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Selection Framework For Domestic Subcontractors by Contractors in The Construction Industry
Selection Framework For Domestic Subcontractors by Contractors in The Construction Industry
CIB2007-468
ABSTRACT
1. INTRODUCTION
Massyn (2003) and Haksever et al, (1995) have reinforced the view that the
selection process of subcontractors is important because the nature of the
contractor-subcontractor relationship is project-based and therefore a
proper selection and management of subcontractors should be one of the
key issues for contractors who want to maintain good performance and
reputation. It is equally important for contractors to support and provide an
enabling environment for subcontractors in order to succeed in their work.
However, the commitment to support subcontractors and hence improve
their performance is quite limited in the construction industry. For instance,
Teo (2002) ranked the support of contractors to subcontractors and found
that it is quite limited.
On the other hand, a selection process which emphasises price can
easily ignore competent subcontractors in the selection process. A lower
tender price does not equate to competency nor does it guarantee good
performance and therefore other factors should be taken into consideration
(Haksever et al, 1995; Kerfoot, 1994; Latham, 1994). Oluwoye et al. (1996)
recommend that when the contractor is rating subcontractors, account
should be made for the ability of the subcontractor to meet the following
criteria:
However, if the contractor’s part of the work is not well managed, for
instance, the contract is not properly coordinated, project interfaces not well
interlinked, contractual obligations not well defined and the use
inappropriate specifications, project performance would still be undermined.
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4. STUDY METHODOLOGY
A study was carried out to investigate the factors that would be suitable for
inclusion in the framework for selecting subcontractors. These factors were
identified at different stages of the construction process, such as pricing,
financial, technical and managerial ability. The target population was
contractors and subcontractors who are members of the Gauteng Master
Builders Association (GMBA). The fieldwork was carried out in July 2006 at
which time there were 240 contractors and 300 subcontractors. Twenty five
contractors and 30 subcontractors were selected randomly to which
questionnaires were sent, to elucidate opinions on what they perceive as
influential factors necessary for subcontractor selection. However, 26
responses were received, 15 from contractors and 11 from subcontractors -
a 47% response. The questions asked were related to the criteria that
contractors use in selecting subcontractors at various stages of the
procurement process. Respondents were asked to rate the importance of
identified factors on an ordinal scale of 1 to 5, where 1 represented not
influential and 5 very influential. The total number of rating per factor (TR)
was divided by the total number of responses to obtain the mean rate(MR).
The MR was then used to rank the factors. The results are shown in tables
1 to 5.
The results of the rating are discussed in the various stages of the
construction process as follows:
that most of the factors were highly rated as shown in table 1. Technical
and managerial competency, workforce skills, mobilization on site,
competitive rates, past records, work and financial capacity stand out
strongly. It can be seen that at this point the contractor is focusing on the
capacity of the subcontractor. A demonstration by subcontractors that they
have adequate capacity may land them on the shortlist. The factors should
be adequately met by domestic subcontractor to ensure selection and
could be used in the framework to eliminate unsuitable domestic
subcontractors.
Levels of Influence: Very Influential=VI(5), Influential = I (4), Somewhat Influential= SI(3), Less Influential=
LI(2) and Not Influential=NI(1), TR= Total Response, MR= Mean Rate
Contractors needs from Subcontractors at Level of influence in the selection TR MR Rank
the pre-qualification stage process
VI I SI LI NI
5 4 3 2 1
% % % % %
Technical and managerial competence and 69.6 21.7 8.7 0.0 0.0 23 4.61 1
experience in the job at hand
Size and resources: skills, experience and 47.8 39.1 8.7 0.0 4.3 23 4.26 2
strength of own workforce
Current workload, commitment and ability 47.8 39.1 4.3 4.3 4.3 23 4.22 3
to mobilize on site when needed
Competitive rates and lowest tender overall 34.8 31.8 9.1 13.6 4.5 23 4.17 4
Past records of working relationship with 34.8 43.5 21.7 0.0 0.0 23 4.13 5
current contractor and/ or reference from
previous employers and financiers
Ability to provide own attendance needs; 43.5 30.4 21.7 0.0 4.3 23 4.09 6
possession of special tools and equipment
that could reduce main contractor's P&G
costs
Financial capacity to undertake the job 43.5 34.8 13.0 0.0 8.7 23 4.04 7
successfully
Compliance with statutory regulations: 40.9 31.8 9.1 13.6 4.5 22 3.91 8
Black Economic Empowerment, Gender
Equality, Workman’s Compensation Act,
tax regulations, etc
Health and safety record 33.3 29.2 12.5 16.7 8.3 24 3.63 9
Location of the subcontractor and 22.7 31.8 22.7 18.2 4.5 22 3.5 10
knowledge of the project environment: local
labour laws, site conditions, material
supplies, etc
Experience with the present contract form, 14.3 23.8 38.1 19.0 4.8 21 3.24 11
terms and conditions
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Levels of Influence: Very Influential=VI(5), Influential = I (4), Somewhat Influential= SI(3), Less Influential=
LI(2) and Not Influential=NI(1), TR= Total Response, MR= Mean Rate
Contractors needs from Subcontractors at Level of influence in the selection TR MR Rank
the pre contract stage process
VI I SI LI NI
5 4 3 2 1
% % % % %
Efficient programming of subcontract 58.3 25.0 8.3 4.2 4.2 24 4.29 1
work and proper fit with main contractor's
master programme for efficient
coordination purpose
Readiness to mobilize on site on 43.5 43.5 8.7 0.0 4.3 23 4.22 2
schedule
Ability to submit error and omission free 33.3 29.2 29.2 8.3 0.0 24 3.88 3
bids that are reasonable and comparable
with others
Well articulated health and safety plan 25.0 25.0 29.2 12.5 8.3 24 3.46 4
Provision of necessary bonds or specific 21.7 13.0 43.5 13.0 8.7 23 3.26 5
insurance requirements
Reasonable discounts 4.5 13.6 50.0 22.7 9.1 22 2.82 6
Levels of Influence: Very Influential=VI(5), Influential = I (4), Somewhat Influential= SI(3), Less Influential=
LI(2) and Not Influential=NI(1), TR= Total Response, MR= Mean Rate
Contractors needs from Level of influence in the selection TR MR Rank
Subcontractors at the construction process
stage VI I SI LI NI
5 4 3 2 1
% % % % %
Good quality of work consistent with 88.5 11.5 0.0 0.0 0.0 26 4.88 1
the general quality level of the main job
Time performance 57.7 34.6 7.7 0.0 0.0 26 4.5 2
High productivity level 60.0 32.0 4.0 4.0 0.0 25 4.48 3
Good control of own workforce 53.8 42.3 0.0 3.8 0.0 26 4.46 4
Good working relations with main 50.0 46.2 0.0 3.8 0.0 26 4.42 5
contractor's team; good tolerance,
loyalty and minimal adversarial relation
Efficient management of own 53.8 34.6 7.7 3.8 0.0 26 4.38 6
workforce
Scope management: ability to manage 44.0 48.8 8.0 0.0 0.0 25 4.36 7
changes without unnecessary claims
Zero or minimal defects and rework 50.0 34.6 15.4 0.0 0.0 26 4.35 8
Compliance with specifications for 46.2 42.3 3.8 7.7 0.0 26 4.27 9
materials and methods
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Compliance with contract terms and 53.8 26.9 15.4 0.0 3.8 26 4.27 10
conditions, labour acts, building
regulations etc
Cost control/ wastage minimization 50.0 30.8 11.5 7.7 0.0 26 4.23 11
Good communication network 38.5 38.5 15.4 7.7 0.0 26 4.08 12
Fair and minimal claims 34.6 46.2 7.7 11.5 0.0 26 4.04 13
Ability to manage the financial and 28.0 48.0 20.0 4.0 0.0 25 4.00 14
contractual risks in the subcontract
On site health and safety practice 36.0 24.0 32.0 4.0 4.0 25 3.84 15
Levels of Influence: Very Influential=VI(5), Influential = I (4), Somewhat Influential= SI(3), Less Influential=
LI(2) and Not Influential=NI(1), TR= Total Response, MR= Mean Rate
Contractors needs from Level of influence in the selection TR MR Rank
Subcontractors at the post process
construction stage VI I SI LI NI
5 4 3 2 1
% % % % %
Efficient and quick completion of snag 57.7 38.5 3.8 0.0 0.0 26 4.54 1
items
Maintenance of good 'after-sales' 50.0 34.6 15.4 0.0 0.0 26 4.35 2
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Levels of Influence: Very Important=VI(5), Important = I (4), Somewhat Important= SI(3), Less Important=
LI(2) and Not Important=NI(1), TR= Total Response, MR= Mean Rate
Best Practice in domestic subcontractor Level of influence in the selection TR MR Rank
selection process
VI I SI LI NI
5 4 3 2 1
% % % % %
Tenders should be assessed and 80.8 11.5 7.7 0.0 0.0 26 4.73 1
accepted not only on the basis of price
Practices that avoid collusion 69.2 23.1 3.8 3.8 0.0 26 4.58 2
Conditions for all tenders to be the same 69.2 19.2 7.7 3.8 0.0 26 4.54 3
Inviting tenders with relevant skills and 57.7 38.5 3.8 0.0 0.0 26 4.54 4
experience to the type of work
Inviting only subcontractors who have 53.8 34.6 7.7 3.8 0.0 26 4.38 5
the ability to submit bona fide bid
Proposed subcontracts to be compatible 50.0 38.5 7.7 0.0 3.8 26 4.31 6
and consistent with the main contract
Sufficient time and information to be 42.3 30.8 23.1 3.8 0.0 26 4.12 7
provided for preparation of tenders
Contracts from recognised bodies to be 23.1 38.5 26.9 7.7 3.8 26 3.69 8
used where they are available
Inviting only subcontractors who have 23.1 30.8 30.8 7.7 7.7 26 3.54 9
the ability to innovate
As part of the study, it was necessary to find out from contractors and
subcontractors whether it is necessary for the establishment of a standard
framework for subcontractor selection and the best practices for this
process. The following factors were rated by contractors and
subcontractors. It can be seen that a standardized framework for selection
of domestic subcontractors in the construction industry as shown in table 5.
To enhance this process, and to achieve best practices in the selection
process, other factors should be considered other than price as shown in
table 6.
6. CONCLUSIONS
7. REFERENCES