THE PERFORMANCE OF CONTRACTORS : CLIENTS PERCEPTIONS JOHN SMALLWOOD AND DANIE VENTER

Transcription

1 CIB World Building Congress, April 2001, Wellington, New Zealand Page 1 of 11 THE PERFORMANCE OF CONTRACTORS : CLIENTS PERCEPTIONS JOHN SMALLWOOD AND DANIE VENTER University of Port Elizabeth, P O Box 1600, Port Elizabeth, 6000, South Africa ABSTRACT Construction is a multi-stakeholder process, the efficiency of which is influenced by clients, project managers, designers and contractors. The type of procurement system (PS) used on a project: provides the framework within which a project is executed; regulates multi-stakeholder contributions, and either engenders or marginalises the integration of design and construction. Traditionally, the performance of contractors has been evaluated in terms of cost, quality and schedule. However, international research indicates that performance relative to cost, quality and schedule is influenced by: health & safety; productivity; performance relative to the environment, and worker satisfaction. Health & safety is also the catalyst for the synergy between the aforementioned project parameters. Although contractors are often perceived to be inefficient and a percentage are, the reality is that the priorities and performance of the other stakeholders and the type of PS used often marginalises the performance of contractors. Given the aforementioned, a survey: Image of contractors, was conducted among members of a South African client association to determine their perceptions with respect to the performance of contractors. Findings include, inter alia: client priorities are quality, client satisfaction, productivity and schedule; clients generally do not pre-qualify designers and contractors on various parameters; contractors are generally rated good, average or poor in terms of performance relative to twenty-six aspects; client and design changes often negatively affect cost; worker skills, short project duration and lack of contractor Quality Management Systems (QMSs) negatively affect quality more than other aspects; rework, client and design changes, and poor productivity negatively affect schedule performance; the traditional construction procurement system (TCPS) is regarded as a suitable form of PS, and various interventions, inter alia, the implementation of QMSs would improve the performance and image of the construction industry. KEYWORDS Performance, multi-stakeholders, parameters, perceptions. INTRODUCTION The client s project performance measures are cost, quality, schedule and utility (Rwelamila & Savile, 1994). Utility includes constructability. Traditionally, cost, quality and schedule have constituted the parameters within which projects have been procured and managed (Smallwood, 1998). Although this traditional approach has been perpetuated by tertiary construction education, clients, designers, project leaders and the construction industry, it has not been successful with the greater percentage of contracts not being completed within budget and to quality and time requirements (Allen, 1999).

2 CIB World Building Congress, April 2001, Wellington, New Zealand Page 2 of 11 Given the aforementioned, the objectives of this paper are to: determine the frequency to which clients requirements relative to the performance measures of cost, quality and time are met by contractors; investigate the aspects negatively affecting contractors performance relative to the performance measures of cost, quality and time determine clients perceptions of contractors general performance; determine the frequency of use of procurement systems, and their suitability, and investigate the effect the separation of design and construction has on the construction process, and if any, the means by which it does. Procurement related issues Procurement systems and related issues are important as they affect, among other, contractual relationships, the development of mutual goals, the allocation of risk, and ultimately, provide the framework within which projects are executed (Dreger, 1996). During research conducted by Smallwood and Rwelamila (1996) among general contractors (GCs) in South Africa, a number of important indicators arose from the GCs stated frequency of exposure to various procurement system characteristics: the TCPS is used most frequently; design is not complete before selecting a contractor; prime costs, which do not constitute finality, are frequently made use of in contract documentation; architects are not always able to co-ordinate and supervise the design team; contractors are selected predominantly on price, and design is separated from construction. Further research conducted in South Africa investigated the frequency at which architectural practices encountered eight particular situations (Smallwood, 2000). Competitive tendering, clients revise their requirements, VOs, and drawings are revised, were ranked first, second, third, and fourth respectively, the majority of respondents identifying often for all four situations. The aforementioned, along with optimum project period, pre-qualification of contractors, and design is complete when construction commences, all achieved importance indices below the mid-point value of 2.5, indicating prevalence. However, less than half of the respondents identified often relative to optimum project period (43.3%), prequalification of contractors (34.5%), and design is complete when construction commences (43.3%). Customer satisfaction Research conducted in the USA by Cook et al. (2000) among a range of electrical contractor customers developed a customer satisfaction model. The model consists of five satisfaction quality dimensions: safety; project management; contractor/customer relationship; cost, and prepared/skilled workforce. Safety entails understanding and following safety regulations, maintaining a safe work environment and employing workers who practice safe work habits. Project management includes the ability to plan, schedule, manage, and execute all aspects of a project from the conceptual design stage to project completion. Contractor/customer relationship encapsulates the overall relationship and is addressed in terms of trust, respect, integrity, willingness to partner, responsiveness, and communication ability. The dimension of cost includes initial project estimates, value engineering services, lower cost alternatives, variation order pricing and project billing activities. Staff who are knowledgeable of the electrical code of practice, skilled in electrical construction techniques, take pride in quality work and understand advanced technologies, constitute prepared/skilled workforce. A national survey conducted during the research indicated safety to be the most important quality dimension, followed by project management and contractor/customer relationship. The prepared/skilled workforce and cost dimensions were jointly ranked lowest in importance.

3 CIB World Building Congress, April 2001, Wellington, New Zealand Page 3 of 11 Kometa et al. (1995) conducted research in the UK among consultants to determine the fundamental needs of clients. Based upon a relative importance index, functionality of a building was ranked first, followed by safety, both during construction and throughout the life of a building, quality, schedule, and cost. Research conducted in South Africa investigated the degree of importance of project parameters according to architects (Smallwood, 2000). Based upon an importance index, client satisfaction was ranked first, followed by project quality, project cost and project schedule. Image Poor contractor performance in the form of cost over-runs, rework, late completion, an unacceptably high accident rate, insensitivity to environmental considerations, poor work practices and adversarial relationships result in a poor image of contractors and the industry (The Civil Engineering and Building Contractor, 1998). Rutland (1986) also stresses the importance of environmental, human and back-up factors. Environmental factors such as plant and equipment and sites, and human factors such as employees presentation attitude and behaviour impact on the visual image. Back-up factors such as stationery, signage and various public relations related activities also affect image. Status quo According to Allen (1999) a Construction Clients Forum survey conducted in the UK in the first quarter of 1999 revealed that: clients were experiencing time overruns on more than half their projects, only one third were completed on time, with 9% finishing early; almost one-third of projects were over budget, and zero defects was achieved on handover on 10% of projects. Role of design The impact of design on contractor performance is universally acknowledged. Designers design, detail, specify materials and processes, conduct quality and progress inspections and contribute to the health and safety process. Effective management of the design process is crucial for the success of projects. This includes, among other, the development of an accurate design brief to confirm client requirements and the integration of the work of designers, and variations, which result in out of sequence operations (Latham, 1994). Causes of poor performance The research conducted among GCs in South Africa by Smallwood and Rwelamila (1996) investigated, among other, the causes of poor performance in terms of health and safety, productivity and quality. The computation of an overall average percentage for each aspect enabled the aspects to be ranked. Inadequate training was ranked first, followed by lack of management expertise, worker participation, QMSs and improvement processes. Tam and Harris (1996) cite, among other, equipment, and quality of management team as factors which affect the performance of contractors. However, according to the Department of Public Works (DPW) (1999), international precedents indicate that many of the difficulties associated with the aforementioned issues arise at the design stage. The current tender adjudication practice by the public sector, and most clients, in South Africa places undue emphasis on price at the expense of overall value for money. This has compelled sectors of the construction industry to seek immediate cost savings to remain competitive, with little regard for long-term consequences, among other, inadequately trained workers, with resultant consequences for industry and client. The DPW (1999) further maintains that the promotion of health and safety, productivity, quality and environmental protection and the enhancement of contractor performance in South Africa will be difficult, as long as the division between design and construction persists. The Department of the Environment, Transport and the Regions (DETR) (1998) in the UK maintains that the efficiency of project delivery is presently constrained by the largely separated processes through which they are generally planned, designed and constructed, and that integration is a pre-requisite for efficiency.

4 CIB World Building Congress, April 2001, Wellington, New Zealand Page 4 of 11 Improving performance In terms of a multi-stakeholder perspective, the DPW advocates the following interventions to improve industry performance in South Africa (DPW, 1999): improvements in the work processes of contractors in co-operation with clients and designers; promotion of best-practice standards for, among other, health and safety, productivity and quality, which standards contractors can aspire to; a shift towards a partnering approach between clients and contractors which includes designbuild and DBOT procurement systems. introduction of health and safety programmes, productivity improvement processes (PIPs) and QMSs. Initial costs are likely to be offset by the benefits of the resultant improvement in efficiency; integrated, as opposed to piecemeal implementation of work-process improvement techniques to enhance the likely success of such implementation due to the synergy between health and safety, productivity and quality; incremental implementation of best-practice due to the debilitated condition of much of the industry, and reinforcement of measures intended to protect the environment, workforce and public i.e. health and safety. The New South Wales Government (1998) intends to engender focus on the following as part of their strategy to improve the performance of its industry: management and workforce development; workplace improvement; industrial relations; health and safety, and environmental management. In terms of a contractor s perspective, The Associated General Contractors of America (1992) advocates Total Quality Management (TQM) as a strategy to improve overall contractor performance. TQM has as its main thrust continuous improvement in health and safety, productivity, quality, and employee and client satisfaction. The TQM mission in construction is to construct a quality product an error-free one for the customer by preventing errors in the construction process. TQM is the linkage of the processes, which deal with health and safety, productivity, quality and satisfaction, with the real benefit being the synergy between them (Levitt and Samelson, 1993). RESEARCH The salient findings of the literature survey are: clients and the type of CPS used influence contractors performance; contractors generally do not meet client requirements relative to cost, quality and time, and the separation of design and construction negatively affects the construction process. Given these findings, the objectives of the research are to determine: client priorities; client practices; the frequency to which contractors meet client requirements; the rating of contractors performance; the aspects which affect contractors performance relative to cost, quality and time; the extent to which clients are involved with the various CPSs and the suitability thereof, and means of improving contractors performance. To this end, a national postal survey was conducted among members of the body which is respresentative of major clients and related stakeholders, namely the South African Property Owners Association (SAPOA). A 20 question, 8 page questionnaire was mailed to 236 members of SAPOA. 36 Questionnaires were returned and analysed, which represents a response rate of 15.3% Commercial (86.1%) predominated among the type of developments respondents mostly undertook/became involved with, followed by industrial (38.9%), and infrastructure (16.7%). 44.4% of respondents undertook/became involved with developments >R10m <R50m in value in 1999,

5 CIB World Building Congress, April 2001, Wellington, New Zealand Page 5 of 11 followed by the R100m <R500m category (27.8%), >R50m <R100m (13.9%) and >R1000m (11.1%). Given that on occasions respondents were required to respond in terms of a range of frequencies, or to rate performance using a range of responses, it was necessary to compute an importance index with a minimum value of 0, and a maximum value of 4, to enable a comparison of various aspects. The importance index is calculated using the formula: 4n 1 + 3n 2 +2n 3 + 1n 4 + 0n 5 (n 1 + n 2 +n 3 + n 4 + n 5 ) where n 1 = Always/Excellent n 2 = Often/Good n 3 = Regularly/Average n 4 = Seldom/Poor n 5 = Never/Very poor Based upon the degree of importance of ten parameters to respondents organisations, project quality achieved a ranking of first, followed by client satisfaction, project productivity, project schedule and public safety (Table 1). It is significant that the top five ranked parameters achieved IIs above 3.0. Given that all ten parameters achieved IIs above the midpoint value of 2.0, the parameters can be deemed to be important. Table 1 Degree of importance of project parameters. Parameter I I* Rank Project quality Client satisfaction Project productivity Project schedule Public health and safety Environment Contractor satisfaction Designer satisfaction Worker satisfaction Contractor health and safety *II = Importance index 75% of respondents undertook developments, of which, with the exception of prequalification of contractors on financial stability, less than one third always prequalified designers and contractors on various criteria (Table 2). It is notable that the top three ranked prequalification criteria are all contractor related, two of which are related to the traditional project parameters, namely: quality and schedule. The highest ranked designer criterion is also quality related. It is significant that the top three ranked criteria achieved I Is above the midpoint value of 2.0, implying that the prequalification of contractors on such criteria can be deemed to be prevalent.

6 CIB World Building Congress, April 2001, Wellington, New Zealand Page 6 of 11 Table 2 Designer and contractor prequalification criteria. Criteria Frequency (%) I I Rank Designers: Consideration for the environment Consideration for H&S Quality Management Systems Contractors: Environmental practices H&S practices/systems Quality Management Systems Schedule performance Financial stability Ownership Given that the I Is, based on the frequency at which contractors meet requirements relative to project parameters are all above the midpoint value of 2.0, the meeting of requirements can be deemed to be prevalent i.e. achieved on more than 50% of occasions(table 3). Table 3 Frequency at which contractors meet requirements Requirement Frequency (%) I I Rank Don t know Schedule (programme) Quality Cost (budget)* Health and safety Environment *When it is within their control Respondents were asked to rate contractors in terms of twenty six aspects (Table 4). The first twenty ranked aspects achieved an II higher than the midpoint value of 2.0, indicating above average performance in these aspects. It is notable that quality, schedule performance and remaining within budget achieved rankings of fifth, sixth and seventh respectively. All three levels of management were ranked within the first three. Administration (project), which is essentially a function of management achieved a ranking of fourth. Safety achieved a ranking of tenth. However, the aspects of health, and concern for the environment, which along with safety are essentially measures of project performance, achieved rankings of twenty second and twenty fifth as a result of IIs of 1.97 and 1.67 respectively, both IIs being below the midpoint value of 2.0.

7 CIB World Building Congress, April 2001, Wellington, New Zealand Page 7 of 11 Table 4 Rating of contractors in terms of various aspects Aspect Rating (%) I I Rank Excellent Good Average Poor Very poor Don t know Management (Top) Management (Middle) Management (Site) Administration (project) Quality Schedule performance Remaining within budget Industrial relations Plant & equipment (condition) Safety Site offices Communication Relations with site neighbours Worker skills Signage (project) Claims orientated Storage Housekeeping Public Relations Post project service Hoarding/site enclosure Health Material waste Worker attire Concern for the environment Facilities (change rooms, toilets, etc.) The aspects which negatively affect a contractor s performance in terms of client s cost (budget) can all be deemed to be prevalent i.e. affect client s cost (budget), as their respective I Is are all above the midpoint value of 2.0 (Table 5). Design changes and client changes achieved rankings of first and second respectively, probably due to their direct impact as a result of the cost related to variation orders. Table 5 Aspects which negatively affect a contractor s performance in terms of client s cost (budget). Aspect Frequency (%) I I Rank Design changes Client changes Late information Inclement weather Design errors

8 CIB World Building Congress, April 2001, Wellington, New Zealand Page 8 of 11 With the exception of client changes and poor health and safety, the aspects which negatively affect a contractor s performance in terms of quality can all be deemed to be prevalent i.e. affect quality, as their respective I Is are all above the midpoint value of 2.0 (Table 6). Worker skills, project duration (short), and lack of QMSs achieved rankings of first, second and third respectively, followed by out of sequence work, and emphasis on production. With the exception of project duration (short), all the other top five ranked aspects are within the control of contractors. However, out of sequence work can be the result of client and, or design changes. Poor specification, late information and design changes, which achieved rankings of sixth, seventh and eighth respectively, are all design and, or client originated. Table 6 Aspects which negatively affect a contractor s performance in terms of quality Aspect Frequency (%) I I Rank Worker skills Project duration (short) Lack of QMSs Out of sequence work Emphasis on production Poor specification Late information Design changes Inclement weather Client changes Poor health and safety With the exception of accidents and poor health and safety, the aspects which negatively affect a contractor s performance in terms of schedule (programme) can all be deemed to be prevalent i.e. affect schedule (programme), as their respective I Is are all above the midpoint value of 2.0 (Table 7). Rework (poor quality), design changes and client changes achieved rankings of first, second and third respectively, followed by poor productivity and information flow. Two of the top five ranked aspects, namely rework (poor quality) and poor productivity are contractor related, and the other three are client and, or design related. Table 7 Aspects which negatively affect a contractor s performance in terms of schedule (programme) Aspect Frequency (%) I I Rank Rework (poor quality) Design changes Client changes Poor productivity Information flow Poor planning Inclement weather Inadequate plant and equipment Labour unrest Accidents Poor health and safety

9 CIB World Building Congress, April 2001, Wellington, New Zealand Page 9 of 11 Table 8 indicates that the TCPS and project management, a hybrid of the TCPS, predominated among the various CPSs respondents were involved with, both achieving I Is above the midpoint value of 2.0. The next two most frequently used CPSs were package deal and turnkey contracts and design-build. Table 8 Extent to which respondents are involved with various procurement systems. Procurement system Frequency (%) I I Rank TCPS TCPS (project management) Package deal and turnkey contracts Design and build Construction management for a fee Design and build Management contracting Table 9 indicates that the ranking of various CPSs in terms of suitability reflects the ranking relative to use. In theory, frequency of use should reflect suitability. Table 9 Suitability of various procurement systems Procurement system Frequency (%) I I Rank TCPS TCPS (project management) Package deal and turnkey contracts Design and build Construction management for a fee Management contracting Only 33.3% of respondents maintained that the separation of design and construction negatively affects the construction process. Given that the I Is, based on the responses of those that responded in the affirmative are all above the midpoint value of 2.0, the means by which the separation of design and construction negatively affect the construction process can be deemed to be prevalent (Table 10). Table 10 Means by which the separation of design and construction negatively affect the construction process Means Frequency (%) I I Rank Seldom Increased design cost Non-utilisation of contractor expertise Increased project time Communication gap between client and contractor Lack of cost effectiveness Extended lines of communication Retarded decision making Poor constructibility

10 CIB World Building Congress, April 2001, Wellington, New Zealand Page 10 of 11 With the exception of construction site hotline (report concerns and problems) most respondents identified the various ways to improve the performance and image of the construction industry (Table 11). The level of response relative to implementation of QMSs (91.7%) is possibly attributable to lack of QMSs achieving a ranking of third in terms of aspects which negatively affect a contractor s performance in terms of quality. Table 11 Ways to improve the performance and image of the construction industry Aspect Response (%) Yes No Don t know Construction site hotline (Report concerns and problems) Implementation of QMSs Minimum qualification requirement to contract Registration of contractors Prequalification of tenderers % of respondents had a comment in general regarding the performance and image of contractors, 8.3% had two comments, and 11.1% had three comments. Selected comments include: Certain contractors are becoming more approachable with partnering philosophy and use of NEC and clear communication systems ; Not enough training facilities ; Overall contractor image varies with size of contract, the larger the project the more professional the contractor and They should all learn to get it right first time. CONCLUSION Literature indicates cost, quality and schedule to be the traditional project performance measures and the primary measures of contractor performance. Contractors do not always meet requirements relative to these performance measures, which is supported by the descriptive research findings emanating from South Africa. However, non-traditional performance measures such as health and safety and the environment, and other aspects such as management and worker skills, industrial relations and facilities, affect performance relative to cost, quality and schedule. Lack of QMSs, poor worker skills/inadequate training, and poor management practices, namely poor planning, predominate among contractor related causes of poor performance. Although contractors received high ratings relative to all levels of management expertise, they received substantially lower ratings relative to worker skills. Both the literature and descriptive research findings indicate that clients and designers directly influence contractors performance through client changes, design changes, VOs and late information. This is likely due to the more frequent use of the hybrid TCPS, project management, and the TCPS, even though clients maintain the two CPSs are the most suitable. Although the majority of clients do not acknowledge the separation of design and construction to have a negative effect on the construction process, most of the client and design originated causes of poor performance relative to cost, quality and schedule, are engendered by the separation of design. This conclusion is reinforced by the level of response relative to the means by which the separation of design and construction negatively affect the construction process. The ways identified to improve the performance and image of the industry amplifies the need for the implementation of QMSs, and ultimately, the need for qualified and skilled personnel in all occupations.

11 CIB World Building Congress, April 2001, Wellington, New Zealand Page 11 of 11 RECOMMENDATIONS Appropriate CPSs should be selected with an emphasis on projects which engender the integration of design and construction. Similarly, project durations should be commensurate with the nature and scope of the work to be undertaken and cost should not be the sole criterion for selecting a contractor. Given the impact of design and client changes, and late information, clients and designers should endeavour to freeze design. Contractors should evolve their quality management process to realise a documented QMS. Clients and designers in turn should prequalify contractors on quality. This will exert pressure on contractors to achieve best practice. Contractors should also implement health and safety programmes and productivity improvement processes, and concerted efforts should be made to educate and train all personnel. REFERENCES Allen, J.D Measuring performance. Construction Manager, May, 18. Cook, J.R., Andersen, N.J. and Andersen, K.W Customer satisfaction in electrical construction. The American Professional Constructor, Vol.24, No.1, 2-5. DETR Rethinking Construction. London, Department of the Environment, Transport and the Regions. DPW White Paper Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry. Pretoria, Department of Public Works. Dreger, G.T Sustainable development in construction: Management strategy for success. In Proceedings of the 1996 CIB W89 Beijing International Conference: Construction Modernization and Education, Beijing, CD Rom file: //D1/papers/ /1633/.163.htm Kometa, S.T., Olomolaiye, P.O. and Harris, F.C An evaluation of clients needs and responsibilities in the construction process. Engineering, Construction and Architectural Management, Vol.2, No.1, Latham, M Constructing the Team. London, HMSO. Levitt, R.E. and Samelson, N.M Construction Safety Management. 2 nd Edition. New York, John Wiley & Sons, Inc. New South Wales Government Construct New South Wales. Sydney, New South Wales. Rutland, P Presenting the company image. The Professional Builder, September, 27. Rwelamila, P.D. and Savile, P.W Hybrid value engineering: the challenge of construction project management in the 1990s. International Journal of Project Management, Vol.12, No.3, Smallwood, J.J Health and safety and the environment as project parameters. In Proceedings of the CIB World Building Congress 1998 Symposium C: Legal & Procurement Practices Rights for the Environment, Gavle, 7-12, Smallwood, J.J. and Rwelamila, P.D Department of Public Works Enabling Environment Initiative Final Report on Initiatives to Promote Health and Safety, Productivity and Quality in South African Construction. Unpublished report. Smallwood, J.J A study of the relationship between occupational health and safety, labour productivity and quality in the South African construction industry. Unpublished PhD (Construction Management) Thesis, University of Port Elizabeth, Port Elizabeth. Tam, C.M. and Harris, F Model for assessing building contractors project performance. Engineering, Construction and Architectural Management, Vol.3, No.3, The Associated General Contractors of America (AGC) An Introduction to Total Quality Management. Washington, D.C., AGC. The Civil Engineering and Building Contractor Constructing a better image. The Civil Engineering and Building Contractor, January, 18. The SubContractor Diamond award achieved in productivity competition. The SubContractor, March/April,