Sustainability Criteria for Awarding Construction Contracts in Greece

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1 International Journal of Sustainability Management an Information Technologies 206; 2(2): oi: 0.648/.ismit Sustainability Criteria for Awaring Construction Contracts in Greece Oysseus G. Manoliais, Konstantinos I. Vatalis 2 Department of Civil Engineering, Democritus University of Thrace, Xanthi, Greece 2 Department of Environmental Engineering, Western Maceonia University of Applie Sciences, Kozani, Greece aress: omanolia@civil.uth.gr (O. G. Manoliais), kvatalis@teiwm.gr (K. I. Vatalis) To cite this article: Oysseus G. Manoliais, Konstantinos I. Vatalis. Sustainability Criteria for Awaring Construction Contracts in Greece. International Journal of Sustainability Management an Information Technologies. Vol. 2, No. 2, 206, pp oi: 0.648/.ismit Receive: September 6, 206; Accepte: October 4, 206; Publishe: October 28, 206 Abstract: Nowaays multiple criteria have been ae to the ecision making proceure as a result of the harmonization of Greece s public procurement to EU guielines (i.e. 72/62/EC, 93/36/EC an 80/67/EC). The main obective of the research is to propose an evaluation methoology as a group ecision framework for this problem. In oing so a systematic proceure is introuce base on Delphi technique aiming to evaluate the capability of groupe venor suppliers to eliver the proect as per the owner's requirements. The orer of the teners is erive by comparison of the teners efficiency. A case stuy is use as an example from a procurement case in Greece using criteria inices namely the Risk management, Quality of work, Price certainty, Time availability an preictability, Technical capacity of tenerers, Regularity of Environment, Energy intensity of builing operation, Economic an Financial capacity of tenerers, Familiarity of tenerers of a builing proect. The results strengthen the opinion that the Delphi metho paire with iscriminant analysis is a powerful an appropriate technique for eriving obective solutions in categorization of procurement cases an is a rather subective area such as the procurement system for venor selection. This research outlines a process by which the traitional teners selection using iscriminant analysis metho can be improve via the utilization of a Fuzzy Delphi Metho (FDM), a cross-mutation of the traitional Delphi Metho (DM) an fuzzy logic (FL). Keywors: Sustainability, Awar Citeria, Fuzzy Delphi, Discriminant Analysis. Introuction Selecting the tener is an important step uring government procurement processes. It irectly etermines whether an entity is capable of attaining high-quality of work proucts within fixe buget an time allotment. However, as the procurement goals hanle by entities have graually become more versatile an complex, some types of procurement cases are not suitable for supplier selection merely base on the lowest price. Purchasing has become more complex an is no longer consiere a clerical function while performe inepenently by untraine iniviuals within a governmental agency while emphasis is given on Quality of work an best value (not simply lowest price) []. Uner these circumstances the necessity to inspect an improve on the current system of most avantageous tenering selection is profoun. In Greece, procurement in terms of practice in awaring construction contracts is ivie into two categories Recently as a result the valuation of venors in Greece the selection proceure was change base upon EU guielines (i.e. 72/62/EC, 93/36/EC an 80/67/EC) an is merely a multiple criteria ecision making proceure [2] The first attempts to evaluate these criteria were to sum up their values though lately ranges of weights were propose by Legislative Laws (i.e. 394/996) [3], [4], [5]. In this research a methoology is introuce for the selection of the most avantageous bier base metho paire with iscriminant analysis [6] an is moifie herein to inclue multiple criteria (Quality of work, environmental etc). The main obective of the research is to propose an evaluation methoology as a group ecision framework for this problem. The results strengthen the opinion that the

2 8 Oysseus G. Manoliais an Konstantinos I. Vatalis: Sustainability Criteria for Awaring Construction Contracts in Greece Delphi metho paire with iscriminate analysis is a powerful an appropriate technique for eriving obective solutions in categorization of procurement cases an is a rather subective area such as the procurement system for venor selection. In the next paragraphs first the theoretical backgroun is presente. Then the methos use for the selection of teners are escribe. After that an example is use to emonstrate the propose metho. Following are the stuy results an conclusions of this research. 2. Backgroun The promotion of multi criteria in procurement ecision making resulte in several avantages, for example, from an economic point of view: there are economic benefits erive, compare with conventional ecision making methoologies. The process of public procurement an the ecision making process is enriche with criteria having to o with Quality of work stanars, prouct elivere at the right time, Risk management, Time availability an preictabilityetc. The overall obective is to exclue firms not suitably qualifie an proposals that o not respon to all requirements though at a low cost. These characteristics present a ifferent practice in Greece s contracts from that in the past. The selection of the most suitable supplier is becoming an important issue within proects in Greece. The challenges for issues selecte for consieration are presente in the next paragraphs: a. Lack of corporate commitment: The implementation of the above issues requires commitment from all levels of an organization, incluing senior management an purchasing agents. b. Insufficient knowlege: It is essential for an organization to have an unerstaning of concepts an relevant terms. c. No acceptable alternative: Lack of acceptable alternatives to a present prouct can be a barrier.. No specifications: On one han purchasers must clearly efine their nees an requirements, though on the other han suppliers must be aske to provie new specifications of their proucts (i.e. environmental). e. Purchasing habits: Purchasing habits have to o with change management, which is important in orer to overcome existing relationships between purchasers an suppliers that make it ifficult to switch to alternatives an change the purchasing process. f. Strategy evelopment: It is essential in orer to implement a procurement programme an aims to ientifying changes, suitable proucts an services, an evaluating the environmental performance of suppliers. g. Definition of criteria for evaluating teners an awaring contracts: The public procurement Directives contains two options for the awar of contracts: either the lowest price or the most economically avantageous tener. In orer to efine which tener shoul be consiere the most economically avantageous, the contracting organization/authority has to inicate beforehan which criteria will be ecisive an will be applie. The Delphi Metho The original Delphi metho was evelope by Norman Dalkey of the RAND Corporation in the 950 s for a U.S. sponsore military proect. Dalkey states that the goal of the proect was to solicit expert opinion to the selection, from the point of view of a Soviet strategic planner, of an optimal U.S. inustrial target system an to the estimation of the number of A-bombs require to reuce the munitions output by a prescribe amount, [7]. [8] characterize the classical Delphi metho by four key features: a. Anonymity of Delphi participants: allows the participants to freely express their opinions without unue social pressures to conform from others in the group. Decisions are evaluate on their merit, rather than who has propose the iea. b. Iteration: allows the participants to refine their views in light of the progress of the group s work from roun to roun. c. Controlle feeback: informs the participants of the other participant s perspectives, an provies the opportunity for Delphi participants to clarify or change their views.. Statistical aggregation of group response: allows for a quantitative analysis an interpretation of ata - Discriminant analysis. Discriminant analysis was pioneere almost seventy years ago by Fisher [9] an was use in proect management applications [6], [9]. In another stuy iscriminant analysis is use to preict the changes of tener price in Hong Kong [0]. A moifie price (E) is a function of tener inex (TI) an tener price (P): In estimating the tener inex, TI, we use the iscriminant analysis for evaluation of teners This methoology is base on the etermination of eviation among evaluate teners. Discriminant analysis is base upon the eviation of exploring tener from the basic comparative tener. The so calle Ivanovich eviation represents the total tener utility i.e. TI = D [9]. The calculation of tener s moifie price is base upon the Ivanovich eviation (D): D E = = s () n i i ( ri ) (2) i= i = i is the ifference expressive the filling of iniviual criteria P TI

3 International Journal of Sustainability Management an Information Technologies 206; 2(2): s i is the stanar eviation r i is the correlation coefficient n is the number of criterions i is the number of matrix rows (number of criterions) an is the number of matrix columns (number of teners). The calculation of Ivanovich eviation is practically achieve in sequential matrix series escribe in the next paragraphs which flow from formula (2) Tener shoul be moifie to P m in orer to inclue of operating costs or life cycle costs (P V ) as follows: P V (3) = n C i i= 0 i (4) ( + r) y = P V is the present value of operating costs linke to the tener price C i is the operating costs in each year i is the number of years from 0 to n an r is the iscount rate. Discriminant Analysis. The steps of the methoology are: Step. Create the input Table of teners vs. criteria. Step 2. Create the fictive matrix (worst value of every criterion). Step 3. Calculate Absolute ifferences-calculate Table Difference matrix () value of criterion of Fictive matrix- Input matrix. The ifferences between comparative teners represent total iscriminant effects. Step 4. Calculate Stanar eviation accoring to the formula: n Step 5. Calculate Fraction /s Matrix Step 6. Calculate Covariance (w) between criteria 2 w = z p = n u (5) (6) (7) 3. Methos The paper introuces a combination of two well-known methos, that of Delphi technique an iscriminant analysis for the procurement problem in two stages. Stage : Ientifying the venor selection criteria - Delphi metho. This involves a number of ifferent activities, or phases an it is consisting of the following steps: Step. Selection of experts. Base on the subect to be examine a number of experts shoul be use (professionals, acaemics etc.) Step 2, Roun. Proposition of criteria of each of the experts to efault number. The success of Delphi metho epens principally on careful selection of the panel [], [2], [3] an [4] suggeste that an expert may be efine as someone with special skills or knowlege evience by leaership in professional organizations, holing office in professional organization, presenter at national conventions, publishe in recognize ournals In the questionnaire, a list of criterions that have been foun from previous research stuies an literature were also inclue for their reference. Step 3. Roun two. Experts are sen the criteria scores an are aske to concise. The total frequency istribution of the experts who suggeste the criteria in roun one an a percentage of the experts for each criterion were also state. Step 4. Selecte criteria are sent to same experts in orer to propose the priority of each criterion. Step 5. Using the occurrence frequency the member group are aske to coincie the priority of criteria. Stage 2: Selecting the most avantageous tener- an z u = i (8) n = (9) pi p Step 7. Calculate Correlation Coefficient via the next formula: an t w r = (0) S S = sis () = r (2) Step 8. Create the Table Discriminative Factor Step 9. Create the Ivanovich eviation (D) Table (D) using equation (2) Step 0. Create the Moifie price Table (P * ) using equation () Create the Tener orer accoring to the rank of the moifie price. The methoology use to aust iscriminant analysis to Greek procurement practices is presente in Fig..

4 0 Oysseus G. Manoliais an Konstantinos I. Vatalis: Sustainability Criteria for Awaring Construction Contracts in Greece Fig.. Tener selection process. 4. Housing Proect in Greece An illustrative case stuy is use from a housing proect in Greece. The 4 teners an the corresponing prices are as follows: N (Firm A 7), N2 (Firm B 68), N3 (Firm C 60), N4 (Firm D 69). Eight criterions were consiere namely: 4.. Proect Characteristics Technical capacity of renerers Regulatory environment Economic an financial capacity of renerers Risk management Quality of work Price certainty Time availability an preictability Familiarity of renerers. Utility values of all six factors were sufficiently consistent at 0.05 level of significance External Environment Table. Steps -4 of the Delphi Metho. Regularity of Environment an socio cultural suitability These Proect characteristics of the External Environment, have been ientifie as being generally aequate for the procurement selection an there is a reasonable consensus on utility values for each procurement system. It is use in Delphi technique to ensure that the consensus is reache for the utility values provie by the panel of experts/practitioners from the inustry. Stage : Ientifying the venor selection criteria - Delphi metho. The Delphi metho aopte in this stuy consiste of the following rouns. The questionnaire of the first roun consiste of the above 8 factors were sent out in early February 203 with a four week return perio, followe by an phone calls to encourage participation. There was 80% response with 2 experts (out of 5) returne the questions. The experts were aske to rate each statement on a 0-9 scale. They were encourage to a aitional comments at the en of the questionnaire. The first roun of Delphi questionnaire was sent via to the panel experts. Table shows the outcomes of participants' perceptions in response to the survey questions of roun one an their relative rank. Criteria Roun Roun 2 response remove votes Rank votes Rank % Y/N Quality of work % N 2 Risk management % Y 3 Price certainty % N 4 Technical capacity of tenerers % N 5 Regulatory environment % Y 6 Economic an financial capacity of renerers % N 7 Time availability an preictability 2 2 6% Y 8 Familiarity of renerers % Y Mean value of scores from -9 In roun two the experts were aske to inicate the relative importance of these twelve criteria that ha been ientifie in roun one of the Delphi survey, using 0-9 rating scale. The results of roun one was also attache to the questionnaire. The roun two of Delphi questionnaire is presente Table 2. Criteria that attracte only a percentage (say 50%, or below), in the category of "very important" or "important" were remove. Stage 2: Selecting the most avantageous tener- Discriminant Analysis After gathering the score of the Members of the commission for each criterion the input Table of teners vs. criteria is formulate (step ). c i = (3) The fictive matrix N i base on the worst value of every criterion is create (Step 2).

5 International Journal of Sustainability Management an Information Technologies 206; 2(2): Di = ci Ni = (4) r = = n r = = n Di = ci Ni = (5) s = y p = The Fictive matrix- value of the Input matrix is calculate (step 3). N i = (6) The Stanar eviation s is Calculate (Step 4) an the Fraction /s Matrix (Step 5). / s Table 2. Steps 6-8 of the Delphi Metho. i i = (7) The Covariance between criteria (w) is calculate (Step 6, Table 2) as well as the Correlation Coefficient an the Table Discriminative Factor (Steps 7 an 8, see Table 2). Then the Table Discriminative Factor (I) is create: z U w S r t Criterion couple (7) (8) (9) (7)-(8) (20) (2) (9)-(20) (22) K-K K-K K-K K2-K K2-K K3-K I = (8) I for criterion K = I2 for criterion K2 = tk-k2 I3 for criterion K3 = tk-k3 tk2-k3 I4 for criterion K4 = tk-k4 tk2-k4 tk3-k4 An the Ivanovich eviation (D) is constructe using equation 2. (Step 9) D D i = (9) Di 2.807, 0.790,.230, N = = 5. Results Finally the Efficiency Table E is create using equation () an the Tener orer accoring to the rank of the efficiency (Eq. 9). E = 7/ = /0.790 = U / P = 60/ /0.765 E (20) = (2) Therefore the tener orer is 4, 2, 3, though the orer if the price was solely use as a criterion was 3, 2, 4,.

6 2 Oysseus G. Manoliais an Konstantinos I. Vatalis: Sustainability Criteria for Awaring Construction Contracts in Greece 6. Conclusions At present scoring an classification methos are use for the evaluation of public orer teners. The selection of the tener is often base upon the lowest price. However the goal of every procurement professional shoul be to achieve best value (not necessarily lowest cost) in the face of the pressures, uncertainty, competing obectives an public accountability entaile in balancing costs an risks. If that goal is to be met in toay s rapily emerging technologies, increasing prouct iversity an choice in orer to incorporate criteria inices in Public Procurement Teners since new moern issues are introuce in public teners more complex evaluation methos must be use. A metho is propose in this research using iscriminant analysis for public procurement in Greece. The propose methoology uses Delphi metho an Discriminant Analysis (DA). The Delphi metho is propose ue to the group ecision nature of the problem examine. Concerning the Delphi Metho, though there are numerous other group ecision approaches that may really help to reach a consensus, the mere avantage is that uses small number of experts an is a flexible. Also the use of DA in such problems oes seem appropriate, since it is base simply on statistical assumptions an can eal with the group multiple criteria ecision problem. A case stuy was examine where the results erive strengthen the opinion that the Delphi metho paire with iscriminant analysis is a powerful an appropriate technique for eriving obective solutions in categorization of procurement cases an is a rather subective area such as the procurement system for venor selection. Further evaluation of this new metho is propose. Discriminant analysis can be incorporate an are capable of hanling numerous inicators use in tener selection. The methoology was successfully applie to an example from Greece s legislation. The metho is capable of hanling numerous inices incorporating the etermination of total tener utility. References [] Fearon, H. E. (989). Historical Evolution of the Purchasing Function. In H. E. Fearon, D. W. Dobler & K. Killen (Es.), the Purchasing Hanbook: A Guie for the Purchasing an Supply Profession pp New York: McGraw Hill. [2] Karanastasis, M. (998). The new legislation on public procurement (public legal entities, public authorities an public enterprises), Athens (in Greek). [3] Law 2286 (995). Public Procurement an Relate Regulations (in Greek) Greek Government Official Journal 266 () pp [4] Legislative Law 370 (995). Harmonization of Greek Legislation to EC Directive93/36/EC (in Greek) Greek Government Official Journal 99 () [5] Legislative Law 394 (996). Public Procurement an Relate Regulations (in Greek) Greek Government Official Journal 9 (), [6] Ng, T., Cheung S. O., Skitmore, R. M., Lam K. C.; Wong L. Y. (2000). Preiction of tener price inex irectional changes, Construction Management an Economics, 8 (7) [7] Dalkey, N. C., & Helmer, O. (963). An experimental application of the Delphi metho to the use of experts. Management Science, 9 (3), [8] Rowe, G. an G. Wright (999). The Delphi technique as a forecasting tool: issues an analysis. International Journal of Forecasting, (5), [9] Ivanovich L. D. (975). Physical Letters A (23), p. 257 [0] Tam, C. M. (992). Discriminant analysis moel for preicting contractor performance in Hong Kong. Unpublishe PhD Thesis, Loughborough University of Technology, Loughborough. [] Bryman, A. (996). Quantity an Quality of work in Social Research, Routlege, Lonon. [2] Emuns, H. (999). The Focus Group Research Hanbook, NTC Business Books. [3] Cabanis, K. (200). Counselling an computer technology in the new millennium an internet Delphi stuy, Ph.D Dissertation, Virginia Polyt. Institute an State University, Virginia, U.S.A. [4] Morgan, D. L. (998). The Focus Group Guiebook, Focus Group Kit, Sage, Beverly Hills, CA, USA.