behavior among Project Team Members: AnAlternative Perspective on an Old Issue”, Construction Management and Economics, December, 22:1033-1045.Ring P S & Van de Ven A (1994) “Developmental Processes of Cooperative InterorganizationalRelationships.” Academy of Management Review, 19:90-118.646

Ross J, (1999) “Project Alliancing in Australia”, Relationship Contracting in Construction, IndustrySummit, 29 th and 30 th June, Sydney, Australia.Rusch, L-P (2008) Basic Site Management, Germany: Birkhauser Verlag.Smith K G, Carroll S and Ashford S (1995) “Intra- and Interorganizational Cooperation: Toward aResearch Agenda.” Academy of Management Journal, 38 (1):7-23.Stets J E and Burke P J (2000) “Identity Theory and Social Identity Theory”, Social PsychologyQuarterly 63 (3): 224-237.Turner M, Lingard H and Francis V (2009) “Work-life Balance: An Exploratory Study of Supportsand Barriers in a Construction Project”, International Journal of Managing Projects in Business,2(1):94-111.Tyler T R & Blader S L (2000) Cooperation in Groups: Procedural Justice, Social Identity, andBehavioral Engagement, USA: Psychology Press.Wangenheim F V, Evanschitzky H, and Wunderlich M (2007) “Does the Employee CustomerSatisfaction Link Hold for All Employee Groups?” Journal of Business Research 60 (7):690-697.Weinberg G (2003) Why Men Won’t Commit, UK.647

Lean Method, a Solution to Problem in HospitalSfandyarifard, E.The University of Salford, UK(email: e.sfandyarifard@pgr.salford.ac.uk)AbstractIt is becoming increasingly difficult to ignore the importance of appropriate building in whichhealthcare can be delivered. There is already a program with the purpose of improving existingprimary, community and secondary healthcare buildings across the country. In addition to that,National Health Service (NHS) is undergoing a transformation from a centralized organisation into anetwork of collaborating and competing health service providers. The design of health servicetraditionally is based on a transformation model concept. In this concept the functional areas arecentral and the emphasis is on clinical specialties. Each department has its own physical space,budgets, employees, and management structures. The emphasis of this concept is on functions, whichtransform “inputs” into “outputs”. Each department has effect in the overall patient experience andcare. Despite having significant progress based on this model, over the last few years, which has beenmade by NHS, more improvements are needed. Poor safety and quality, capacity constraints andqueues, cash-flow crises, low levels of efficiency and low levels of staff motivation in hospitals areas a result of traditional systems. It is possible to tackle all these problems at the same time under theumbrella of “Lean Healthcare”. The aim of Lean concept is to reduce waste and maximise value,enabling increased patient satisfaction through redesigning and streamlining services. The aim of thispaper is to applying Lean method as a solution to the problems of the hospital environment. Thestudy began with a review of relevant materials from textbooks, journals, conference papers, andInternet information to capture the background of Lean principles. It is then accompanied byexamples of implementation of this method in the hospital environment. At one hand, Lean canimprove safety and quality, on the other hand, improve staff morale and reduce costs. The Leanmessage is 100 per cent positive; through releasing human potential it can add value to patient careand consequently improve quality. It can create a virtuous circle rather than perpetuating viciousones.Keywords: Hospital environment, Lean hospital, Lean method648

1. IntroductionIt is becoming increasingly difficult to ignore the importance of appropriate building in whichhealthcare can be delivered (Ulrich et al., 2004).„Lean is a toolset, a management system, and a philosophy that can change the way hospitals areorganized and managed. Lean is a methodology that allows hospitals to improve the quality of carefor patients by reducing errors and waiting times. Lean is an approach that can support employeesand physicians, eliminating roadblocks and allowing them to focus on providing care. Lean is asystem for strengthening hospital organizations for the long term—reducing costs and risks whilealso facilitating growth and expansion. Lean helps break down barriers between disconnecteddepartmental “silos,” allowing different hospital departments to better.‟(Graban, 2009.pg 1)The aim of this paper is to applying Lean method as a solution to the problems of the hospitalenvironment. This paper starts by explaining brief rehearsal of the Lean principle, looking at theimportance of value versus waste, noting the essential role of standard work and giving examples ofthe various tools of lean.2. Research methodAccording to Hart (1998, pp.13) the literature review is „‟the selection of available documents (bothpublished and unpublished) on the topic, which contain information, ideas, data and evidence writtenfrom a particular standpoint to fulfil certain aims or express certain views on the nature of the topicand how it is to be investigated, and the effective evaluation of these documents in relation to theresearch being proposed‟‟The advantages of the literature review are : providing researchers the knowledge required to narrowthe focus of their research topic, specifying the research problem in detail, identifying gaps inexisting research knowledge, learning how to express certain views on the nature of the topic,identifying of neglected issues in previous researches, getting a rich source of secondary evidenceon which to outline and finally creating a summary of research evidence(Burns ,1997, pp.27-29).The study began with a review of relevant materials from textbooks, journals, conference papers, andInternet information to capture the background of Lean principles. It is then accompanied byexamples of implementation of this method in the hospital environment.3. The 5 Principles of leanThe book Lean Thinking defines the term as follows: “In short, lean thinking is lean, because itprovides a way to do more and more with less and less—less human effort, less equipment, less time,and less space—while coming closer and closer to providing customers with exactly what theywant.”(Womack and Jones, 2003)According to Womack and Jones (2003), the five principles of Lean can be described as follows:1. Specify value from the customer‟s perspective.2. Identify and define the value stream649

3. Make the value process flow.4. Let work and supplies be pulled by the customer5. Pursue for perfection through supply the customer needs continuallyThe five principles of Lean thinking, which should be described for hospitals, are summerised inTable1.In the field of healthcare, there might be many customers. The most obvious one is the patient andother customers could be the patient‟s family, hospital employees, physicians, and payers. Valuecould have different meaning to different costumers. The existence of an internal costumer in anyprocess is probable. Therefore, the person who is doing the work should be aware of the importanceand effect of his work on ultimate end customers. The work should also be performed in such waythat allows the “downstream” recipient of the work to play as an effective in the total patient caresystem.In Lean, the costumer‟s viewpoint defines the value of the output of a process. Therefore, followingcriteria are essential to consider an activity as value-added (Sayer et al, 2007).The customer must be willing to pay for the activity.The activity must transform the product or service in some way.The activity must be done correctly the first time.Table .1PrincipleLean Thinking Principles for HospitalsLean Hospitals Must:ValueSpecify value from the patient’s perspectiveValue streamFlowPullIdentify all the value-added steps and eliminating steps that do not create value.Keep the process flowing smoothly by eliminating causes of delay, such as batchesand quality problems.Avoid pushing work on the next department; let work be pulled by the customer.PerfectionPursue perfection through continuous improvement.Source: Adapted from Lean Enterprise Institute, “Principles of Lean,”http://www.lean.org/WhatsLean/Principles.cfm (accessed April 20, 2009)650

4. Seven wastesAccording to Ohno seven types of waste have been identified (Liker, 2004). In the field of healthcare,waste means all activity that adds cost but not value. The first step is to recognise the existing wasteand followed by elimination as the next target.The different types of waste in the hospital environment are shown in table.2 and will be discussed infollowing section.4.1 Waste of defectsThe work activities in hospitals that are not done right the first time or Defects can cause injury ordeath. According to the Institute of Medicine, the estimated 400,000 ”preventable drugrelatedinjuries” take place each year (Graban, 2009); which can be assigned as defect, with extraconsequences such as illegible handwriting, misplaced decimal points, or defects in the process forgetting medications to the patient.For example, three babies died due to wrong level doses of heparin in the newborn intensive care unitof Methodist Hospital (Indianapolis, Indiana). (Davies, Tom, 2006) The incident was a result of aseries of process defects, including the stocking of adult doses of heparin by a pharmacytech in thenewborn ICU drug cabinet. In another process defect, nurses mistake in administrating the right dosemedicines in newborn ICU.A number of process defects, miscommunications, led to this incident and no single person isresponsible for the whole event or the failure. However, being concentrated on the overall processdose not mean that no one is liable for the failure and the incident and the workers should still be heldaccountable.A defect does not necessarily have to cause harm and can include things that go wrong that lead torework or workarounds. It can even be a slowing he product of patient specimen and test result,which results in the waste of the labor time for the employees. Process defects include things that gowrong and lead to rework or workarounds.4.2 Waste of overproductionThe Waste of Overproduction is defined as; if production is phased ahead of schedule, eitherproducing too much of a product or producing earlier than it is needed by the customer. For example,the medicines produced by the pharmacy in one hospital for nurses and patients should be madeand/or delivered in an appropriate time. If it is delivered too early, it can be consideredoverproduction as it may be returned back to pharmacy.651

4.3 Waste of transportationThe waste of transportation can be defined as the movement of components and materials on around asite. Double handling is a waste that affects both productivity and quality. Therefore, in the long termwe might rearrange the elements of the hospital to reduce the transportation distance for patients orspecimens. Moreover, the use of our understanding about the transportation waste during the designand construction phases of a new hospital can be so useful and effective.As an example, in one hospital a 74-year-old woman during the course of her visit for a procedurewould walk the equivalent of 5½ football fields. In order to reduce the waste, the hospital decided toimplement the Lean method and redesign more carefully through taking patient walking distancesinto account.4.4 Waste of waitingWaiting time can be defined, as a time when nothing is happening or, it is not being used effectively.Patients wait during their care procedures in their patient pathway. Systemic problems or unevenworkloads can also cause the employees to wait. Lean methods can be used in order to reduce thewaste of waiting in both cases.Due to poor flow or poor scheduling, patients often wait for appointments in different hospital unitssuch as physician clinics.As well as patients, other physical products such as tubes of blood, pharmacy orders and medicationsalso spend a considerable amount of time waiting instead of being used more effectively - valueaddedwork. The waiting is the enemy of smooth flow and is mostly as a result of batching withindifferent units and departments, poor scheduling and the waiting on employees who have more thanone responsibility.Process defects, delays in upstream processes, uneven workloads, and low patient volumes are thecommon causes of employee wait.This waiting time can be replaced with productive activities, such as cleaning, maintaining, checking,and even deliberate relaxation.In order to improve quality and productivity, time management is required to develop a contingencyplan for the best use of time.652

4.5 Waste of unnecessary inventoryThe waste of unnecessary inventory is seen as the enemy of quality and productivity and refers tohaving more inventory than is needed. It results in increase lead-time, prevents rapid identification ofproblems and increase space thereby discouraging communication.In hospital excessive inventory waste could be seen in; bed assignments, pharmacy stock, labsupplies, samples, specimens waiting analysis, paperwork in the process and patients in beds.Excess inventory that may be expirable, such as supplies and medications or simply kept on shelvescan harm hospitals in different ways. Moreover, the primary goal of the Lean is not just keeping theinventory level low, but it should aim to take care of the patient and costumer needs and then try tokeep the inventory in the lowest possible level.In a Lean environment, through appropriate supply and inventory system the given patient care ismaximised while the cost and waste for the hospital are minimised.4.6 Waste of motionThe waste of transportation was referred to the product and the waste of unnecessary movement isrelated to employees. Some of the benefits of reducing this waste could be; reducing the physicalfatigue of employees or having more time for value-added work.Some examples of the waste of motion could be searching for patients, meds and charts, gatheringtools and supplies and handling paperwork.According to Graban (2009), unnecessary walking is the main source of wasted motion in a hospitalsetting, which could be reduced by providing a better layout and organization of supplies andequipment.4.7 Waste of inappropriate processingThis form of waste refers to use larger scale equipment than required by the customer.For example, in the laboratory, in order to analayse many blood specimens they should becentrifuged. The blood will be separated into its components in a particular time that after this timethe remaining blood has no value and no additional information. As a common habit among the staff,the time set for centrifuges are longer than recommended required.Examples of the waste of inappropriate processing include:Multiple bed moves653

RetestingExcessive paperworkUnnecessary proceduresMultiple testing4.8 The waste of human potential or talentThe waste of human potential or talent is the eighth type of waste, which is not mentioned in Leanliterature and other suggested it.Highly skilled employees‟ potential will be wasted when they have to search for supplies, as we arenot getting the most out of their.Lean aims to include following roles: managing, leading, developing, and inspiring people and notjust about managing supplies or any particular processes.Bodek, (2004, pg 115) describes it as a waste of “not utilizing the talent inherent in your workers”which could injures patients, the employee and also the organisation.5. Essential non-value-added activitiesThere are some necessary activities under the current processes, which are called Essential Non-Value-Added activities and should be removed through a major improvement. In the field ofhealthcare, a good example could be employees‟ walking activities. Walk to a medicine cart or walkbetween far ends of the unit. Relocating the medicine cart or adding a second cart and clustering allof a nurse‟s patients together in adjoining rooms could be a solution to reduce the need to walk more.One of the most common discussions about value-added or non-value-added activity comes fromquality inspections.The medication administration process has multiple inspection steps, such as (Graban, 2009):Pharmacists verifying prescriptions for proper dosing and interactionsPharmacists double-checking the work of pharmacy technicians who pulled medications tomatch the orderNurses double-checking that the right medication is being given to the right patient654

In the Lean concept these inspection steps are necessary if the existing process is not perfect. So Leanrecognised all these inspection steps as a NVA. From the Lean perspective, it should be necessary tofind a way to have a process without errors instead of using inspections or double-checks to find themafter the fact. However, the inspection steps should not be eliminated until the error proofing bedeemed 100% effective, to protect the patients.6. Non-value-addedSome non-value-added activities just take up time, space and utilise resources and are sounproductive, which are wastes. In a hospital environment, non-value-added activities could beprocess defects, waiting time or time spent dealing with errors.Recognising time spent dealing with errors as a none-value-added activity does not mean thatemployees should avoid fixing problems. It however, should be focused on improvement andprevention.Some examples of VA and NVA activity for different departments in a hospital are shown in Table 3.Table.3examples of VA and NVA activitiesDepartment VA Activity NVA ActivityEmergencyroomClinicallaboratoryBeing evaluated or treatedBeing centrifuged or testedInterpreting a test resultWaiting to be seenWaiting to be moved as a batchFixing a broken instrumentPharmacyMedication being formulated or preparedCreating an IV formulationBeing inspected multiple timesCreating an IV formulationOperatingroomOperating on patientWaiting for delayed procedureor performing unnecessarystepsInpatient unit Administering medications to a patient Copying information from onecomputer system into anotherRadiology Performing MRI procedure Performing a medicallyunnecessary scan655

7. Standardized workMost communication about process changes on job instructions and policies in hospitals are oftenoccurs in informal ways such as posted signs and verbal handoff communications. The discordant ofsigns can be easily missed by employees in a hospital which is a dynamic environments operated withmany peoples. In order to improve and manage the communication methods and the way that we dothe work, the work system should be standardised based on Lean practices.7.1 Types of Standardized Work DocumentsIn practice there is no single format of standardized work documents and many types of them can fitdifferent situations.As it can be seen in table.4, some of the common formats in standardised work systems are listed,with examples of their application in a hospital.Table .4 Types of Standardized Work DocumentsTool or Document Purpose Hospital ExampleStandardized work chartWork combination sheetPrimary document that shows jobresponsibilities, common work tasks, andhow long they should take; often shows adiagram of where work is doneAnalyzes relationships between an operatorand a machine to synchronize work andeliminate operator waiting time; used todetermine how multiple people could dividethat workDaily routine for lab employees,nurses, pharmacy employeesClinical laboratory “core cell”automated areaProcess capacity sheetAnalyze capacity of equipment, rooms, otherresources; considers changeover or set timeand other planned downtimeAnalyzing OR capacity andchangeover timeOperator workinstructionsSource: Adapted from “Lean Hospital”Details important cyclical and noncyclicaltasks, used as a reference or trainingdocument, and is not posted in the workarea; describes key points for quality andsafetyClinical laboratory core cell;pharmacy technician duties forresponding to first dose ordersIn some cases the detailed work instructions have been made as job guidance sheets to indicate thelevel of detail, task, sequence, timing and key points that are important in656

health and safety of the work. These documents are posted in the workplaces and can be used as areference or as a checklist to ensure the correct performance of the steps.Depending on our particular situation the exact format of standardized work documents, as with otherLean practices, can be adopted and applied.8. Lean methodsIn order to convert the philosophy and concept into action the technical tools, which simply are justone component of the integrated system of Lean can be used and would be very necessary toeliminate waste. This chapter will focus on some of the hospital-specific examples of the use ofvisual management and 5S.8.1 Reducing waste through visual managementThe visual management is another form of standardised work, which aims to illustrate the waste andproblems related to employees and managers and fix them instead of hiding them.Reducing the “information deficits” in the workplace is the main purpose of visual management fromGwendolyn Galsworth perspective (2005). Also she mentioned that a lot of similar questions areasked by people or even some just made up.”(Ibid) It happens also in the hospital environment due tolack of information, which do not exist or is not readily apparent—thus the need for visualmanagement.As an example, some of the children in the radiology department of one children‟s hospital areappointed for multiple imaging diagnostics, such as a sonogram and an MRI.As employees can only see the schedule for their modality, it is common some patients leave withouthaving their second imaging completed.Consequently, this will result in wasting equipment time, transportation and time for the patient andparents and also reworking for the scheduling employees.The visual management tool was used in this case to eliminate the wastes and reworking by the staff;the front desk staff of the radiology department‟s, attach two laminated color-coded cards to thepatients‟ shirt who have two modalities to visit.This will remind the first modality‟s staff that the patient need go for the second procedure andconsequently the team took a more simple, effective and visual plan to overcome that informationdeficit.657

8.2 5S: Sort, Store, Shine, Standardize, and SustainIn order to reduce waste by improving workplace organization and visual management, the 5Smethodology can be used. Implementing 5S is more than just a neat and orderly looking workplace,as John Touissant, CEO of ThedaCare Health System (Wisconsin), evaluated that this methodology(5S) improvements had reduced the amount of wasted time from 3.5 hours a day to just 1 hour perday in an average‟s 8-hour shift of a nurse.( Touissant, 2007)The 5S concept takes its name from the origins of the method in five Japanese words beginning withthe letter „S‟ which can be either translated into 5 English „S‟ words.8.2.1 SortThe first stage of five is “Sort” which aims to remove items or equipment that are no longer needed.As an example, in one laboratory, the team who work on the sorting activity, found some items suchas expired reagents or slides dating back many decades, broken centrifuge or microscopes or tubesthat expired months ago in the bottom of drawers.By removing the unneeded items, the excess construction and maintenance costs will be reduced andalso the broken equipment and expired supplies can be used for value-added activities (5S forOperators).A buffer zone is placed for the items that might be needed in the department to allow everyone have alook at the items which team was deciding to throw away(Galsworth, 2005).8.2.2 StraightenThe next step of 5s is properly organising the items and equipments that remain. Items andequipments should be kept in the closest to the point of use and in the multiple storage points if usedby multiple people.8.2.3 ShineThe third S of 5s focuses on the cleanliness with the purpose of identifying who is responsible forwhat cleaning and checking and allocating and monitoring those tasks accordingly.There is a centralized housekeeping department in hospitals which only does major cleaning. In the5S approach, the light cleaning and overall cleanliness of the department could be done by peoplewho work there through a team‟s daily or weekly Standardised work routine.658

8.2.4 StandardiseThe establishment of workplace procedures or fourth S tends to maintenance of standards. It isimportant to define a best location for the needed items and then ensure that they always kept in thedefined position. It results in number of benefits to employees or physicians who work in multipleunits in hospital.Standardise often happens through visual methods such as the marking of “home locations” withvinyl tape or shadow outlines. Marking of “home locations” with vinyl tape have benefit of ability tosee instantly which item is out of place or missing, reduce the wasted time searching for items andreturn items to their locations easily.“Shadowing” happens by a physical outline or photo of an item that should be in a location.8.2.5 SustainThe fifth and the last s, is about sustaining and continually improving of organizations, adding up toidentification and assignment of responsibilities to people as a regime for review is being established.Through a scheduled basis, the supervisors of a hospital are able to check that a standardised workaudit is following new standards.9. FlowMoving from batch and queue towards flow through a value stream should be a one of the mainhospital‟s goal. In the hospital environment smooth flow is necessary for both patient and products.The flow can be improved through reducing and eliminating waiting, interruptions, and delays fromthe value stream instead of doing the value-adding work faster.First of all, the problem that causes these delays should be identified. As an example, in a surgerydepartment, the source of delay might be:Patients sometimes show up late, lab results are not always back in time for the surgery, supplies ortools needed to start surgery are missing, and surgery lengths are unpredictable.Finding their reasons could solve some of these problems. Such as patients delay which might be dueto lack of clear signage and a confusing hospital layout.659

9.1 Improving patient flowOne of the most important issues in hospital is the problem with patient flow. This could be solvedthrough using the concept and method of Lean in order to identify blockages and obstacles that causedelay, and remove them.In many support functions in hospitals where the primary product for a continued care is an itemrather than patient such as laboratories, pharmacies, perioperative services, and nutritional services,Lean methods have been used in order to improve the patients flow.9.2 Improving flow in clinical laboratoriesThe Lean methods have been widely implemented in different parts of clinical laboratories inhospitals such as the clinical lab, transfusion services, microbiology, and anatomic pathology.During multiple stages of testing in a clinical lab such as specimen collection, receiving, or testingareas, that are basically the value stream the specimens may be delayed. As the clinical labs areusually experiencing large number of testing and critical turnaround time expectations, the Leanmethod can play a significant role.9.3 Improving Patient Flow in the Emergency DepartmentThe congestion time in EDs impacts both patients and employees. In one hand, the patients start tocomplain about the delays, especially the delays between different steps in the value stream, beforebeing admitted or being able to release. On the other hand, as the number of patients complainsincreases the ED employees feel unable to fix the system.They may even be blamed by newspaper‟s headlines for complains, while one may find the root ofthe problem in other part of the value stream.As the ED hallways are not private room to wait they may therefore become an overcrowded andmentally stressful place.The Lean methods can be used to improve the processes in an emergency department such as patientflow. As the patient flow, by improving the processes hospitals can eliminate the waiting times.10. ConclusionIn order to minimise waste for patients and for employees in hospital a Lean hospital is physicallydesigned. Rather than forcing departments and employees to adjust their activity to the limited space,660

its design supports workflows and value streams. A Lean hospital has process technology,automation, and information systems that make work easier or better error prevention.At one hand, Lean can improve safety and quality, on the other hand, improve staff morale andreduce costs. The Lean message is 100 per cent positive; through releasing human potential it can addvalue to patient care and consequently improve quality. It can create a virtuous circle rather thanperpetuating vicious ones. But Lean needs leadership and leaders and won‟t just happen on its own. Itrequires people who really demand the change and also able investigate how to do it collectively andwin senior management support. It requires managers with the vision to give staff chance toexperiment.ReferencesDOH(2001) Press Release 16 November 2001http://www.dh.gov.uk/en/Publicationsandstatistics/Pressreleases/DH_4011531Graban, Mark.(2009)”Lean Hospital”, Productivity Press, New YorkDaniel Jones and Alan Mitchell, (2006), Lean thinking for the NHS, Lean Enterprise Academy UK.Available at: http://www.nhsconfed.org/Publications/Pages/Leanthinking.aspxDavies, Tom, “Fatal Drug Mix-up Exposes Hospital Flaws,” Washington Post, September 22, 2006,http://www.washingtonpost.com/wp-dyn/content/article/2006/09/22/AR2006092200815.html?nav=hcmodule (accessed May 10, 2009).David Ben-Tovim (2006), Can Lean Save Healthcare? available at:www.leanuk.org/downloads/health/can_lean_save_healthcare.pdf -Galsworth, Gwendolyn,(2005), Visual Workplace, Visual Thinking , Visual-Lean Enterprise Press,Portland.Hart C (1998) Doing a literature review, London, SageLiker, Jeffrey K.,( 2004),The Toyota Way: 14 Management Principles from the World‟sGreatest Automaker , McGraw-Hill, New YorkNHS(2008a) 18 week target initiative http://www.18weeks.nhs.uk/Content.aspx?path=/ accessed 4thMay 2009.Productivity Press Development Team,( 1996), 5S for Operators Productivity Press , New York.Ridley, D. (2008), Literature Review: A step by Step guide for Students, SAGE Publications Ltd,London661

Sayer, Natalie J., and Bruce Williams,( 2007), Lean for Dummies , John Wiley & Sons,IndianaTalbot-Smith, A. and Pollock, A. M. (2006) The New NHS A Guide, RoutledgeTouissant, John,( 2007), presentation, First Global Lean Healthcare Summit.Ulrich, R., Quan, X., Zimring, C., Joseph, A. and Choudhary, R.(2004), The role of the physicalenvironment in the hospital of the 21st century: a once-in-a-lifetime opportunity. The Center forHealth Design for the Designing the 21st Century Hospital Projectvans, G. W., McCoy, J M.(1998), When buildings don‟t work: the role of architecture in humanhealth. Journal of Environmental Psychology 18: 85-94.Womack, James P., and Daniel T. Jones,( 2003), Lean Thinking, Free Press ,New York662

Investigating the Adaptability of Relational Contracting(RC) Practices – The Sri Lankan ContextGunatilake, S.University of Central Lancashire(email: SVGunathilake@uclan.ac.uk)Liyanage, C.University of Central Lancashire(email: CLLiyanage@uclan.ac.uk)Jayasena, H. M.University of Moratuwa(email: suranga@becon.mrt.ac.lk)AbstractDespite the plethora of research and industry reports promoting the use of relationship-basedprocurement approaches, the Sri Lankan construction industry still remains dominated by traditionalprocurement and contracting strategies. The industry suffers from the numerous drawbacks inherentto the traditional procurement environments. Research elsewhere suggests that adaptation ofrelationship-based procurement approaches could help uplift the industry performance drastically.This research examines the adaptability of relational contracting (RC) practices (e.g. partnering andalliances) to the Sri Lankan construction industry. The findings of the paper are mainly based on aquestionnaire survey. Data gathered were subjected to quantitative analysis. Overall, the researchsuggests that there is a facilitating environment to RC within the Sri Lankan construction industry.Findings of the research also reveal that the contractors in general were more supportive towardsadaptation of RC approaches than the consultants. Furthermore, the level of existence of facilitatorsto RC (and hence, the adaptability of RC) appears to have a positive co-relation with the level ofintegration in project teams.Keywords: facilitators, integrated procurement environments, quantitative analysis, relationalcontracting (RC), Sri Lankan construction industry.663

1. IntroductionThe construction industry of Sri Lanka, to-date, remains clearly dominated by traditional procurementsystems (Rameezdeen 2007). These traditional procurement environments are generally criticised fortheir characteristic adversarial relationships, unhealthy competition, purely price-based selections,numerous change orders and improper risk transfer tactics (Palaneeswaran et al. 2003). Poor levels oftrust, co-operation and communication are common amongst parties of these projects. As adeveloping country, in Sri Lanka, these challenges are heightened by the presence of a generalsituation of socio-economic stress, resource shortages and institutional weaknesses (Ofori 2000). Allthese contribute to unsatisfactory project performance ultimately resulting in under-performance ofthe construction industry as a whole. Given the increased efficiencies and performance levels that theconstruction demands of the country are likely to require (especially with the large scale post-warreconstruction projects been undertaken) business-as-usual in the traditional procurement frameworksseems no longer an option for the Sri Lankan construction industry. Initiatives around the world foruplifting the construction industry performance have highlighted the need for more effective teamworking (Kumaraswamy et al. 2005) within project teams. This, therefore, has created a growinginterest on “relational contracting (RC)” practices (such as, partnering, alliances and joint ventures).These practices are now proliferating into construction industries around the world following theirsuccessful implementation in various countries, including USA, UK and Australia.The following sections of the paper provide an insight to the concept and benefits of RC. Acomprehensive review of the available literature revealed that the majority of the research in relationto relational contracting has been done for the context of developed countries. There is little to noresearch available exploring the adaptability of these practices in developing countries (especially forthe Sri Lankan context). This research sort to address this void by exploring the adaptability of RCpractices in the Sri Lankan construction industry. It is hoped that fulfilling this aim would provide abasis for future considerations in creating relationship-based procurement approaches in the SriLankan context.2. Relational Contracting (RC)The phrase 'relational contracting' (RC) is used to describe a spectrum of project delivery methodsthat focus upon the relationship between parties to a construction project (Aglionby and Georgiou2004). In contrast to the traditional forms of construction contracts, relational contracts are flexible innature. They sought to establish working relationships between the parties through a mutuallydeveloped, formal strategy of commitment and communication, aimed at win-win outcomes for all(Kumaraswamy et al. 2005). RC principles provide the foundation for a variety of practices such as,partnering, alliances, joint ventures and other forms of collaborative working.Many research studies have established numerous benefits of RC practices to the constructionindustry. For instance, adopting RC has been found to significantly increase project performance interms of cost, time, buildability of design, and fitness-for-use (Bennet and Jayes 1998; Chan et al.664

2004). Many government organisations in the UK that have adopted partnering have documented adecrease in litigation (Thompson and Sanders 1998). Furthermore, RC is also found to provide anopportunity for innovation, especially with respect to value engineering changes, constructabilityimprovements, providing a platform to develop sustainability strategies (Abudayyeh 1994). Otherthan these measurable benefits, improvements in subjective areas such as, worker morale (Thompsonand Sanders 1998), team working and effective collaboration have also been attributed to RC.2.1 The Sri Lankan ContextThe aforementioned realised benefits and success stories of RC practices have encouraged aconsiderable number of clients and contracting organisations around the world to adopt RC practicesin delivering construction projects. The Sri Lankan construction industry, however, is still laggingbehind in this context. According to Rameezdeen (2007), the only type of RC practices currentlyadopted in Sri Lanka are joint ventures (JV). These are also mainly attributed to the involvement ofinternational contractors. The joint venture projects in Sri Lanka account for about 1-3% of allconstruction projects undertaken thus far. However, as mentioned earlier, with the spur ofdevelopment programmes underway the scale and complexity of construction projects and theexpectations of clients continue to rise in Sri Lanka. Accordingly, there is a growing need to shifttowards project delivery processes that encourage cooperation and collaboration within projectteams, thereby resulting in higher levels of industry performance. Thus, development of RC culturesin project delivery teams appears to be a viable option for the Sri Lankan construction industry.However, as Kumaraswamy et al. (2005) states, “RC is not a one-size-fits-all guaranteed fix, butrather a philosophy that must be tailored for each situation for which it is applied. Although, manycountries around the world are quite advanced in the practice of RC approaches, it remains anunexplored area for research in the Sri Lankan context. Therefore, before any recommendations toadopt these practices could be put forward, it is necessary to investigate the adaptability of RC to thelocal construction industry.3. Facilitators to RCIn order to achieve the aforementioned aim, it was necessary to first identify the factors that facilitatethe development of RC. These factors were identified using a comprehensive literature review. Theyare summarised and presented under three main categories (i.e. client related, organisational relatedand project related) as follows.3.1 Client related factorsRahman and Kumaraswamy (2002), state that any arrangement for collaborative teamwork should beclient-led. It is the client that prepares the contract conditions and selects the other team members.Thus, initiative, support and knowledge about project processes of clients are essential in facilitatingthe implementation of RC.665

3.2 Organisational related factorsThese include commitment from the top management, empowering decision making at the lowestpossible level, trust between different divisions and hierarchical levels in organisations (vertical intraorganisationaltrust), possession of adequate resources and competency to perform of organisations.The support and commitment of top management is essential in implementing any new approach,including RC. In addition, it is also necessary for sharing of inter-organisational resources, such asknowledge and information, which is a key feature of RC approaches (Chan et al. 2004).Possessing a good competency to perform and adequate resources implies that an organisation is notonly able to make, but is actually competent to deliver on promises based on trust (Das and Teng1998). This helps build mutual trust among parties. An organisation‟s competency to perform couldbe improved by empowering decision making at lower levels and building vertical intraorganisationaltrust.3.3 Project related factorsThe project related factors can be again sub divided into six sub sections as follows.3.3.1 Trust, communication and team workingMutual trust is fundamental to the implementation of RC. According to Bidault and Castello (2009)there is an optimum level of mutual trust between partners that maximise their joint creativity andinnovativeness. Efficient and effective communication within the project team helps improveunderstanding and build trust and therefore, reduce claims and change orders (Tang et al. 2006). RCpractices in general could be viewed as effective approaches to team working (Chan et al. 2004;Rahman and Kumaraswamy 2008). Effective coordination, which reflects the expectations of eachparty from the other parties in fulfilling a set of tasks (Mohr and Spekman 1994), is essential toachieve good team working.3.3.2 Mutual goals/ objectivesIt is a conventional view in the construction industry that the client and contractor‟s respectiveobjectives are in conflict. For the client the priority is the economic delivery of the project, while forthe contractors it is the commercial imperative of making profits (Wong et al. 2008; Wood and Ellis2005). Implementation of RC requires aligning commercial as well as project objectives of all parties.Mutual objectives may include achieving value engineering savings, meeting the financial goals ofeach party, and early completion. Jin and Ling (2006) found that adherence to mutual goals helpssave time, improve communication, lower the risk exposure and increase mutual understanding.Parties should have combined responsibility in achieving these goals.666

3.3.3 Mutually agreed risk-reward plans, performance appraisal and disputeresolution mechanismsTo ensure the adherence to these mutual goals by parties, periodic joint evaluation should beundertaken and positive behaviour, as well as short comings must be recognised. Risks should beshared fairly between the parties, in contradiction to the general tendency by clients and consultantsto transfer majority of risks to the contractors. Conflict resolution techniques such as, confrontationand coercion are counter-productive and present win-lose solutions (Lazar 2000). Joint problemsolving techniques, joint monitoring and performance appraisal systems may be used to overcomethis issue and produce win-win solutions for all parties.3.3.4 Flexible contractsDue to the high level of uncertainty and complexity associated with construction contracts, it is notrealistic to fully perceive or quantify all future events to prepare comprehensive contracts. RCprinciples accept this and advocate the use of flexible contracts to effectively address these issues(Macneil 1974).3.3.5 Long-term commitmentLong-term commitment can be regarded as the willingness of the involved parties to integratecontinuously to unanticipated problems (Bresnen and Marshall 2000; Cheng et al. 2000). Suchcommitment would imply a willingness among parties to permit short-term losses in the expectationof end-of-project mutual gains; thus preventing opportunism (Lazar 1997; Mohr and Spekman 1994).3.3.6 Learning and innovationThis includes capacity for innovation, presence of a learning culture and a positive attitude towardscontinuous improvement within project teams. Innovation, capture of knowledge and lessons learnedis an important aspect of a successfully implemented RC practice (Walker and Hampson 2003).According to Jin and Ling (2006), cultivating a learning culture in tendering stage could improve costperformance; while after construction stage, it could reduce change orders or claims. Sharing thelessons learnt among all parties could result in achieving overall performance improvement andcontinuous growth.4. Research designThe purpose of this research was to explore the adaptability of RC practices in project environmentsin the Sri Lankan construction industry. This was achieved using a questionnaire survey. Thequestionnaire was divided into two main sections. The first section sought general information aboutthe respondents. The second section included the 37 factors identified during the literature review. Aseven-point Likert scale, ranging from (1) disagree very strongly to (7) agree very strongly, was usedto obtain the respondents' level of agreement on each of the factors given. The questionnaires were667

self-delivered, which helped ensure a 100 percent response rate. Informal interviews were alsocarried out with respondents to further clarify and validate the overall findings attained from thequestionnaire survey.4.1 Selection of respondentsThe implementation of RC practices requires a change of attitudes and culture in project deliveryteams. This research sought to gather the perceptions of project team members, with respect to theapplicability of the identified facilitators to RC in the Sri Lankan context. Two separate samples wereselected for this purpose, which included 10 projects with traditional procurement arrangements and10 projects with Design and Build (D&B) type procurement arrangements. The D&B arrangementsare the most common form of integrated procurement arrangement used in the Sri Lankanconstruction industry. Selection of these two separate samples enabled to identify any differences ofopinions between participants with different levels of project team integration. The convenientsampling technique was used with the main purpose of securing a good response rate. In addition, thenature of the data collected was such that no bias could be expected by selecting this samplingtechnique.4.2 Profile of respondentsIn each DBB project, a member of the consulting team and a member of the construction team wereselected and questionnaires were distributed to them. In the projects with D&B arrangements, thesame team (from a single organisation) acted as the design and the construction team. Therefore, inthis instance, a single questionnaire was given to a member of the project team. All the respondentsselected fall into the category of „professionals‟. Some held senior or middle management positionswithin their respective organisations. Therefore, all the respondents were actively interacting anddealing with members from other organisations working in the project team. Thus, their views on thefacilitators to the development of more collaborative working relationships were developed throughhands-on experience of working with other project parties.Table 1: Years of experience in the construction industryYears of Experience Number Percentage %1-5 7 236-10 6 2011-15 5 1616-20 5 16Over 21 7 25Total 30 100668

Table 1 gives the years of experience of the respondents in the construction industry. On average,respondents have worked in the industry for 14 years with 77 percent of the respondents having oversix years of experience.4.3 Data analysisThe results of the data analysis of the questionnaire survey, inter alia, examined whether factors thatfacilitate RC already exist in the project environments in the Sri Lankan construction industry. Thehigher the level of existence of facilitating factors in the project environments, the higher the level ofadaptability of RC practices. In contrast, if the facilitators were found to be lacking, it would be animpediment to implementing RC practices indicating a low level of adaptability of RC practiceswithin project environments. Since the questionnaire used a Likert scale the gathered data wasordinal in nature. Hence, it was not possible to carry out arithmetical calculations such as, mean orstandard deviation or any parametric tests on the data gathered. Therefore, the median and the interquartile ranges were calculated. Due to space limitations, Table 2 only shows the aforementionedcalculations for the questionnaire survey results on the project-related factors. Similar, analyses werecarried out for the client-related and organisation -related factors. The Mann-Whitney U test was alsoused as a method of data analysis. This was used as a non-parametric equivalent of the independentsamples t-test. The results of the Mann-Whitney U tests was used to examine any significantdifferences between the perceptions of different categories of participants, i.e. 1) traditional vs. D&B,2) contractors vs. consultants in traditional projects. The following sections discuss the findingsrelating to the above.5. Discussion5.1 Potential to develop RC in the Sri Lankan ContextThe results revealed that, of the 37 factors identified, 30 factors could be regarded as factorsfacilitating RC in the current project environments. Out of these, the strongest facilitators includedthe organisations‟ competency to perform, the capacity for innovation within project teams and thepresence of mutually agreed dispute resolution mechanisms. With respect to these 75 percent of therespondents stated that they „agree‟, „agree strongly‟ or „agree very strongly‟, whereas, the remaining25 percent were „undecided‟ on the issue. Similarly, 75 percent of the respondents showed varyinglevels of agreement to the presence of commitment from senior management, vertical intraorganisationaltrust, and having a mutually agreed mechanism for dispute resolution in place.Factors such as, open and efficient communication between parties, effective coordination betweenparties, team working attitude of all parties and mutual trust among parties, which are essential inbuilding a RC culture, all had a median of five. The four aforementioned factors, along with topmanagement support were found to be the most important facilitators of RC in the works of Chengand Li (2001) and Kumaraswamy et al. (2005). Thus, the presence of these factors to this extent in669

the present project environments, where polarisation of parties is expected due to past experiences ofadversarial relationships and disputes is an important aspect.The strongest impediment to RC in the current Sri Lankan context was identified to be thecommercial pressures on organisations. With regard to this item, 50 percent of the respondents agreedit prevented them from working co-operatively with other project parties. This made alignment ofcommercial and project objectives of parties, which is an important facilitator to RC, difficult in thecurrent context. A number of contractors interviewed saw themselves constantly having to choosebetween better relationships and collaboration with project parties having conflicting objectives andtheir own objectives of profit maximisation. The issue was amplified in situations where thecontractors had been forced to operate in increasingly tight margins due to increased competition andlowest price selections. Findings of a similar study conducted by the Construction Industry Instituteof Australia (CIIA) had revealed similar results where there was strong agreement among respondentsthat commercial pressures on organisations was a barrier to developing successful partneringrelationships.In addition to above, the results revealed that the respondents were divided between agreement anddisagreement, with respect to long-term commitment of the other project member organisations, theability of their own organisations to work collaboratively with competitor organisations, equalitybetween project parties, timely responsiveness to problems, joint responsibility for the projectoutcome of parties and arrangements to share rewards as well as risks. Therefore, it was necessary toinvestigate these items further and explore if the perceptions improved with better integration ofteams, by comparing between the traditional and D&B projects before a conclusion could be made.5.2 Differences in perceptions: According to the type of project5.2.1 Traditional vs. D&BThe results of the Mann-Whitney U tests revealed 11 factors had a significance level lower than 0.05showing noteworthy differences in perceptions between the two groups. Analysing the responsesgiven by the respondents of the two groups for these factors showed better facilitators to RC in D&Bprojects compared to the traditional projects.In traditional projects, 50% of the respondents „disagreed‟, „disagreed strongly‟ or „disagreed verystrongly‟ that there was any equality between parties. In contrast, less than 25% of the respondentsfrom D&B projects „disagreed‟ with the statement. The dominant position held by consultants in thetraditional project teams, especially in approving payments to contractors was significant in affectingthe equality between parties in these projects. More than 50% of the respondents in traditionalprojects disagreed that there was timely responsiveness to problems arising in projects. This wasinterrelated to the fact that there was poor coordination in these projects. Over 50% of therespondents in traditional were undecided or disagreed (with 25% of the respondents stating they„disagree strongly‟ or „very strongly‟) to the fact that there was effective coordination within theproject team. On the other hand, 75% of the respondents from the D&B projects stated varying670

degrees of agreement to the statement. Similarly, project team members from D&B projects weremore supportive towards trying to reach win-win solutions to problems. These results showed that achange of adversarial attitudes was possible through better integration of the project process. Hence,it could be deduced that as the levels of integration of project teams increase, the relationshipsbetween project parties improve; thereby making the project environments more conducive to RCapproaches.5.2.2 Contractors vs. Consultants in Traditional ProjectsMann-Whitney U test between contractors and consultants of the traditional projects identified sevenfactors with significance levels lower than 0.05 indicating significant different perceptions in the twogroups of respondents. Overall, the results showed that in comparison to consultants, the contractorshave a more conducive attitude towards developing collaborative relationships within project teams.The contractors showed better long-term commitment with 75 percent agreeing that they were willingto allow small losses to their own organisations in the expectation of end of the project mutual gainsor future projects from clients. However, all of the consultants were either undecided or disagreedwith the statement. Furthermore, all the contractors were either „undecided‟ or „disagreed‟ with thestatement that all project parties were held jointly responsible for the outcome of the project, whilenone of the consultants disagreed with the statement. This showed the frustration of the contractorswith regard to the ability of the consultants to escape blame for problems in design and designcommunication.6. ConclusionsThe research found that there were 30 factors, identified as facilitators to developing relationalcontracting, present in the Sri Lankan construction industry. However, in the current traditionalprocurement environments the factors that could facilitate better relationships between parties appearto be overshadowed by inherent pressures created by the traditional procurement and contractingstrategies; most prominent among which is the commercial pressures on organisations. The dominantposition held by the consultants in the traditional project teams seems to be magnifying thesepressures. Comparison of perceptions of contractors and consultants in traditional projects revealedthat, contractors were more supportive towards the development of collaborative projectenvironments than the consultants. This showed the frustration of the contractors towards the inferiorposition they are constantly given within the traditional project teams, as well as the unwillingness onthe part of consultants to give up their dominant position.Mann-Whitney U tests between traditional and Design and Build (D&B) project team membersrevealed that the factors facilitating RC were stronger in the D&B environments. Significantimprovements were found in D&B projects with respect to the level of equality between projectparties, timely responsiveness to problems and the willingness of project parties to reach win-winsolutions to disputes. Finding that there were stronger facilitators to RC with increased integration inproject teams complimented the findings of Kumaraswamy et al (2005). Thus, their statement that671

approaches to building a RC culture can be reinforced through measures to promote integrated teamscould be held valid to the Sri Lankan context as well.Drawing from the results of this study, it is recommended that initiatives be taken in shifting awayfrom the traditional project delivery strategies towards RC. These initiatives could begin withmeasures to promote integrated teams in project delivery processes by the government and otherindustry related institutions. At the same time, awareness should be given to clients (especially clientsof large scale or repetitive construction projects) on these RC practices and the potential benefits thatcould be obtained through their adaptation. It was revealed that the research findings concurred withthe findings of similar researches done in other countries. Therefore, it could be deduced that theresults obtained have a high reliability. Furthermore, these findings make the relevant internationalliterature on this area applicable to the Sri Lankan context as well.Table 2: The questionnaire survey resultsItem(Project Related Factors)Percentiles25th 50th(Median) 75thThere is capacity for innovation within the project team 5.0 5.0 6.0The risk allocation/sharing arrangements are clearly defined in thisproject (Avoiding unclear and confusing use of words to reducedisputes and potential legal liabilities)The dispute resolution arrangement of this project has been agreedto by all the relevant project parties5.0 5.0 6.05.0 5.0 6.0There is a learning culture within the project team 4.0 5.0 6.0You are willing to trust and rely on the other project team membersin this projectThere is a positive attitude towards continuous improvement withinthe project team5.0 5.0 5.04.0 5.0 5.0The contract in this project is flexible to deal with uncertainties 4.0 5.0 5.0The procurement/contract strategy of this project is appropriate 4.0 5.0 5.0The fear of opening future claims does not restrict your organisationfrom involving in resolving non-contractual claims in this project4.0 5.0 5.0There is efficient communication between parties in this project 3.0 5.0 6.0There is open communication between parties in this project 3.0 5.0 6.0There is effective coordination between parties in this project 3.0 5.0 5.0There is a team working attitude between parties in this project 3.0 5.0 5.0There is good project planning in this project 3.0 5.0 5.0The risk is allocated or shared fairly between parties in this project 3.0 5.0 5.0The project parties try to reach win-win solutions to disputes arisingin this project3.0 5.0 5.0There is timely responsiveness to problems arising in this project 3.0 4.5 5.0672

All project parties are held jointly responsible for the outcome of thisprojectThere are arrangements to share the rewards such as, cost savingsmade in this project3.0 4.5 6.03.0 4.5 6.0There is equality between parties in this project 3.0 4.5 5.0ReferencesAglionby, A and Georgiou, P (2004) “Relationship Contracting, The ICAC and WTO ProcurementRules”. In: CII-HK Conference on construction partnering: Our partnering journey-Where are wenow and where are we heading?, 9 December 2004, Hong Kong.Bennet, J and Jayes, S (1998) “Trusting the team: The best practice guide to partnering inconstruction”. London: Thomas Telford.Bidault, F and Castello, A (2009) “Trust and creativity: understanding the role of trust in creativityorientedjoint developments”. R&D Management, 39(3), 259-270.Bresnen, M and Marshall, N (2000) “Partnering in construction: a critical review of issues, problemsand dilemmas”. Construction Management and Economics, 18, 229-237.Chan, A P C, Chan, D W M, Chiang, Y H, Tang, B S, Chan, E H W and Ho, K S H (2004)“Exploring critical success factors for partnering in construction projects”. Journal of ConstructionEngineering and Management, 130(2), 188-198.Cheng, E W L and Li, H (2001) “Development of a conceptual model of construction partnering”.Engineering, Construction and Architectural Management, 8(4), 292-303.Cheng, E W L, Li, H and Love, P E D (2000) “Establishment of critical success factors forconstruction partnering”. Journal of Management in Engineering, 16 (2), 84-92.Das, T K and Teng, B S (1998) “Between trust and control: Developing confidence in partnercooperations in alliances”. Academy of Management Review, 23(3), 491-512.Jin, X H and Ling, F Y Y, (2006) “Key Relationship-based determinants of project performance inChina”. Building and Environment, 41, 915-925.Kumaraswamy, M M, Rahman, M M, Ling, F Y Y and Phng, S T, (2005) “Reconstructing culturesfor relational contracting”. Journal of Construction Engineering and Management, 131(10), 1065-1075.Lazar, F D (1997) “Partnering – New Benefits from Peering inside the black box”. Journal ofManagement in Engineering, 13(6), 75-83.673

Macneil, I R (1974) “The many futures of contracts”. Southern California Law Review, 47(3), 691-816.Mohr, J and Spekman, R (1994) “Characteristics of partnering success: Partnering attributes,communication behaviour and conflict resolution techniques”. Strategic Management Journal, 15(2),135-152.Ofori, G (2000) “Challenges of construction industries in developing countries: lessons from variouscountries”. In: Ngowi, A.B and Ssegawa, J (Eds), 2nd International Conference of CIB Task Group29, 15–17 November, Gaborone. National Construction Industry Council, University of Botswana,and CIB, 1–11.Palaneeswaran, E, Kumaraswamy, M, Rahman, M and Ng, T (2003) “Curing congenital constructionindustry disorders through relationally integrated supply chains”. Building and Environment, 38, 571-582.Rahman, M M and Kumaraswamy, M M (2002) “Joint risk management through transactionallyefficient relational contracting”. Construction Management and Economics, 20, 45-54.Rahman, M M and Kumaraswamy, M M (2008) “Relational contracting and team building: assessingpotential contractual and noncontractual incentives”. Journal of Management in Engineering, 24(1),48-63.Rameezdeen, R (2007) “Construction procurement selection: Study of trends in Sri Lanka”. In: Thecommonwealth association of surveying and land economy conference, 22 June 2007, Colombo, SriLanka.Tang, W, Duffield, C F and Young, D M (2006) “Partnering mechanism in construction: Anempirical study on the Chinese construction industry”. Journal of Construction Engineering andManagement, 132(3), 217-229.Thompson, P J and Sanders, S R (1998) “Partnering Continuum”. Journal of Management inEngineering, 14(5), 73-78.Walker, D and Hampson, K (2003) “Procurement Strategies – A Relationship based Approach”.Oxford: Blackwell Science.Wong, W K, Cheung, S O, Yiu, T W and Pang, H Y (2008) “A framework for trust in constructioncontracting”. International journal of project management, 26, 821-829.674

International Council for Research andInnovation in Building and ConstructionCIB’s mission is to serve its members through encouraging andfacilitating international cooperation and information exchangein building and construction research and innovation. CIB is engagedin the scientific, technical, economic and social domainsrelated to building and construction, supporting improvementsin the building process and the performance of the built environment.CIB Membership offers:• international networking between academia, R&Dorganisations and industry• participation in local and internationalCIB conferences, symposia and seminars• CIB special publications and conferenceproceedings• R&D collaborationMembership: CIB currently numbers over 400 members originatingin some 70 countries, with very different backgrounds:major public or semi-public organisations, research institutes,universities and technical schools, documentation centres,firms, contractors, etc. CIB members include most of the majornational laboratories and leading universities around the worldin building and construction.Working Commissions and Task Groups: CIB Membersparticipate in over 50 Working Commissions and Task Groups,undertaking collaborative R&D activities organised around:• construction materials and technologies• indoor environment• design of buildings and of the built environment• organisation, management and economics• legal and procurement practicesNetworking: The CIB provides a platform for academia, R&Dorganisations and industry to network together, as well as anetwork to decision makers, government institution and otherbuilding and construction institutions and organisations. TheCIB network is respected for its thought-leadership, informationand knowledge.CIB has formal and informal relationships with, amongst others:the United Nations Environmental Programme (UNEP);the European Commission; the European Network of BuildingResearch Institutes (ENBRI); the International Initiative forSustainable Built Environment (iiSBE), the International Organizationfor Standardization (ISO); the International LabourOrganization (ILO), International Energy Agency (IEA); InternationalAssociations of Civil Engineering, including ECCS, fib,IABSE, IASS and RILEM.Conferences, Symposia and Seminars: CIB conferencesand co-sponsored conferences cover a wide range of areas ofinterest to its Members, and attract more than 5000 participantsworldwide per year.Leading conference series include:• International Symposium on Water Supply and Drainage forBuildings (W062)• Organisation and Management of Construction (W065)• Durability of Building Materials and Components(W080, RILEM & ISO)• Quality and Safety on Construction Sites (W099)• Construction in Developing Countries (W107)• Sustainable Buildings regional and global triennial conferenceseries (CIB, iiSBE & UNEP)• Revaluing Construction• International Construction Client’s ForumCIB Commissions (August 2010)TG58 Clients and Construction InnovationTG59 People in ConstructionTG62 Built Environment ComplexityTG63 Disasters and the Built EnvironmentTG64 Leadership in ConstructionTG65 Small Firms in ConstructionTG66 Energy and the Built EnvironmentTG67 Statutory Adjudication in ConstructionTG68 Construction MediationTG69 Green Buildings and the LawTG71 Research and Innovation TransferTG72 Public Private PartnershipTG73 R&D Programs in ConstructionTG74 New Production and Business Models in ConstructionTG75 Engineering Studies on Traditional ConstructionsTG76 Recognising Innovation in ConstructionTG77 Health and the Built EnvironmentTG78 Informality and Emergence in ConstructionTG79 Building Regulations and Control in the Face of ClimateChangeTG80 Legal and Regulatory Aspects of BIMTG81 Global Construction DataW014 FireW018 Timber StructuresW023 Wall StructuresW040 Heat and Moisture Transfer in BuildingsW051 AcousticsW055 Construction Industry EconomicsW056 Sandwich PanelsW062 Water Supply and DrainageW065 Organisation and Management of ConstructionW069 Housing SociologyW070 Facilities Management and MaintenanceW077 Indoor ClimateW078 Information Technology for ConstructionW080 Prediction of Service Life of Building Materials andComponentsW083 Roofing Materials and SystemsW084 Building Comfortable Environments for AllW086 Building PathologyW089 Building Research and EducationW092 Procurement SystemsW096 Architectural ManagementW098 Intelligent & Responsive BuildingsW099 Safety and Health on Construction SitesW101 Spatial Planning and infrastructure DevelopmentW102 Information and Knowledge Management in BuildingW104 Open Building ImplementationW107 Construction in Developing CountriesW108 Climate Change and the Built EnvironmentW110 Informal Settlements and Affordable HousingW111 Usability of WorkplacesW112 Culture in ConstructionW113 Law and Dispute ResolutionW114 Earthquake Engineering and BuildingsW115 Construction Materials StewardshipW116 Smart and Sustainable Built EnvironmentsW117 Performance Measurement in ConstructionPAGE 1

International Council for Research andInnovation in Building and ConstructionPublications: The CIB produces a wide range of specialpublications, conference proceedings, etc., most of which areavailable to CIB Members via the CIB home pages. The CIBnetwork also provides access to the publications of its morethan 400 Members.CIB Annual Membership Fee 2010 – 2013Membership will be automatically renewed each calendaryear in January, unless cancelled in writing 3 monthsbefore the year endFee Category 2010 2011 2012 2013FM1 Fee level 11837 12015 12195 12378FM2 Fee level 7892 8010 8131 8252FM3 Fee level 2715 2756 2797 2839AM1 Fee level 1364 1384 1405 1426AM2 Fee level 1133 1246 1371 1426IM Fee level 271 275 279 283All amounts in EUROThe lowest Fee Category an organisation can be in depends onthe organisation’s profile:Recent CIB publications include:• Guide and Bibliography to Service Life and DurabilityResearch for Buildings and Components (CIB 295)• Performance Based Methods for Service Life Prediction(CIB 294)• Performance Criteria of Buildings for Health and Comfort(CIB 292)• Performance Based Building 1st International State-of-the-Art Report (CIB 291)• Proceedings of the CIB-CTBUH Conference on Tall Buildings:Strategies for Performance in the Aftermath of the WorldTrade Centre (CIB 290)• Condition Assessment of Roofs (CIB 289)• Proceedings from the 3rd International PostgraduateResearch Conference in the Built and Human Environment• Proceedings of the 5th International Conference onPerformance-Based Codes and Fire Safety Design Methods• Proceedings of the 29th International Symposium on WaterSupply and Drainage for Buildings• Agenda 21 for Sustainable Development in DevelopingCountriesR&D Collaboration: The CIB provides an active platformfor international collaborative R&D between academia, R&Dorganisations and industry.Publications arising from recent collaborative R&D activitiesinclude:• Agenda 21 for Sustainable Construction• Agenda 21 for Sustainable Construction in DevelopingCountries• The Construction Sector System Approach: An InternationalFramework (CIB 293)• Red Man, Green Man: A Review of the Use of PerformanceIndicators for Urban Sustainability (CIB 286a)• Benchmarking of Labour-Intensive Construction Activities:Lean Construction and Fundamental Principles of WorkingManagement (CIB 276)• Guide and Bibliography to Service Life and DurabilityResearch for Buildings and Components (CIB 295)• Performance-Based Building Regulatory Systems (CIB 299)• Design for Deconstruction and Materials Reuse (CIB 272)• Value Through Design (CIB 280)Themes: The main thrust of CIB activities takes placethrough a network of around 50 Working Commissions andTask Groups, organised around four CIB Priority Themes:• Sustainable Construction• Clients and Users• Revaluing Construction• Integrated Design and Delivery SolutionsFM1FM2FM3AM1AM2IMFull Member Fee Category 1 | Multi disciplinary buildingresearch institutes of national standing having a broadfield of researchFull Member Fee Category 2 | Medium size researchInstitutes; Public agencies with major research interest;Companies with major research interestFull Member Fee Category 3 | Information centres ofnational standing; Organisations normally in Category4 or 5 which prefer to be a Full MemberAssociate Member Fee Category 4 | Sectoral research &documentation institutes; Institutes for standardisation;Companies, consultants, contractors etc.; ProfessionalassociationsAssociate Member Fee Category 5 | Departments, faculties,schools or colleges of universities or technicalInstitutes of higher education (Universities as a wholecan not be Member)Individual Member Fee Category 6 | Individuals havingan interest in the activities of CIB (not representing anorganisation)Fee Reduction:A reduction is offered to all fee levels in the magnitude of 50%for Members in countries with a GNIpc less than USD 1000 anda reduction to all fee levels in the magnitude of 25% for Membersin countries with a GNIpc between USD 1000 – 7000, asdefined by the Worldbank. (see http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf)Reward for Prompt Payment:All above indicated fee amounts will be increased by 10%. Memberswill subsequently be rewarded a 10% reduction in case ofactual payment received within 3 months after the invoice date.For more information contactCIB General Secretariat:e-mail: secretariat@cibworld.nlPO Box 1837, 3000 BV Rotterdam,The NetherlandsPhone +31-10-4110240;Fax +31-10-4334372Http://www.cibworld.nlPAGE 2

DISCLAIMERAll rights reserved. No part of this book may be reprinted orreproduced or utilized in any form or by any electronic,mechanical, or other means, now known or hereafterinvented, including photocopying and recording, or in anyinformation storage or retrieval system withoutpermission in writing from the publishers.The publisher makes no representation, express or implied,with regard to the accuracy of the information contained in this bookand cannot accept any legal responsibility or liability in whole or in partfor any errors or omissions that may be made.The reader should verify the applicability of the information toparticular situations and check the references prior to any reliancethereupon. Since the information contained in the book is multidisciplinary,international and professional in nature, the reader is urged to consult withan appropriate licensed professional prior to taking any action or makingany interpretation that is within the realm of a licensed professional practice.

CIB General Secretariatpost box 18373000 BV RotterdamThe NetherlandsE-mail: secretariat@cibworld.nlwww.cibworld.nlCIB Publication 360