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Functional Evaluation of Change Order and Invoice Management Processes Under Different Procurement Strategies: Social Network Analysis Approach
Functional Evaluation of Change Order and Invoice Management Processes Under Different Procurement Strategies: Social Network Analysis Approach
Abstract: As construction projects become more complex, making strategic decisions such as selecting the appropriate delivery method and
the right type of contract becomes more convoluted. Several studies have realized that delays in progress payments and change orders during
construction projects are among the main causes of overruns in megaprojects. Using social network analysis (SNA), the present paper ex-
amines the effect of different types of project delivery methods and contract types on these factors through an organizational lens. The three
main research objectives of the study include (1) finding the most prominent actors who control the change and invoice processing pro-
cedures; (2) examining the contribution of different delivery methods to these workflows; and (3) evaluating the effect of contract type on the
behavior and characteristics of project’s key actors. Two project delivery methods (design–bid–build and design–build) and three contract
types [unit price, lump sum, and engineering, procurement, and construction (EPC)] are examined. Correlations were identified among the
roles (rather than actors) and strategic positions in the networks. The constructive involvement of the owner in the invoice process of an EPC
contract was also identified as an advantage of such a procurement strategy. On the other hand, although traditional delivery methods have
more egocentric and hierarchical social networks, it became apparent that regular periodic meetings in such projects reduce the number of
bridges between individuals/clusters and hence can decrease the risk of bottlenecks in the processes. The main contributions of the paper
include providing an analytical tool for the analysis of projects’ actor networks; as well as performing a functional comparison among
the three common delivery methods and contract types through the behavior of actor networks in three case-study projects. Besides laying
out an approach for owners to decide on the project delivery method, this study sheds some light on the multilayer structure of project social
networks and promotes SNA as a fruitful technique for analyzing project behavior. DOI: 10.1061/(ASCE)CO.1943-7862.0001974. © 2020
American Society of Civil Engineers.
Author keywords: Social network analysis; Project delivery method; Project procurement; Change order; Invoice management.
contract types; (2) detect the strengths and weaknesses of different Beyond a modeling technique, SNA can be used for diagnostics
delivery methods and contract types with respect to the progress to identify issues in the communication and information sharing
payment and change order workflows; and (3) evaluate the effect performance of actors/teams (Malisiovas and Song 2014). For in-
of contract type on the behavior and characteristics of certain key stance, Pryke (2012) suggested the similarity in the level of central-
actors of the projects. ity for project actors within various social networks of a project
In this regard, social networks were formed in which nodes re- (i.e., contract, performance incentive, and communication net-
present the project actors and edges represent interactions among works) as a measure of the project management system’s maturity.
Accordingly, Abbasian-Hosseini et al. (2019) studied the influence
them (concerning progress payment and/or change orders). Analyt-
of social network conditions on the performance of individuals
ics derived from such social networks in case-study projects were
within the social network of crews through the analysis of centrality
then analyzed with different procurement strategies. Because no
for each individual. Correlation analysis between centrality and
two projects are the same, the comparisons and conclusions of this
work-plan variations of each crew in their study showed a positive
study may not be prescriptive; nevertheless, the proposed method
association between the levels of influence individuals receive from
lays out an approach for project managers to better evaluate the
the network and their deviation from the work plan (Abbasian-
dynamics of interactions for the most sensitive workflows in their Hosseini et al. 2019).
projects. Case-based analysis of project networks using SNA is a
common practice in the literature. Several researchers have previ-
ously studied the dynamics of social networks at an individual
Related Works (i.e., node), or network level in case-study projects, to compare the
performances under different conditions (e.g., Wambeke et al.
A social network is defined as a finite set of actors with defined 2012; Di Marco et al. 2010; Akgul et al. 2017; Nik-Bakht and
relations among them (Wasserman and Faust 1994). Social network El-Diraby 2017; Abbasian-Hosseini et al. 2019). Pryke (2012)
analysis is a combination of mathematics, information technology visualized and analyzed the social networks formed based on dif-
(IT), and sociology (Pryke 2012), which explores the social struc- ferent types of relationships (including contractual, cost manage-
ture of a system through social networks (Kereri and Harper 2018). ment, instruction, progress management, performance incentive,
An analysis of the literature in construction engineering and man- and information exchange) in four case studies. By calculating dif-
agement (CEM) by Kereri and Harper (2018) showed exponential ferent measures in those networks, he successfully compared the
growth in the number of publications using SNA in the field of overall efficiency of traditional versus modern project governance.
construction over the last decade. SNA is used to classify, visualize,
and analyze complex systems in CEM (Pryke 2017). Particularly,
after identifying limitations and issues in the structure of a network, Methodology
SNA allows modifying the system to design an altered version of
the network and improve information sharing and communication Fig. 1 shows the general method of this study. At the highest
among the project team. This subsequently brings about a balance level, the proposed method involves the formation, analysis, and
between the social and scientific aspects in the management of proj- interpretation/comparison of social networks for projects running
ects (Ruan et al. 2011). under the three different procurement routes.
A construction project can be considered as a temporary net-
work in which complex interprofessional and interorganizational Data Collection
contractual and working relationships govern the interactions Given the data-driven nature of SNA, proper and sufficient data are
among project actors. Construction project teams are decentralized known as the heart of related studies. The procedure of gathering
and heterogeneous because they normally consist of a mixture of data about the flow of interactions among actors can significantly
actors from different professional and organizational backgrounds affect the study outcomes. Some challenges involved in the data
(Di Vincenzo and Mascia 2012). The construction industry is collection include dynamics and variations of the information ex-
facing a growing complexity in different aspects (organizational, change through different phases of the project; adoption of unfit
technological, and informational, among others), and appropriate data collection tools; and disinterest of interviewees (when inter-
tools and mechanisms are needed to successfully manage complex views are used as the data acquisition technique). The quantitative
construction projects (Baccarini 1996). Using SNA can provide representation of relationships among the actors, referred to as soci-
insights about actors’ participation in different activities by illus- ometry, is widely dependent on interviewing individuals or analyz-
trating how they perform and collaborate in their roles (Pryke ing project documents (as the source of data to form social network
2012). It can also provide indicators for knowledge integration, graphs). Sociometric data verify the presence (or absence) of inter-
work collaboration, and effective communication (Ruan et al. actions between individuals, which are then represented as edges of
2011). the social graph (Tichy et al. 1979).
Any additions, deletions, or modifications to the scope of the work 2. The strength of communication ties (i.e., weight of graph edges)
(i.e., the contractual agreement) are considered as a change (Hwang can vary according to the number of items exchanged among
and Low 2012). Similar to the invoice approval, change orders fol- two nodes (i.e., the number of change instructions brought about
low certain processes starting from the need realization to the RFI, in all communication instances between two certain actors).
redesign, valuation, recalculation, and finally, issuing a change Because the numbers are drastically different in different con-
order (or change directive). The process involves several actors tract types, the total number of change orders (instructions) be-
and includes different instances of communication among them tween actor pairs is normalized by the total number of change
(referred to here as a change network). Normally, all instructions orders in the project that satisfy Condition 1, i.e., as follows:
In other words, edge weights in the change networks represent to as Projects A, B, and C. Indeed, no two projects are identical,
the percentage of change orders that involve the two nodes at either but an attempt was made to select the case studies so that they
end of the edge. All edges in both invoice and change networks are would be comparable. Projects were chosen such that they have
directed. Double edges are used for reciprocal relationships. the same general contractor and similar client organization types/
In order to validate the findings regarding the change and in- organizational culture, and are focused on the same construction
voice networks and to compare them with the real data, the main activities (only in civil, mechanical, and electrical fields) for all
findings of the three case-study projects were turned into clauses, three projects. Table 1 introduces the general attributes of the
and a survey was developed asking the opinion of project partic- case-study projects.
ipants (using a Likert-scale format) as well as their additional inputs A considerable challenge in SNA-based studies is how to nor-
and insights. The questionnaire was circulated among the main ac- malize the effects of personal (and interpersonal) characteristics
tors of the three projects and was completed by 20 participants. of the involved social entities in the process of generalizing results
After aggregating the responses, a few statements that showed of an experiment. In this study, as well, in addition to the project
the opinion bifurcation were set aside from the results. procurement type, different characteristics of project actors may
affect the network structure of the projects. Choosing projects with
the same contractor and client organizational culture helped to con-
Case-Study Projects trol these variables to some extent. In this situation, many roles in
the different projects had been performed by the same individuals.
To investigate the performance of the invoice and change networks In many cases, different individuals from the same organization
under different project delivery methods, three case-study projects who take the same (or similar) roles in different projects follow
were selected from the Iranian construction industry implemented the same or similar organizational culture and work ethics, which
under three contract types, i.e., lump sum, unit price, and EPC. can be translated into similar ranges of productivity and/or work-
Due to the confidentiality considerations, they will be here referred related characteristics. Furthermore, organizations usually set some
an agreement with a consultant for professional services such as tractor. Moreover, because the builder and designer are merged to
project management, engineering design services [in different dis- the same entity, constructability issues are normally better handled
ciplines including architectural, structural, and mechanical, electri- in the design phase.
cal, and plumbing (MEP)] as well as supervising construction However, unlike the traditional contracts, change orders in the
activities according to the design specifications. The general con- EPC would not be considered a source of making additional profit
tractor was appointed through a two-stage tender process (prequa- by the contractor. As a result, such a delivery method is generally
lification and the lowest bid). The construction work was procured involved in fewer change instances during the construction, and
using a unit-price contract. Financial invoices of the contractor many changes would be internal processes of the design-builder
were processed based on the unit cost of each item, as indicated party. The study of documents confirmed that most change in-
in the contract, and the quantities of work completed, as taken structions in Project C were related to alterations in the client’s
off on the site. requirements.
Fig. 2. Graphs of invoice and change networks in the three case-study projects: (a) Project A; (b) Project B; and (c) Project C. Node size indicates the
degree centrality, edge thickness indicates the weight of communication between nodes, node/edge shading indicates the communities, and edge
curves indicate connection directions (clockwise).
The comparison of communities in invoice networks for the This network holds a different pattern of centrality (in comparison
two traditional contracts [Figs. 2(a and b)] shows a fewer num- with Projects A and B). Instead of a single central node (an ego), in
ber of coalitions in the lump-sum contract (two communities in this network, there are three central nodes [project control officer
Project B, one dominated by the actors who work onsite and (CO), project manager (PM), and the civil engineer (CE) of the
another formed by the office staff, versus four communities in client’s team]. This distribution of the centrality is an indicator
Project A). The clustered nature of the invoice network in the case of higher resilience for the network.
of unit-price contract suggests an intradisciplinary process, involv-
ing technical experts (mechanical, civil, and electrical) communi-
Change Networks
cating among their own teams on the one hand and with the
financial management on the other hand. The change network of Project A is represented in Fig. 2(a). The
The invoice network for Project C, on the other hand, is the sim- central actors of this network are project managers (of the contrac-
plest among the three case studies [Figs. 2(c)]. Three reasons for tor and consultant) and civil engineer of the client’s team; who form
this simplicity can include (1) the absence of a consultant from a multidisciplinary core representing the three main players of the
the process; (2) the reduced number of actors involved; and project. All actors with technical roles (except the land surveyor)
(3) the simplified process of developing, checking, and approving are involved in this network, and the isolated nodes are mainly the
the invoices. Providing invoices in EPC contracts is a simple and financial actors. The archived documents of this project show
straightforward procedure, so is the associated invoice network. weekly review meetings in the superintendent’s office, attended
during the construction phase. On the other hand, the change in- Analysis Results and Discussion
struction process in Project B (lump sum) is simpler than Project
A (unit price). Beyond a visual/qualitative comparison among the networks de-
The change network graph in Project B demonstrates a con- picted in Fig. 2, SNA employs various metrics to quantitatively ex-
struction coalition composed of four communities. The largest plain different social networks. Those metrics were examined to
community has the PM (consultant) as its central node, joined with compare the behavior of networks in our projects at two different
other consultant actors (i.e., designers, supervisors, and estimators, levels, i.e., the network and node levels. This study aims to identify
among others). This community also includes the operator’s the metrics that could best help project managers evaluate the func-
representative (OR), which indicates close cooperation and com- tional performance of their projects under various procurement
munication between the consultant and operator in this project. strategies. The results, which are discussed in the following sub-
The representative of the operator (RO) in Project B is poorly con- sections, were validated through a survey involving the main actors
nected to the project coalition. A lower number of change orders in of the three case-study projects.
lump-sum contracts reduces regular coordination meetings between
contract parties, and because there are no legal or contractual rela-
tionships between the RO and the project team, the former’s par- Network-Level Analytics
ticipation has diminished. Network statistics map a graph’s structure to a simple numerical
The analysis of information exchange frequency shows that space, in which standard statistical methods can be applied. The
around 84% of all reviewed change instructions in Project B most primitive examples of network statistics are first-order analyt-
(i.e., weight of the directed edge between the PM and contractor ics, i.e., the number of nodes and edges, but there are more complex
and PM and consultant) are proposed and requested by the contrac- metrics that can better highlight different behavioral aspects of a
tor. One of the most interesting communities in this network is the network. Network statistics applied in this study include (1) average
one composed of the contractor’s engineering personnel [i.e., elec- degree and average weighted degree, (2) diameter and average
trical (EE), mechanical (ME), and civil (CE) engineers], making a path length, density, and (3) modularity and clustering coefficient.
complete graph hinged to the rest of the network through the super- Details on the definitions and calculations of these measures have
intendent (S). The superintendent in this case is a gatekeeper been given by Nik-Bakht and El-Diraby (2017) among others.
(a hinge) who will be capable of controlling the flow of information Table 3 showcases the values of these metrics for the invoice
to and from these actors. Similar to Project B, the client, consultant, and change networks of the three case-study projects.
and contractor’s site personnel have separate communities in the In the case of invoice networks, the unit-price contract shows the
change network of Project A. highest numbers with all metrics. The statistics show that in Project
The change network of the EPC project [Fig. 2(c)] has fewer A, on average, an actor has communicated with 2.132 other actors
orphans than its invoice network (only the financial manager and has spent 5.737 h for communications regarding the progress
and accountant are orphans in this network). Unlike Projects A payment per each invoice. The average communication times spent
and B, in Project C, the operator (end user) and the client are not on the invoice process in Projects B and C have been about 2 h and
separate entities. The considerably lower number of change instruc- under 1 h, respectively. The process under the unit-price contract
tions in this project [1/9 of the number for the lump sum and 1/27 of involves a considerably large number of actors and involved actors
those for the unit price (Table 2)] indicates the low emphasis on can be up to eight steps away from one another in the process. This
instructions as a means of applying variations in the project. not only shows the larger size and higher density (compared with
The actual number of change incidents could have been more than other procurement routes) but also a higher dispersion for the net-
the quantity of the instructions reported, but many of those were work of actors involved.
deemed internal processes (of the designer-builder) and were not As seen in the table, merging the consultant’s role in the design-
documented as instructions. build entity (represented by the contractor in Case study C), has not
group cohesion, as well as a measure for redundancy (because re- In addition to the metrics that reveal the overall behavior of a net-
moving the nodes with clustering of 1 will not affect the structure of work, SNA provides analytics for the evaluation of individuals’
a network). Thus, networks of Project C show lower levels of re- behavior. Different variants of centrality, as well as transitive mea-
dundancy. The strict monitoring of activities and the adversarial sures, such as authority, hub, and page rank, are widely used in the
approach between contract parties in traditional contracts are the literature to evaluate the importance level of nodes in a network
main reasons for the higher cohesion in their networks. from different aspects. Due to the popularity of centrality in the
The average clustering coefficient for the change network of CEM literature, this study uses different centrality measures (de-
Project B has a considerably greater value than the other two proj- gree, betweenness, closeness, and eigenvector centrality) to com-
ects. This is attributed to the better-established scope and precise pare the actors’ roles and positions in change and invoice networks
drawings/specifications at the bid stage of lump-sum contracts. The of different projects. In general, centrality is the state of being cen-
change process in this kind of project is stricter and more compli- tral in a network structure and is an indicator of the potential im-
cated in a way that any change should be investigated and approved portance, influence, and prominence of an actor in a network
by different teams and groups of experts, making a greater number (Hossain 2009) calculated from the distribution of relationships
of triadic closures among the nodes. Only 15% of participants in the through the network. A complete explanation of centrality mea-
validation survey (i.e., 3 out of 20 respondents) disagreed with the sures and methods of their calculation has been given by Pryke
clause that reflected this finding, i.e., that “a considerably stricter (2012) and Nik-Bakht and El-Diraby (2017), among others.
monitoring is applied by the owner (and consultants) within the Table 4 lists prominent actors for the two networks in each
change process in lump-sum projects, compared to unit-price case-study project. As seen, the TOM has the highest level of power
and EPC projects,” Among possible reasons that were provided in the invoice network of projects with traditional contracts
to the participants, 85% (17 out of 20) selected the item stating (i.e., Projects A and B). In the case of the unit-price contract, this
“the nature of lump-sum contract reduces instances of design actor is the unique central node (from all aspects). This is an in-
change” as the root cause for this phenomenon. dicator of lower redundancy and can increase the risk of opportun-
Another important indicator of connections’ density is modular- istic behaviors by such an actor in the network. Generally, the actor
ity (evaluating the relative density of within- and between- who has the role of preparing invoices is usually the most promi-
community connections). Notably, change networks generally have nent individual in terms of degree centrality [the role bestowed
higher modularity than invoice networks. Usually, the change order on the control officer (CO) in the EPC project and is giving them
processes involve more technical considerations compared with the the same position in that network]. In the lump-sum project, the
invoice cases, and hence engage more specialties and create more project manager (PM) of the contractor, despite having a compa-
linkages within different communities. High modularity and low ratively low degree centrality, is a bridge among many other actors
average clustering for the change network of the EPC project are [Figs. 2(b)], which gives them a high betweenness. The consider-
indicators of a star-shaped network with relatively poor interactions ably greater in-degree (than out-degree) for this actor explains how
across the communities. In contrast, the high average clustering co- they can control the flow of the process (or even hinder it and cause
efficient, and comparatively low modularity in change network of delays). The technical office administrator (TOA) in the EPC
the lump-sum project indicate the vast spread and a broadly con- project has the highest betweenness and closeness. Being an em-
nected network. These two patterns can be the two ends of a spec- ployee of the client, the central role of the client party in the invoice
trum in terms of the complexity of the processes they represent. network of this project is noticeable. On the same basis, it is also
Together with the low level of average clustering, both networks noticeable that in all three projects, actors with the highest eigen-
of the EPC contract are of the least density among the case studies. vector centrality are individuals from the client’s team.
More relationships between experts from different disciplines and A glance at the central nodes of change networks reveals the
more widespread communications among the teams would lead to a shift of centrality to PMs in the change order workflows. The only
better flow of information. Thus, the change networks with higher exceptions are observed in the EPC project, where the technical
Whereas the consultant PM is more strategically positioned in the provider of invoices, who collects data from the personnel and
the change network of the unit-price contract, this actor is the most presents them to the consultant and client) will be at the most stra-
centrally positioned (i.e., most accessible) in the lump-sum con- tegic position (as is the case for Project A). However, in the case of
tract, and the case is vice versa for the PM of the contractor. lump-sum contract, the contractor PM (who is not by the definition
Figs. 3 and 4 compare some of the top influential nodes from the the invoice provider) has the highest betweenness centrality and is
invoice and change networks, respectively, in the three case-study in the position of controlling the information flow.
projects. Taking such a perspective will be helpful in better under- Most surprisingly, in Project C, the prominence of the TOA
standing the effect of contract type on characteristics of the key (top-level management of engineering department at the client
actors/roles. Four roles are showcased here (in the interest of organization, acting as an administrator to coordinate the client’s
space), and the full comparison of roles in different contract types engineers with the finance, budget, and contracting departments)
in detail will be presented elsewhere. From a holistic view, as suggests that the client’s importance in the invoice process of
shown in Fig. 3, the project manager, superintendent, and control EPC contracts can dominate the invoice providers.
officer, as employees of the contractor in the unit-price contract, are Another interesting insight regarding the betweenness comes
the most active actors in comparison with similar roles from other from the change network of traditional contracts. Consultants, as
Fig. 3. Comparison of the same roles in different projects (case of invoice networks): (a) project manager of contractor (PM); (b) superintendent (S);
(c) control officer (CO); and (d) technical office administrator (TOA).
Fig. 4. Comparison of the same roles in different projects (case of change networks): (a) project manager of contractor (PM); (b) superintendent (S);
(c) control officer (CO); (d) technical office administrator (TOA); and (e) designers’ average.
entities who set/coordinate technical relationships between the processes (and subsequently, the roles involved). Firstly, various
owner and contractor, are in the position of bridging between the centrality measures can highlight the influential nodes of a project
two clusters of actors in technical issues. Because a change order is from different perspectives. Secondly, most project networks are
a technical issue, the consultant is expected to be at the most stra- process-dependent phenomena; hence, instead of studying one
tegic position in the change network. However, in the unit-price whole social network for the entire project, it would be more ben-
project, the consultant PM (as the senior technical representative eficial to analyze theme-specific networks corresponding to various
of this entity) has the highest betweenness centrality; in Project B, functional evaluations.
it is the contractor PM who owns such a position. Fig. 2(b) shows
that in this project, three representatives from the three parties
Concluding Remarks
(i.e., consultant PM, contractor PM, and TOA) form a dense central
core within the network. However, when quantitatively comparing This study introduced the application of SNA as a strong tool for a
the values of betweenness, it is revealed that in the case study, the functional comparison among different construction procurement
contractor PM has been overshadowing the other two actors. During strategies by scoping project delivery method and contract type
the validation phase, experts involved in that project commented and focusing on cases of change orders and progress payments
that due to the nature of the lump-sum contract, the consultant (un- (as two of the main causes for delays and overruns in construction
like the contractor) did not have enough incentives and was not as projects). This method can be readily applied to other aspects of
active in moving forward the change process. Hence, in practice, construction projects such as risk management and quality control,
this role was (unofficially) assigned to the contractor. among others. The results showed how the analytics derived from
More case examples of this type will be provided elsewhere. SNA (at two levels of the network and individuals involved) can
Beyond specific observations in the case studies, however, an offer to project managers and owners an additional control tool
emphasis on the capability of the introduced method/metrics as per- in the management of their construction teams.
formance measures in a construction project is of the present pa- At a high level, the study has two major contributions:
per’s intention. The results confirm that although centrality can be • This study offers a useful technique and analytical tool to project
used as a performance measure to control the flow of various work managers, engineers, consultants, and contractors for analyzing
Pryke, S. 2012. Social network analysis in construction. Hoboken, NJ: Wasserman, S., and K. Faust. 1994. Social network analysis: Methods and
Wiley. applications. Cambridge, UK: Cambridge University Press.