I hereby declare that I have read this thesis and in my opinion this thesis is sufficient in terms of scope and quality for the award of the degree

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2 I hereby declare that I have read this thesis and in my opinion this thesis is sufficient in terms of scope and quality for the award of the degree of Master of sciences (Construction Management) Signature :. Name of Supervisor : DR. ARHAM ABDULLAH Date : 30 th March 2005

3 SUBCONTRACTOR SELECTION METHOD USING ANALYTIC HIERARCHY PROCESS RAVICHANDRAN A/L MANOHARAN A project report submitted in partial fulfillment of the requirements for the award of the degree of Master of Sciences (Construction Management) Faculty of Civil Engineering Universiti Teknologi Malaysia APRIL 2005

4 I declare that this thesis entitled Subcontractor Selection Method Using Analytic Hierarchy Process is the result of my own research except as cited in the references. The thesis has not been excepted for any degree and is not concurrently submitted in candidature of any degree. Signature :. Name : Ravichandran s/o Manoharan Date : 30 th March 2005

5 Especially dedicated to my beloved family

6 ACKNOWLEDGEMENT Without the support and help of many people, this research would not have been possible. First of all, the author wish to extent the greatest thanks to the project supervisor, Dr Arham Bin Abdullah for his help, support, advise and corporation in conducting the research, especially during the structuring the research model. I also wish to acknowledge all the contractors and experts who have extended their valuable times and resources in providing necessary information for the research. Acknowledgement is also due to anonymous panels for their valuable comments during the presentation of the research. I also owe a debt of gratitude to my family members and friends for their support and encouragements throughout my master programme. The author is extremely grateful to all who have contributed, either directly or indirectly to the research. Finally, but most important, express my thanks to Construction Technology Management Centre (CMTC) and all lecturers in providing the knowledge and make this master programme to reality.

7 ABSTRACT Sub-contractor selection is one of the most important aspects in construction contract. The success level of construction is very depends on the quality of subcontractor selection process. Majority of selection process are over emphasized on the bid cost rather than trade-off between other parameter such as quality, safety and environmental commitments. Instead these have contributes in project delays, cost overruns, non-confirmation on quality, lost time accident, increase number of claims, litigation and contractual issues and failure to comply with local authority and construction specification. Concerning to this problems, the subcontractor prequalification, evaluation and selection process needs to be reviewed to achieve the project goals based on multi criteria decision making process. The main initial thrust of this study was to identify the criteria used for selection process, which was adopted by the various type of contractor working in Putrajaya. This exercise involved knowledge acquisition phase to capture the expert knowledge including collecting documents of current procurements practice, knowledge from the literature review and interviews with experts from various construction companies. The data collected are used to create a theoretical model for subcontractor selection that represented by the Analytic Hierarchy Process. It is concludes that the choice of subcontractor should be consider based on multi criteria decision rather than automatically accepting the lowest bid. The finding from the research indicated that the common criteria considered by the contractor during the selection are the cost, past performance, financial soundness, technical expertise, management capability, subcontractor workload, previous work experience, and track record. The study recommended that procurers should no longer depends totally on their experience to decide on their selection process but an effective decision support system (DSS) like Analytic Hierarchy Process (AHP) is important to systematically evaluate the selection process. The research also serves as sources of information for subcontractor to win the contract and act as platform for contractor to make an appropriate decision on the choice of subcontractor.

8 ABSTRAK Pemilihan sub-kontractor adalah perkara paling penting dalam sektor pembinaan. Tahap kejayaan sesuatu projek banyak bergantung kepada kualiti pemilihan sub-kontraktor. Kebanyakkan kaedah pemilihan sub-kontraktor terlalu memihak kepada faktor harga tanpa memikirkan faktor-faktor lain seperti kualiti, keselamatan dan peranan alam persekitaran. Akibatnya banyak projek pembinaan mengalami kelewatan, kerugian, tidak dapat memenuhi kualiti piawaian, peningkatan kemalangan di tapak bina, peningkatan isu berkaitan dengan kontrak dan pembayaran serta kegagalan memenuhi kehendak pihak berkuasa dan specifikasi projek. Kajian ini adalah bertujuan untuk mengenal pasti kriteria dalam proses pemilihan sub-kontraktor yang diamalkan oleh kontraktor-kontraktor di Putrajaya. Untuk mencapai matlamat ini kepakaran pihak-pihak kontraktor dalam pemilihan sub-kontraktor diambil kira melalui pengumpulan data, pengalaman mereka dan menemubual kontraktor secara langsung. Analisis data kemudian digunakan untuk membuat satu model theoretical yang digambarkan oleh Analytic Hierarchy Process. Kesimpulannya, pemilihan sub-kontraktor mestilah berasaskan kepada kepelbagaian kriteria dan bukan memilih secara langsung berdasarkan paras harga yang terendah. Hasil kajian menunjukkan pemilihan sub-kontraktor dipengaruhi faktor seperti harga, pencapaian masa lepas, keupayaan kewangan, kepakaran teknikal, kemampuan pengurusan, pengalaman kerja lepas, beban kerja subkontraktor dan rekod kerja. Kajian ini juga mencadangkan bahawa kontraktor tidak seharusnya menggunakan hanya pengalaman mereka dalam pemilihan subkontraktor tetapi mereka juga haruslah menggunakan sistem penyokong keputusan seperti Analythic Hierarchy Process dalam membuat keputusan pemilihan. Kajian ini juga dapat membantu sub-kontraktor untuk memenangi kontrak dan sebagai landasan kepada kontraktor dalam pemilihan sub-kontraktor.

9 vii TABLE OF CONTENTS CHAPTER TITLE PAGE TITLE PAGE DECLARATION DEDICATION ACKNOWLEDGEMENT ABSTRACT ABSTRAK TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF SYMBOL LIST OF APPENDICES ii iii iv v vi vii xi xii xiv xv 1 INTRODUCTION OF STUDY 1.1 Introduction Problem statement Background of the research Justification of the research Aim of the research Objectives of the research Scope and limitation of the research Brief research methodology Structure of dissertation 8

10 xii CHAPTER TITLE PAGE 2 LITERATURE REVIEW Introduction Construction project phases Definition Project life cycle Conceptual and feasibility studies Engineering and design stages Procurement stage Construction stage Start up and Implementation Operation and utilization Tender and estimation process Pre-qualification The decision to tender The estimating process The tendering process Bid evaluation Criteria for bid evaluation Sub-contractor selection model Multicriteria decision making (MCDM) Bespoke approaches (BA) Multi attribute analysis (MAA) Multi attribute utility theory (MAUT) Multiple regression (MR) Cluster analysis (CA) Fuzzy set theory (FST) Conclusion 50

11 xiii CHAPTER TITLE PAGE 3 RESEARCH METHODOLOGY Introduction The methodology adopted for the research Literature review Knowledge acquisition Questionnaires survey Interviews Analytic hierarchy process (AHP) Background of AHP AHP principles Decomposition Prioritization procedure Synthesis of results Measuring Inconsistency Decision support system Summary 70 4 KNOWLEDGE ACQUISITION FOR MODEL DEVELOPMENT 4.1 Introduction Knowledge acquisition Survey sample Questionnaire survey Questionnaire design Interview survey Data Analysis 77

12 xiv CHAPTER TITLE PAGE Analysis on questionnaire survey Discussion and findings Analysis on interview survey Discussion on findings Summary 97 5 DEVELOPMENT OF THEORETICAL MODEL Introduction Modeling Expert Choice Software Development of the AHP model Developing the AHP hierarchy The pairwise comparison Synthesis of the AHP model Sensitivity analysis Operation of the theoretical model User requirements System requirements Starting the system Data input Assigned judgment in pairwise comparison Synthesize to get results Summary 117

13 xv CHAPTER TITLE PAGE 6 CONCLUSION AND RECOMMENDATION Introduction Findings Summary Recommendation for further research Conclusion 122 REFERENCES 123 APPENDICES A-B

14 xvi LIST OF TABLES TABLE NO TITLE PAGE 2.1 Criteria for sub-contractor selection Pre-qualification recommended by CID agency Important of Pre-qualification criteria Hypotthethical MAA example MCDM method for single criterion synthesis approach Matrix of methodology characteristic AHP pairwise comparison scale Random index RI Response from the questionnaire survey Response preference of selection criteria Relative Index Value for each criteria Application of DSS in selection process Justification of the identified criteria Sub criteria for the assessment of main criteria 92

15 xvii LIST OF FIGURES FIGURE NO. TITLE PAGE 1.1 Research objective and methods Project activity flow chart The estimating and tendering process Pre-qualification criteria used by MTRC, Hong Kong RRC frame for contractor pre-qualification Decision analysis paradigm MCDM method of classification Typical stepwise procedure for bespoke approach Possible stepwise procedure for MR pre-qualification model Jointing tree CA output Hierarchy of the project example The respondents acceptable to participate in the research The composition of respondents by profession The range of respondent s experience in the selection process Respondent s roles in the selection process Respondent s involvement in the type of construction work Procurement system applied by contractor Tender arrangement method in the selection process List applied in subcontractor pre-qualification The source used in the selection criteria Method of evaluating the selection criteria 87

16 18 LIST OF FIGURES FIGURE NO. TITLE PAGE 5.1 The functional architecture of theoretical model Criteria and sub-criteria identified Strong rating (5) in pairwise comparison between financial soundness and managerial capability (level 1 with respect to the goal) Pairwise comparison level 2 element in respect to level Pairwise comparison level 3 element in respect to level Distribute synthesis mode Ideal synthesis mode The operational flowchart Subcontractor selection model The information data input The verbal comparison window Model view showing the synthesized with the respect to the goal Synthesis window Dynamic sensitivity graph Performance sensitivity graph Gradient sensitivity graph Head to head graph Two-dimensional plots sensitivity graph 117

17 19 LIST OF SYMBOLS A Crj - Score for contractor j Vij - Variable (attribute) i score respect of j Wi - Maximum score Σ - Total n - Number of independent variables Ui - Represents the attribute consider by decision maker f(uxi) - Calculation based on considered parameter Y* - Represents the dependent variable Co - Permanent constant Ci - Partials regression coefficients - Infinite CI - Consistency index I max - Eigenvalue max IR - Inconsistency ratio

18 20 LIST OF APPENDICES APPENDIX TITLE PAGE A Sample of questionnaire survey B Interview survey template

19 21 CHAPTER 1 INTRODUCTION OF STUDY 1.1 Introduction The construction industry in Malaysia has experience a wide range of expansion during the past 20 years. Today, most of the construction project undertaken are more complex in nature, demanding greater skill and technologies, fast track and concurrent works practices, very competitive in term of price, demanding for end-product quality and good decision making skill, capabilities in utilizing knowledge management and very critical in dealing with contractual issue than ever before. There are increasing number of research/ professional are being conducted/engaged to confronted with the problems and challenges faced by the modern construction industry. Since, many of these issues are of relatively new concern to the industry and directly related to the sub-contractor performances, the selection and evaluation process of sub-contractor needs to be reviewed to cope with these challenges. There are many methods of tendering system applied in the construction contract. However the open tender system seems be the most popular for the client for awarding the contract. Normally, the client awarded the works to the contractor, then the contractor will engaged a few companies called subcontractor to carry-out the works according to the work assigned. Therefore the selection of the sub-contractor is consider the important aspects and critical issue in any construction contract.

20 10 The success level of any construction project may depend on the basis philosophy of the right person for the right job. But, in many cases, the selection of sub-contractor are over emphasize on the lowest bid acceptance. In reality, subcontractor with the lowest tender price is usually awarded a contract. This trend may be valid when the client are very clear of the likely cost of the project and being experience with similar type of project and working environment. However, it may not works in most of the project, because the selection of sub-contractor based on the lowest tender price alone may result in a false economy to the project. Various research methodologies were adopted in several countries to achieve the Value procurement to the procures in the selection of sub-contractor. The value procurement is one that considers price and other factors in the bid greatest value for money to the client. Finding from experts reveal that the tradition lowest price wins in practice is being replaced by multi criteria judges. This indicates increase awareness of procures in selecting sub-contractor attributes via a more multi criteria selection methodologies. Certainly it is not a easy concept to identify the universal criteria for bid selection, as it depends on certain factors consider such as client demands, contractual issue, project viabilities, authority requirement and construction methods. Although, that is growing realization on the value procurement to the client, but the basic fundamental problems is what constitutes a sound subcontractor selection methodology for the bid selection. According to the previous research by many experts, there are few types of selection methodologies can be applied by the procures in the bid selection. These methodologies including Bespoke approaches (BA), Multi-attribute analysis (MAA), multi attribute utility theory (MAUT), Multi regression (MR), Cluster analysis (CA), Fuzzy set theory (FST) and Discriminate analysis (MBA).

21 Problem Statement The correct choice of sub-contractor is a great concern for procurers during the selection process, as it has a significant impact on the success of the project. Although considerable effort has been focused on pre-qualification, but the majority of selection are over emphasize on cost priority rather trade in between cost, time and quality. In most circumstances, the lowest price bid is automatically win the tender. Finding also suggest that contractor are not aware of all the options, methodologies and decision support system that is available for sub-contractor selection and evaluation. The human judgment and experience is used to select the most appropriate sub-contractor during the evaluation process. 1.3 Background of The Research This study begin with the identification the various criteria used by the procures during the selection process. It will allows to address the issues of which decision criteria is most considerable in the selection process. The background of the research focused on the collection of data through knowledge acquisition. The knowledge acquisition activities included extensive literature reviews, interviews, questionnaires and correspondence with the experts in the construction company. The purpose of the knowledge acquisition is to capture the nature of selection process, potential criteria and ranking method applied by the construction experts during the selection bid. It is also to reveal if any decision support system is applied in the selection process. Having set out the criteria, the research then consider to develop a theoretical model that represents the appropriate sub-contractor selection by using Analytic Hierarchy Process Model (AHP).

22 Justification of The Research The growing importance of sub-contractor selection criteria renews the interest of both practitional and academia working in the construction industry. Furthermore the current selection process is critized and typically emphasized on the lowest tender price which eventually would lead to the false economy of the project. There is a serious outcry in the construction industry demanding a revolution in the tender awarding system for sub-contractor as it has significant impact on the project success. This research is carry-out to justify that the selection of sub-contractor should not based on lowest price alone but should consider other parameter such as cost, quality and time. In additional, the current selection process is performed in an un-structure initiative manner with considerable reliance on the experience of procurers and his judgment. The procurers can no longer depends totally on their past experience to decide the appropriate sub-contractor, because the nature of selection process which involves multi criteria decision skill has become more complex. In response to the need for a robust sub-contractor selection system, this research is justify to develop a theoretical model based on Analytic Hierarchy Process for the selection of subcontractor. In order to provide a better platform for subcontractor selection process, it is essential to capture the knowledge of experts and to develop a more formalized and accuracy process with the support of decisions making tools. 1.5 Aim of The Research The specific aim of this research are to identify the criteria used in subcontractor selection and to help the procures in making decision on selecting the

23 13 most appropriate sub-contractor based on the combination multi criteria and application of Analytic Hierarchy Process. 1.6 Objective of The Research The research is set-up to examine the criteria of subcontractor selection and to support the procurers on the appropriate subcontractor selection using the decision support system. In order to satisfy these needs, it initiated with 3 objectives: a) To understand the nature of subcontractor selection approaches practiced by various contractor. b) To explore and define the potential criteria which affect the selection of sub-contractor. c) o develop theoretical model that represents the appropriate subcontractor selection based on AHP process. 1.7 Scope and Limitation of The Research The scope of the research is to identify the criteria for subcontractor selection using knowledge acquisition phases and to assess the information which involves multi criteria decision making ability using Analytic Hierarchy Process. Hence, the research is limited to the following scope: a) The knowledge acquisition phases only involved the main contractor working in Putrajaya.

24 14 b) Assessment of the information is used to develop the theoretical model based on Analytic Hierarchy Process. c) The study is not consider what is the best methodology for subcontractor selection but it will focus on the application of AHP as one of tool for decision support system. 1.8 Brief Research Methodology The research methodology used to achieve the objectives of the research is depicted in figure 1.1. A brief guideline of the research methods is explained in this section and the details research methodology is represented in Chapter 3. a) Literature Review :- The extensive literature review focused on two major subjects. First, the overview understanding of the criteria used for sub-contractor selection in various countries. Secondly, the review of various methodologies for sub-contractor selection based on the decision support system. This literature review provided a theoretical idea and profound knowledge of the topics and to frameworks the structure of the research. The literature review focused in obtaining the information through a combination of several sources, which includes, publication from several professional bodies, construction magazines, experience, interaction with experts and the used of local university library to assist books, journals, conference papers and internet facilities. b) Knowledge acquisition :- The process involved a capturing of knowledge from the experts directly involved in the pre-qualification, selection and evaluation process. The knowledge acquisition activities

25 15 included interview, questionnaires survey and correspondence with the contractors. c) Theoretical model development :- The data collected in the knowledge acquisition phases are use to develop a theoretical model based on the Analytic Hierarchy Process as a propose decision support system for this research. Research Objectives 1. To understand the nature of subcontractor selection approaches practiced by various contractor. 2. To explore and define the potential criteria which affect the selection of sub-contractor. 4. To develop theoretical model that represents the appropriate subcontractor selection based on AHP process. Research Methodology Literature Review Chapter 2: Selection criteria and methodology Questionnaire Survey Chapter 3 Research Methodology Chapter 4 - Knowledge acquisition for model development Interviews Chapter 3 - Research Methodology Chapter 4 - Knowledge acquisition for model development Expert Choice 2000 Chapter 5 - Theoretical model development Figure Research objective and methods

26 Structure of Dissertation. The structure of the dissertation is frame into 6 major chapters and a brief summary of each chapter s contents is presented below:- Chapter 1 : Introduction of study, discuss on the research project undertaken and the important of the research. It then justifies the need for the research; aims, scope, objective, limitation of research and brief research methodology adopted. Chapter 2 : Literature review - more details literature review of subcontractor selection and construction practiced are considered. This including the construction on project life cycle, sub-contractor tendering process, criteria of evaluation & selection and methodology analysis for selection process. Chapter 3 : Research methodology - give the overall view of research methodology including the knowledge acquisition phases, basic concept of decision making including its definition and phases, concept of model development and detail information of Analytic Hierarchy Process the theoretical aspect, justification of using the model for the research and explanation of expert choice software as a decision support system. Chapter 4 : Knowledge acquisition for model development presents the method of data collection and the result obtained from the questionnaires survey, semi-structured interviews and analysis. Chapter 5 : Development of theoretical model Described the development process of theoretical model and the operation system.

27 17 Chapter 6 : Conclusion and recommendation presents the summary and conclusion of the dissertation. It discuss and concludes the key finding of the research and recommendation for future works.

28 10 CHAPTER 2 LITERATURE REVIEW SELECTION CRITERIA AND METHODOLOGY 2.1 Introduction In this chapter, the literature review discussed general idea on the construction project phases, estimating and tendering sequence, pre-qualification criteria and selection methodologies. The first part of the chapter overview on the concept of project life cycle phases, especially the procurements stages which is related to the evaluation of sub-contractor. Part II defines the estimating and tendering process. It is to review the process and sequence of tendering process that take place within a sub-contractor s organization. Evaluation and selection of sub-contractor are verified in part III of the literature review. It focused on the method, criteria of selection and factors that affect the selection process.

29 11 Finally, the literature overview the selection methodology that are used by various procures based on the research done by the expert and academic in this field. 2.2 Construction project phases Definition Various definition of the construction project have been focused in the literature: A construction project may be viewed or defined in several differences way, for example: The entire process required to produce a new product, new plant, new system or other specified result. (Archibal, 1976) A narrowly defined activity which is planed for a finite duration with a specific goal to be achieved. (General electric, 1977) A construction project involves a single, definable purpose, end-item or result, usually specified in terms of cost, schedule and performance. (John M.Nicholas, Project Management Business and Technology) The construction industry embrace a wide range of activities and has similar common characteristic to both manufacturing and service industry. The industry is very custom oriented, uniqueness in characteristic, highly fragmented, integrated with many organization, interdependencies, various complexity, identical and vary extensively site characteristics. (Avraham Shtub, Project Management)

30 12 In summary, the construction project can be define as one-of-a-kind activities that never be exactly repeated but linked together as a task, interdependencies and uniqueness in characteristic, various complexity process, working together to achieve the specific goal through a several phases called a project life cycle Project life cycle A project has a life cycle which go through a several stages on the process, from the beginning stage to the completion. We defined the stages as the project life cycle. The overall development process consists of six distinct stage of a project phases. Each stage involves various organization, numerous tasks, activities input & output, overlapping and inter-linked activities. The input and the output of each stages of the project phases affect the sub-sequences stages. The process in the life cycle required coordination, team working, technical capabilities, decision making, re-engineering, benchmarking and scheduling techniques. Six basis phases contribute to developing a project form an ideal to reality are shown in Figure 2.1 conceptual & feasibility studies, Engineering and design, procurements, construction, start-up & implementation and operation & utilization.

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32 Conceptual and feasibility studies Most construction projects begins with recognition of a need for a new facility. Before the new facility (project) is undertaken, a sizing up takes places. The organization or client initiates the project through an element of identifying the user s environmental and objectives, commercial, economic and investment studying, the various alternative solution, technical and engineering studies, environmental feasibility and impact assessment of the undertaking the project. At this stages the works are handled by the owner alone or by the owner working with consultant or engaged the third party to carry out the conceptual and feasibility studies Engineering and design stage Engineering and design stage have two main tasks: a) Preliminary engineering and design b) Detailed engineering and design a) In the preliminary engineering and design stage, an organization initiates the project and evaluate potential alternatives through architectural concepts, technological process, comparative economic studies, design conceptual, size and capacity, organization needs, long-term commitments, maintenance issues, make or buy decisions for special components, accessible of spare-part and cost & risk analysis.

33 15 These works are traditionally the domain of architects and design-oriented engineer specialists from several engineering disciplines and manufacture specialists. The input and output will be discussed to provide an extensive review process before a detailed engineering and design is established. b) Detailed engineering and design stage involved a process where comprehensive plans are prepared. These plans consist of : i) Product and process structure design ii) Final performance requirements iii) Detailed breakdown of the work structure iv) Schedule information v) Expected cost and cash flows vi) Tool for exciting controlling the project developed A detailed design review of each plan and attribute of the project will be conducted prior to approval for the implementation of the project. This detailed phases again involved works from design engineer at various disciplines, Architect, Client and Authority for final approval. In same cases, the input from the construction method and cost knowledge may injected into the detailed engineering and design process. This is especially happen in the concurrent engineering aspects and design-built project.

34 Procurement stages The third life cycle phase involves the procurements process. It is generally can be divided into 2 aspect; firstly the contracting and sub-contracting for services of general and specialty construction contractor s. The other is obtaining materials and equipments component to support the construction project. This two function involved a wide responsibility and always dependent of the contractual approach taken for a particular project. Various contract form and agreement would be used in the procurements process. However the selection of the procurements and contracting always based on client decision. The specialist professional called Quantity Surveyor Consultant provide advise in terms of tendering process, contractual issues, procurements method, price analysis and cost for completion. The procurements work to the lower level such as sub-contractor or specialists contractor can be handled by the main contract on the project, based on tendering process Construction stage It is a process whereby designer s plans and specification are converted into physical facilities. The process involves the organization, coordination, controlling & planning all the resources for the project labour, equipment, materials, technology, method, budget and time. In construction stage, contractor needs to complete the project within the budget and according to the standard of quality and performance specified by the designer.

35 17 The keys person at this stage are played by the contractor, sub-contractor and their employees. There is also input from supporting roles played by the suppliers, inspection and interpretation from Architect & Engineer Start-up and Implementation Start-up and Implementation involved of testing, adjusting and re-correcting the components to make sure all components function well together as a total system. Often this phase also involves a warranty period whereby the designer and the contractor can be called back to re-correct problems that were not immediately evident upon initial testing. This implementation phase is basically carried out by the quality control group to evaluate the system by performing acceptance tests based Operation and Utilization This phase is one of the most crucial because a judgment needs to be made whether the project has achieved its operational goals. The operation phase is frequently carried out by organization such as operational team and maintenance team. The operation and utilization phase can also involve recycling through the first five phase of a project mentioned above, whether the work is done to customer services and satisfaction.

36 Tender and Estimation Process It is essential to understand tendering and estimating process that take place within sub-contracting organization. The process can be divided in to 4 main stages: pre-qualification, the decision to tender, estimating process and tendering process, which is similar to the tendering process within the contractor organization Pre-qualification Pre-qualification is a process to identify that the selected sub-contractor has the capable of performing the works. Before the contractor decide to call for subcontractor to bid, the contractor may decide to qualify all bidders. Generally there are 2 ways in which the contractor exercise of the prequalification a list of sub-contractor: a) By public invitation (Via the media & internet ) b) By private invitation ( based on recommendation, experience, inhouse contractor, client request and etc.). In this process, the sub-contractor would be requested to submit their resume, company profile, job experience, capital, equity structure, resources, financial status, overdraft facilities and etc. The purpose of the pre-qualification is to help both parties the contractor and sub-contractor in making the decision. The contractor does not prepare a bid and incur the inherent cost unless it can qualify. On the other position of being under pressure to accept a low bid from the un-qualify sub-contractor.

37 The decision to tender Invitation to bid are forwarded to all the bidders listed in the prequalification. After investigation the plan, specification and tender documents, the sub-contractor make a major decision whether or not to bid a job. The decision to tender is the starting point of the tendering process. Basically, in the sub-contractor s organization, the decision to bid or to reject the bid it depends to the top management and the tender committee team based on the consideration of various factors such as: a) The company s current workload b) The company s turnover and overhead c) The ability of resources d) The type of works, location, capability and experience e) The identity of the promoters and his representative f) Type of contract g) Payment terms and advance payment h) Retention bonds, performance bonds i) Defect liability period and Liquidated Ascertained Delays The Estimating Process The estimating process is a process of producing cost estimate of a tender. It can be divided into eight steps which is link together from the planning stage until the preparation of cost to the manager, described in Figure 2.2 ( R. Mc Caffer. A.N. Baldwin). The estimating process involves the following tasks:-

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41 23 a) Programming the estimating a) Preliminary project study b) Material and sub-contractor enquires c) Project study, construction method & planning d) Calculation labour and plant cost e) Estimating the direct costs f) Calculating on cost g) Preparing reports for the manager a) Programming the estimate A process of preparing a programme called tender submission programme which defined the tasks required to complete the estimate and indicate the list of key dates to be achieved by the personnel responsible for the input of the tender. b) Preliminary project study Preliminary project study involved a complete and detailed study on the construction method, item to be sub-contracted, site investigation or soil study to be carry out, consideration of design alternative, the principal quantities of works, the materials for which quotes are required, specialist information input, technology to be applied and tender strategy and scheduling technique. c) Material and specialist sub-contractor enquires It is task of obtaining a quoted price for supply every major, components and the expected time required for delivery and specialist sub-contractor quotation The data obtained from the supplier and subcontractor will be included in the estimate together with allowances of attendance and services.

42 24 d) Project study and construction method planning The key personnel involved in this tasks are the estimator and the planner. The purpose of this process is to identify the most efficient and hence the cheapest method to complete the jobs. The task involved the study of contract drawings, analysis of bill of quantity, site visit and preparation of alternative method of works. The method statement are description on how the work will be executed with detail work planning. e) Calculation labour and plant costs. It involved the calculation of all in costs for labours and the plant cost which will included in the pricing. The labour cost will be measured in terms of the production rate whereas the plant cost is measured based on hourly or weekly rate. f) Estimating the direct cost The job of estimator s is to determine the cost to the sub-contract for executing the works. The senior management than will determine the tender or selling price. The direct cost is basically categorized as a rate for labour, plant materials and special contractor without include site overhead profit. The combination of the unit cost of each item will produce the direct cost for the works. g) Calculating on-cost The calculation of on cost or the site overhead is the final stages in the estimating process. The site overhead cost including the calculation of the sum of money required to cover the staffing, plant,

43 25 transport, accommodation, temporary works, general items and etc which was not included in the direct cost. Many companies have created the detailed checklist of items required for site overhead and the amount based on the contract duration stipulated in contract documents. h) Preparing report for tender meeting The estimator will prepare a report of the estimating to senior management containing the information on tender project, construction method & planning, risk in contract documents, unresolved contractual issues, assumption on the estimating, assessment of profitability and any information concerning the project The tendering process The tendering process begins when the manager received the tender estimating cost from the estimator. In the process, the manager needs to make final decision before writing-up the bill. Basically the tendering process involves four stages : a) The assessment of the estimate and evaluate of adjustments. Usually, in this stage the senior manager and his staff including some experts staff will check themselves the estimating cost provided by estimator and their teams. The senior manager may ask several

44 26 questions and more detail information to make sure the estimate is adequate and may make necessary adjustment if required. b) Allowance for general overhead The next step is to include some cost of general overheads that will be incurred by the company. The financial department and human resource department may provide the necessary information including the expenses of head office, administrator expenses and support team cost. This is indirect cost that allowed to be included for general overhead in the tender. The senior manager than may decide to reduce or to maintain the percentage of expenses before included in the tender. c) Allowances for risk and profit The senior manager also will included some allowances for risk and the profit adjustment phased on percentage to the direct cost. d) Writing up the bill The transfer of the rates into the billing of quantity is final stage before the tender submitted. The estimator may check the final calculation and also carried out rate loading to make the final adjustment before writing up the bill. 2.4 Bid Evaluation The term evaluation is concern with gathering information or data for the strategic assessment of tender bids submitted by pre-qualified sub-contractor. The evaluation process should embrace investigation of sub-contractor s potential to

45 27 deliver of acceptable standard, on time and within the budget. Hatush (1996) concludes that any types of sub-contracting exercise comprise five common process called project packaging, invitation, pre-qualification, short listing and bid evaluation. The only difference in sub-contractor s procurements system is the procurers strategic choice of criteria which changing between procurers and project ( Rusell and skibriewski, 1988) Criteria for bid evaluation Sub-contractors bid evaluation is a decision making process that involved consideration of a wide range of decision criteria as well as the participation of many decision making practices (Rusell and skiriewski, 1988). The bid evaluation aims is to achieve the project goal by ensuring the simultaneous selection of construction project to meet the clients satisfaction. The method of qualification and assessment of bid evaluation criteria have hardly changed. There are many research have been done in this field to identify the common key play criteria for selection of sub-contractor. According to Hatush (1966) criteria for sub-contractor s selection is emphasis to the characteristic of the project itself. The information consider in relating to selection are based on the following factors:- a) The sub-contractor s permanent place of business d) Adequacy of plant and equipment to do the work properly and expeditiously. e) Suitability of financial capability to meet the obligation required by the works. f) Technical ability and experience g) Performance of work of the same general type and on a scale not less than 50% of the amount of the proposed method.

46 28 h) The frequency of previous, failures to perform contracts properly or fail to complete them on time. i) The current position of the sub-contractor to perform the contract well. j) The contractor relationship with sub-contractor or employees. In another research conducted in UK, Hatush and Skitmore (1997) have identify 20 criteria that influence the sub-contractor selection process ( Table 2.1). Table 2.1 Criteria for sub-contractor selection (Hatush and Skitmore 1997) 1. Previous job un-complete 2. Personnel management 3. Financial status 4. Bank facilities 5. Capabilities 6. Management knowledge 7. Project management organization 8. Experience 9. External relationship 10. Job expertise 11. Safety requirements 12. Business experience 13. Safety experience 14. OSHA application 15. Sub-contractor and client relationship 16. Credit facilities 17. Financial capabilities 18. Skill workers 19. Equipment & machinery 20. Knowledge increase ratio

47 29 A research conducted by Dennis (1993) has conclude that the criteria for sub-contractors selection should satisfy both the engineers and the client, whereby each bidder should have :- a) The financial strength to sustain the cash flows likely within the constraints impose by the contract. b) Technical capability (including human resources) sufficient to satisfy the requirement of the contract. c) A complete understanding of similar project scopes and ability to absorb subsequent change. d) The facilities (Testing, quality control) necessary to endorse assurance of quality. e) The ability to comply in all respect with health and safety requirement. In other study, Palaneewarans and Kumaraswamy (1999), examined the evaluation criteria used in different countries such as US, Hong Kong, and Australia. According to them the criteria applied in Hong Kong, are more related to the corporate structure, experience, work knowledge, resources, workload, performance of similar project and support function-safety and quality management. (Figure 2.3). Whereas the criteria consider in Australia involved management, business relation and financial capability (Table 2.2). Palaneeswarans and kumaraswary propose a universal model for subcontractor bid evaluation based on the research conducted in various countries. The developed evaluation criteria are classified in three groups responsiveness (promptness, realism, completeness), responsibility (conformity, performance, quality, safety, partnering, specific) and competency (resources, experience, constraints) (Figure 2.4).

48 30 EVALUATION FACTORS CORPORATE EXPERIENCE RESOURCE/ FACILITIES WORKLOAD SUPPORT FUNCTION Structure Management/ Corporate Relations Performance on MTRC Contracts Construction performance Staffing Labour Construction plant Current Future Safety Quality Management Contractual Similar projects Hong Kong experience Planning/ Programming Design Manufacturing fabrication Sub-contractor Figure 2.3 Pre-qualification criteria used by Mass Transit Railway Corporation (MTRC), Hong Kong. 30

49 31 Table 2.2 The mandatory additional and reserved pre-qualification recommended by the Construction Industry Development Criteria Purpose Remarks Technical capacity To enable the company to The information required for demonstrate it has the making this assessment is : past technical capacity to performance and experience; perform the work for management and which it is seeking administration capabilities; prequalification or labour and equipment; subcontractor registration for specific and consultants. Financial capacity Quality assurance Time performance Occupational health and safety projects. To enable a client to reach an informed opinion regarding the overall financial position and capacity of a company. To improve the quality and performance of the products and process in the construction industry. To enable the client to assess the company s ability to manage and deliver projects within the special time. To encourage employers to establish and maintain effective systems to manage the risks to the health and safety of their employees and other, arising from the nature of the work performed. It is a condition of this that companies are externally audited. The company is also required to demonstrate level of compliance with minimum requirements of accounting and financial controls and financial length: ownership of the company ; historical financial information; forecast cash flow; borrowing work in progress; off balance sheet information. The intention is to encourage companies to achieve third party certification. The key elements of the criterion focus on the extent of documentation and implementation of a Quality System to Australia Quality Standard. The pro foma will provide details of past project performance and status of the company s time management systems. It also provides for reference details. The occupational health and safety pro foma enable a client to identify whether the company has: a documented occupational health and safety management systems; provisions for self assessment of the performance of the system against each of the system elements; verification of the system s performance by second or third party audit.

50 32 Table 2.2 The mandatory additional and reserved pre-qualification recommended by the Construction Industry Development (cont d) Criteria Purpose Remarks Human resource To encourage best human The human resource pro management resource management and foma provide a client with industrial practice as a means of information on the minimizing industrial company s performance disputation and maximizing regarding; human resource workforce productivity. management processes; human resource management outcomes; organizational culture. Skill formation To ensure that the skill levels in the construction industry are continuously improved. Additional and reserved criteria Additional criteria 1. Claim s performance 2. Compliance with legislative requirement 3. Management for continuous improvement Reserved criteria 1. Research & development 2. Export development The skill information pro foma seeks a declaration that the company is meeting its statutory obligation in relation to training, has a skill formation policy, and is implementing a skill formation strategy.

51 34 RESPONSIVENESS Promptness Realism Completeness RRC Framework RESPONSIBILITY Conformance (By laws, regulation and standards) Performance (Past performance, current Performance) Other (Quality system, safety policy, partnering, specific) COMPETENCY Resource (Financial, manpower and equipment) Experience (Past experience, project specific knowledge) Constraints (Current workload, subcontractor, quarantees) Figure 2.4 RRC (Responsiveness, Responsibility, Competency) frame for contractor pre-qualification 33

52 34 Other in-valuable study conducted by Ng and Skitmore, Who determined 35 criteria as a result of their previous study acquired in UK construction industry (Table 2.3). They have focus six categories of organization perception in the evaluation bid including private & public clients, architect, civil engineers, quantity surveying and project management practices. In 1990, Rusell develop a knowledge based system in the USA to help evaluate a sub-contractor criteria including reputation, past performance, financial workload and technical expertise. A research conducted by Fox 1996, conclude that the most common criteria for sub-contractor selection is the capacity of the sub-contractor to complete the job on time. Fox suggests that selection criteria should consider the bid price, work quality, time of completion, financial capability, sub-contractor organization, previous experience and work experience. According to Albino (1998), the selection criteria for sub-contractor is depends on the size and capacity of the sub-contractor to carry out the works. He suggested that the capability of the sub-contractor should be considered as a main criteria for the selection bid otherwise the project may faced difficulties. This is proven in another research conducted by Ng 2001 whereby the suitability and capabilities of sub-contractor to perform the project is consider very important. Bently (1990) has cited that the criteria selection should emphasize on financial capabilities, technical soundness, management capabilities and safety and health. In Malaysia, Efni Uslinda (2004) found that the works records, previous works experience, technical knowledge, completion time, work loads and cost were used as a criteria in the selection of sub-contractor.

53 35 Table 2.3 Important of Pre-qualification Criteria 1 Performance 19 Reputation 2 Fraudulent activity 20 Claims and contractual dispute 3 Financial stability 21 Co-operative outlook 4 Management capability 22 Relationship with consultant 5 Stability of firm 23 Capacity of work 6 Competitiveness 24 Quality assurance & control 7 Progress of work 25 Credit rating 8 Standard of quality 26 Level of technology 9 Failed contract 27 Relationship with sub-contractor 10 Relationship with client 28 Working capital 11 Health and safety 29 Form of contract 12 Integrity 30 Specialized trade 13 Resources 31 Method of procurement 14 Project s complexity 32 Location 15 Size of project 33 Length of time in business 16 Response to instruction 34 Amount of sub-contracting work 17 Type of project 35 Number of previous bids 18 Previous debarment 2.5 Sub-contractor selection model Sub-contractor selection model is a process of evaluating groups of subcontractor and then choosing the appropriate sub-contractor using decision-aiding model, so that the objective of the project will be achieved. The decision-aiding model used to abstract the relevant issues about a problem from the welter of detail in which the problem is embedded. According to Turban and Aronson (1998) the

54 36 decision aiding model is a process of choosing among alternative courses of action for the purpose of attaining a goal or goals. When a contractor choose a project selection model, the following criteria shall be adopted (sounder,1947). a) Realism The model should reflect the reality of the manager s decision situation, including the multiple objectives. b) Capability The model should be sophisticated enough to deal with multiple time periods, simulate various situations both internal and external to the project and optimize the decision. c) Flexibility The model should give valid results within the range of condition that the contractor might experience. d) Easy to use The model should be reasonably convenient, not take a long time to execute and be easy to use and understand. e) Cost Data gathering and modeling costs should be low relative to the cost of the project and must surely be less than the potential benefits of the project. There are basically two types of sub-contractor selection model, numeric and non-numeric models. Non numeric models do not use number as input whereas the numeric models do, but the criteria be measured may be either objective or subjective. The basic concept of model is that, (Jake R. Meredate Samuel J. manfel JR). i) Models do not make decision, people do, The manager, not the model, be responsibility for the decision.

55 37 ii) All model, however sophisticated are only partial representation of the reality they are meant to reflect. No model can yield an optimal decision except within its own possibly inadequate, framework. In the decision aiding analysis paradigm, the outcomes of the system model provide the input to the value model. The output of the latter is a statement of the decision maker s preferences during the decision making judgment (Figure 2.5). According to Simon (1977) the decision making process involves four major phases. Uncertainty Input data Outcomes For System Model Value Model Pretences Alternatives Ordering The environment Figure 2.5 Decision Analysis Paradigm a) Intelligent phase - define the purpose of the decision by identifying the problem in the organization. b) Design Phase - Formulating a model that represents the decision problems. The model then validated the criteria for a possible courses of action are determined. c) Choice phase - Evaluating the criteria and recommending an appropriate solution to the model, and d) Implementation phase - Putting the recommended solution to work.

56 Multicriteria Decision Making (MCDM) Procures as decision makers are faced with decision problem in the selection of sub-contractor. Many procures make decision based on experience and personal judgment in the selection process. Before selecting the appropriate sub-contractor, the procures need to verify all the criteria and must be able to identify the best techniques to assess the criteria using multi-criteria decision making abilities. The multi-criteria decision making (MCDM) is developed in United States of America and aims to help the decision maker learn the problems and guide them in identifying a preferred course of action (Zeleny 1992). It is decision adding tool for many scientific and engineering challenges and can be applied to research related to contractor selection ( Fong and Choi, 2000) and project procurement selection (Alhazmi and Mc Caffer, 2000). The MCDM methods can be classified in several ways as shown in (Figure 2.6). Firstly using a single decision maker or group decision maker, then classified methods according to the type of data or using operation approach. There are various number of multi-criteria decision making is available for selection of subcontractor using different types of decision aiding tools. In the following section discussed the various methodology including Bespoke approaches (BA), multiattribute analysis (MAA), Multi-attribute utility theory (MAUT), Multiple regressive (MR), Cluster analysis (CA) and Fuzzy set theory (FST) Bespoke Approaches (BA) Bespoke approaches incorporate several decisional techniques simultaneously and the evidence much variance. It is classify in terms of many parameter before a

57 39 Classification of MCDM Methods Number of Decision makers Operation Approaches Type of Data Single Group Deterministic Stochastic Fuzzy Single Criterion Synthesis Approach based on MAUT Outranking Synthesis Approach based on Outranking Method TOPSIS MAVT UTA ELECTRE I ELECTRE IS ELECTRE II SMART MAUT AHP ELECTRE III MELCHOIR ELECTRE IV ORESTE ELECTRE TRI REGIME Fuzzy Weight sum Fuzzy Maximim PROMETHEE I NAIADE PROMETHEE II Figure 2.6 MCDM Methods Classification 39

58 40 decision is made (Figure 2.7). This parameter play a important facts that a subcontractor must satisfied (cut-off points) in order the selection can be made. If the sub-contractor fail to incorporate with the importance parameter, then the subcontractor is rejected from the short listing. INITIAL SUBMISSION Eg. ISO 900 Accrediation Are all must satisfied? Binary decision No yes Divide tender into components Eg. Financial Eg. Health & safety All components satisfactory Binary decision yes No REJECT CONTRACTOR For project pre-qualification For shortlist Pre-qualification Select (best) required number of tenders Place contractor onto on select/standing or rotation list INVITE TENDERS (Ultimately) Figure 2.7 Typical stepwise procedure for Bespoke Approach

59 41 Bespoke approaches usually concerns adjudication either by an individual decision maker or an amalgam of decision maker in the case of larger construction package. The cut-off points is basically done in terms of binary decision (yes/no) before approach or rejected. In summary the Bespoke approaches is common and easy to use but need more correct information about the sub-contractor and the project before a decision is made. As a result of wrong binary decision, the contractor may fail to fulfill the contract requirements Multi-Attribute Analysis (MAA) Multi-Attribute are frequently employed by decision maker in many industry because of their easiness and simplicity to implement. According to Holt 1998, Multi-Attribute is commonly used in short listing and qualification of tender. Multi-Attribute consider a decision alternative with respect to several of that alternative s attribute. The attribute is a characteristic that can be measured and should be pursued to its fullest. Attributes may be measured quantitatively or not be quantitiable. The MAA equation can be expressed as: n A Crj = Σ V ij W i (1) i=1 Where : A Crj = Score for contractor j V ij W i N = Variable (attribute) i score respect of contractor j = Maximum score = The number of attribute considered in the analysis

60 42 Table 2.4 shows the hypothetic evaluation of four contractor in respect of five attributes. The choice of sub-contractor can easily calculate and the sub-contractor with highest score will be selected. Table 2.4 Hypothetical MAA example V1 W1 V2 W2 V3 W3 V4 W4 V5 W5 ACrj Acrj max UACrj Rank Cr Cr Cr Cr Where the components (Vi and Wi in this instance) are represented by an infinite range of integer then a unified aggregate sub-contractor score designated UACrj with 0 UACrj 1.0 may be achieved via UA Crj = Acrj (2) Acrj max Where = A Crj max is the maximum attainable aggregate score utilizing Wi.

61 Multi Attribute Utility Theory (MAUT) Multi attribute has a similar terms to multi attribute analysis but utilities a quantitative method of determining values. It is widely used method, started by Fishburn (1970) and Keeney and Raiffa (1976). It can quantitatively used both tangible and intangible attributes during evaluation. According to Keeny and Raiffa (1976), MAUT underlines a set of methods for making the choice such as: 1) Define the alternative and relevant alternative attributes 2) Evaluate each alternative on each attributes 3) Assign relative weight to the attributes to reflect preference 4) Combine the attribute weights and evaluation to yield and overall satisfaction evaluation of each alternatives, and 5) Perform sensitivity and make a decision The overall concept of MAUT is based on the foundamental axiom; any decision maker attempts unconsciously ( or implicity) to maximize some function aggregating all the difference points of view, which are taken in account (Vincke 1992). The basic concept of multi attribute theory is the set of attributes is formulate a mathematical function called a multi attribute utility, that will assign number called outcome utilities, to the each outcome state. Utility (normally expressed as Ui) is a measure of desirability or satisfaction of a attribute of an alternative contractor.

62 44 The overall concept of MAUT can be very complex with respect to both models and utility weight derivation. MAUT may be applied to the sub-contractor selection problem in one or two fundamental ways-consider; n A Crj = ΣU i (3) i=1 Ui = Σf (uxi) (4) Where = U i = Represents the attribute consider by decision maker A Crj = Aggregate score for contractor j F (uxi) = Calculation based on considered parameter. Alternatively, U i may be used in conjunction with scaling constants or weighting coefficient as follows : n A Crj = ΣU i w ij (5) i=1 Where = Wi = Maximum score for each parameter The combination of this two equation will provide weightage score for each sub-contractor and selection will based on highest score. The advantage of MAUT is that the problem become a single objective problem once the utility function has been assessed correctly. Table (2.5) summarizes some of the single criterion synthesis approach based on MAUT principles (Guitomi and Martel 1998).

63 45 Table 2.5 MCDM Methods for single Criterion Synthesis Approach Single Criterion Synthesis Topsis (Technique for order by similar to ideal solution) Description The chosen alternative should have the profile, which is the nearest (distance) to the ideal solution and farthest from the negative-ideal solution. (Hwang and Yoon, 1981b) MAVT (Multi-attribute value theory) Aggregation of the values obtained by assessing partial value functions on eash criterion to establish a global value function V. Under some conditions, such V can be obtained in an additives, multiplicative, or mixed manner. (Keeney and Raffa, 1976). UTA (Utility theory additive) Estimate the value functions on each criterion using ordinal regression. The global value function is obtained in an additive manner (Jacquet-Lagreze and Siskos, 1982) SMART (Simple multi-attribute rating technique) Simple way to implement the multi-attribute utility theory by using the weighted linear averages, which give an extremely close approximation to utility functions. There are many improvements like SMART and SMARTER. (Edward and Barron, 1994; Olson, 1996)

64 46 Table 2.5 MCDM Methods for single Criterion Synthesis Approach (cont d) Single Criterion Synthesis Description MAUT Aggregation of the value obtained by assessing (Multi-attribute utility theory) partial utility functions on each criterion to establish a global utility function U,. Under some conditions, U can be obtained in an additive, multiplicative, or distributional manner. (Keeney and Raffa, 1976; Vinke, 1992) AHP Converting subjective assessments of relative (Analythical hierarchy importance into a set of weights. This technique process) applies the decomposition, the comparative judgments on comparative elements and measures of relative importance through pairwise comparison matrices, which are recombined into an overall rating of alternatives (Saaty, 1980; Saaty, 1994a) EVAMIX Two dominance indexes are calculated: one for ordinal evaluations and the other one for cardinal evaluations. The combination of these two indexes leads to a measure of the dominance between each pair of alternatives. (Voogd, 1983) Fuzzy Weighted Sum These procedures use a cut technique. The a level sets are used to derive fuzzy utilities based on the simple additive weighted method. (Dubois and Prade, 1982) Fuzzy maximim This procedure is based on the same principle as the standard maximum procedure. The evaluations of the alternative s are fuzzy numbers. (Bellman and Zadeh, 1970) (Source : Guitouni and Martel, 1998)

65 Multiple Regression (MR) Multiple regression is statistical technique whereby an equation is constructed to observe and ultimately predict the effect of several independent variable upon a dependent variable. An MR equation will predict a numeric outcome (designated Y*) this being a function of several i dependent variable v1, v2 vi. An MR equation may be formalized as : n Y* = Co + ΣV i C i (6) i =1 Where = Y* = Represents the dependent variable C i = Partial regression coefficients Co = A constant representing the intercept upon the y-axis of the resulting regression line. n = Number of independent variables Upon the completion of the calculation, the sub-contractor will be listed according to ranking and be measured using the following equation. P1 = Co + C1V1 + C2V2 +.. CnVn (7) Where = P1 = Score at pre-qualification level Co = permanent constant Vn = Score for parameter The highest score using this equation will give the best selection for the subcontractor. The method of the application is shown in Figure 2.8.

66 48 Adequate insurance Bonding capacity Financial stability Etc. Contractor desirous to tender Are musts satisfied Evaluate MR attributes achieve interval data Apply MR equation P1=Co +.Vici No Yes Reject contractor Rank contractors based on pre-qualification scores Select desires number of tenderer ie., highest P1 scores Figure 2.8 Possible stepwise procedure for an MR pre-qualification model Cluster Analysis (CA) The cluster analysis methods described by a set of numerical attribute scores and uses a classification algorithm to group the contractors into a number of cluster such that sub-contractors classes. Two types of cluster analysis mostly used, the jointing tree clustering and K means clustering. Figure 2.9 shows a jointing tree clustering for 19 contractor, segregated into two principal clusters. A clear structure in terms of sub-contractor that are similar to each other is reflected in the tree are proportional to the dissimilarity between subcontractors.

67 47 Cluster tree 1.4 Cluster 1 Cluster Cr17 Cr19 Cr8 Cr12 Cr4 Cr16 Cr2 Cr18 Cr9 Cr1 Cr14 Cr15 Cr7 Cr10 Cr3 Cr11 Cr13 Cr6 Cr5 Figure 2.9 Jointing tree CA output: dendrogram. Vertical axis: respective distance from cluster centre 49

68 Fuzzy Set Theory (FST) Fuzzy set theory is more qualitative take account human judgment and cope with uncertainty. It also can deal with multi-criteria information which may also be impressive and subjective. The concept can be reverted back to Bespoke approaches. In Bespoke approaches, the binary decision is made either yes or no. FST takes this a stage further such as No, Minimum, Maximum and strong. This ranking can be identify by using the Fuzzy Set equation. 2.6 Conclusion The nature of selection process involve multi-criteria decision making abilities from the identified criteria and alternative. There are various criteria of subcontractor selection which is depends on the decision maker. Whichever selection methodology is employed the best protection against a bad selection decision is a good selection procedure. Table 2.6 shows the matrix of methodology characteristics with respect to the sub-contractor selection task. In the next chapter, it will discuss the methodology adopted in this research especially the knowledge acquisition (KA) and Analytic Hierarchy Process (AHP).

69 Table 2.6 Matrix of methodology characteristics with respect to the contractor selection 41

70 52 CHAPTER 3 RESEARCH METHODOLOGY 3.1 Introduction This chapter consists of two topics. The first part of the research methodology discuss in details of knowledge acquisition (KA) adopted in the research. The second part overview on Analytic Hierarchy process, as a decision aiding tool. 3.2 The Methodology adopted For The Research Research methodology can be defines as a process of investigation to obtain information for reliable research results. According to Fielding and Schreier (2001), there are three types of research methodology; quantitative, qualitative and triangulation research. In order to achieve the objective, this research is focus on knowledge

71 53 acquisition by using quantitative research based on survey research (questionnaires and interviews survey). Then the information obtained from knowledge acquisition is use to develop a theoretical model based on Analytic Hierarchy Process. The following section described each of the methods adopted in detailed Literature Review Literature review is the most important aspect in any research works. It is the starting point in understanding the background of research and provide a basis idea and fundamental for the research. In this research literature review is focus on two main topics: The sub-contractor selection criteria and Analytic Hierarchy Process. However any topics that consider relevant and related to the research was also reviewed, for example the various methodology selection and estimating & tendering process. The first step in literature review, is to determine the source of obtaining information. In this research most of the literature review is based on journal available in internet and can easily access from the library of University Technology Malaysia. Specialist publication journal are obtained by searching the web page, such as Building and Environment, International journal of project management, Construction management and economics, Automation in construction and European journal of operational research. Then the information obtained are systematically transferred into notes, tables and diagram. Some of the information is printed as a hand copy or safe in memory stick for future review. The other sources of information is by reading from books that is available at public university or purchase material from books store, review previous lecturer notes, Master and Phd. thesis, obtaining information from lecturer specialist in this field and review construction quality procedure documents.

72 Knowledge Acquisition (KA) Knowledge acquisition is defined as the process of extracting structuring and organizing knowledge from one or more sources ( Turbon & Aronson, 1998). In this research the knowledge acquisition process involved capturing the experts knowledge in pre-qualification and selection process and then transforming the appropriate knowledge into a theoretical model. The human expert including the senior manager, contract manager and quantity surveyor in construction organization, who directly involved in the selection of sub-contractor. The knowledge captured from the expert represents the two objective s of the research: a) To understand the nature of sub-contractor selection approaches practiced by various contractor. b) To explore and define the potential criteria which affect the selection of sub-contractor. There are various technique has been developed to capture the experts knowledge such as questionnaires survey, interview, case studies and protocol. This research is focus in capturing the knowledge using questionnaires survey and interviews. The details explanation of this method are discussed in following section Questionnaires Survey Questionnaires survey is one of the most popular method for capturing the expert knowledge. Questionnaires is defines as a formal set of question or statement designed together the information from respondents that will accomplish the goals

73 55 of the research project. The questionnaires needs to be designed to meet the objective and aim of the research. The researcher must know how to design a questionnaires before affectively perform the questionnaires survey. Researcher need to consider three basic fundamental before design the question. a) What is the purpose of the survey? b) What kind of question the survey would be developed to answer? c) What sorts of results consider from the questionnaires? In this research the design of the questionnaires was referred to the procedure recommended in internet questionnaires design and surveys sampling. This recommendation including : a) Be user friendly and look professional b) Encourage respondents to answer honestly and accurately c) Must be general, clear and easy to answer d) Should be tested for wording, clarity and completeness e) Don t make the question too long f) Most question related to the research should be placed in the middle of the survey g) Difficult question should appear towards the middle or end of the survey. There are two types of question that can be used in the questionnaires survey; open-ended and close-ended. Open-ended question do not provide respond choice and sensitive to the respondents desire for expression. It is will suited for exploratory studies. The close-ended can be sub divided to dichotomous and multiple choices question. The close-ended questions supply response choices and reduce in interpreter bias and easy to analysis. Dichotomous question are closeended question that offer to response choices and suitable to understand the respondents demographic compassion. Whereas the multiple choice questions are

74 56 close-ended questions that provide respondents more that two choices from which to select. In this research all the questions are design as close-ended question, with a space provided as an options for respondents to give more details information. Only one question is designed as open-ended question to capture the response interpretation on selection criteria. There are three ways of sending the questions to the respondents by hand, using facilities or web page design and survey through postal services. In this research most of questionnaires are send to the respondents by hand. The following explained the reasons: a) To avoid the possibility to get low response rate from the survey. b) To make sure the targeted group answer the question. c) Avoid consumption of time from respondents when a respondent receive by mail, he is free to complete the question on his on time. d) To make sure the response understand the question very well Interviews Interview is a process of collecting information through direct communication between the interviewer and respondent. It is one of the popular methods in knowledge acquisition. There are many ways to conduct interview; faceto-face, by telephone and videoconference. In this research the interview is conducted using telephone communication and face-to-face interview. In face-toface interview, it allowed for personal contact between the interviewer and the respondent. Whereas in telephone interviews, the interviewer may not able to recognize the respondent.

75 57 There are three basic types of interview: a) Structured interviews - It use a systematic approach and orally administered questionnaires doing interview b) Semi-structured interviews - It is use open-ended question but seek specific information. c) Unstructured interviews - It is informal and lack of standardization. Need simple planning and it is a brief way of understanding the problems. In this research the survey is conducted through questionnaires followed by a semi-structured interviews (telecommunication and face-to-face), that allows more freedom for the experts to express the view especially on the selection criteria adopted, methodologies applied and the result from the current system practice by the company. During the interview, the researcher brief statement of the research conducted and the objective of the research. Then a planned question was forward during the interview for the respondent to answer. The interviewer also may ask some suggestion to improve the research and further result required in the selection process. Basically, the most important question ask during the interview to fulfill the research objective is: a) To verify the important criteria for selection of sub-contractor. b) What the information (sub-criteria) is used to access the main criteria c) The outcome of current practices in the selection of sub-contractor by the contractor. d) The possibility application of decision support tool in the selection process.

76 Analytic Hierarchy Process (AHP) Analytic Hierarchy Process is an effective decision making technique based on multi-criteria decision making methodology (MCDM). It consider the human judgment, experience, perception and feelings in the decision making process. This research focus on developing a theoretical selection model based on the AHP approach. It help decision maker to select the most appropriate sub-contractor against a number of sub-contractor with various alternatives. The Analytic Hierarchy Process was chosen for this study based or following reason: a) The ability of AHP to incorporate tangible and intangible factors in a systematic way. b) It able to solve constructed problems in a variety of decision making situation, ranging from the simple personal decisions to the complex capital intensive decision. c) The problem is broken down in a logical fashion from the large elements to smaller elements. d) It works by examining judgments made by decision makers and measure the consistently of those judgments. e) It does not required numerical judgment from the decision maker. The AHP software except choice (EC) are ready by available to calculate the matrix equation in to a meaningful results Background Of AHP The Analytic Hierarchy Process (AHP) was develop by Thomas Saaty in 1970 s, to provide a simple but the theoretically sound multiple criteria methodology for evaluating alternatives. It aims at quantifying relative priorities for

77 59 a given set of alternative on a ratio scale, based on the judgment of the decision maker and stresses the importance of the intuitive judgment of a decision maker as well as the consistently of the comparison of the alternative in the decision making process (Saaty. T.L. 1980). The application of Analytic Hierarchy Process can be found in such diverse fields as portfolio selection model solve by using AHP methodology include project procurement system (Mohammed I.A, Khalil 2000), project management (Kamal 2001) and Engineering problems (Saaty 2001). According to Partovi (1992),the AHP is a decision aiding tool for dealing with complex, unstructured and multi attribute decision. Ny Dick and Hill (1992) described the AHP as a methodology to rank alternative courses of action based on the decision makers judgment concerning the important of the criteria and the extend to which they are met by each alternative. Golden (1989), described AHP as analytical by using members, hierarchy by structuring the decision problem into levels and process-oriented because its stepby-step approach. Murahdar (1990) support the belief that the AHP caters specifically for decision making with multi criteria. A part from this the calculation enhances the effectiveness of this technique. Belton (1986), compared AHP and a simple multi-attribute value (MAV), as two of the multiple criteria approaches. He noticed that the MAV approach is fail to incorporate systematic checks on the consistency of judgment compared to AHP. A number of criticisms have been launched at AHP over the years. Belton and Gear 1983, pointed out that AHP method can suffer from rank reversal (an alternative chosen as the best over a set of X, is not chosen when some alternative, perhaps the important one, is excluded from X). Saaty (1987) responded to this critique, with introduction of new information in the model. To overcome this problem, the revised AHP (Ideal Model AHP) which proposed each column of the

78 60 AHP decision matrix to be divided by the maximum entry of the column. Watson and Freeling (1987), critize that the method of asking question is meaningless, for example, which of these two criteria is more important for the goal? By how much? Whereas Dyer and Wendel (1987) attacked the AHP on the grounds that it lack a firm theoretical basis. Harker and Varges (1987) and Perez (1995) discussed these major criticisms and proved with a theoretical examples that the critique are not valid. They commented that AHP is based upon a firm theoretical foundation and it is a variable and usable decision making tool for day-to-day operational. This is support by Triantaphy (1904) and Mann (1995) that AHP or the ideal AHP model is the most broadly accepted method and is considered by many as the most reliable MCDM method AHP Principles The design of the AHP must satisfy the goal of developing model that allowed the contractor to decide which sub-contractor to be selected from the list of qualified sub-contractor, The element of the problems in the construction industry are numerous and the interrelationships among the elements are extremely complicated. According to Saaty (1980), in any model development of AHP, the users needs to identify the goals of the research and the problem faced in order to achieve the goals. Holden (1989) suggests that the following assumption, stated in terms of axioms, hold it the methodology is to be valid for design the model. Axiom 1 - Given any two alternatives (or subcriteria) i and j from the set of alternatives A, the decision maker is able to provide a pairwise comparison a ij of these alternatives under criterion c from the set of criteria i on a reciprocal ratio scale; that is,

79 61 a ij = 1 a ij for all i,j A Axiom 2 - When comparing any two alternatives i,j A, the decision maker never judges one be infinitely better than another under any criterion c i; that is, a ij for all i,j A. Axiom 3 - The decision problem can be formulated as a hierarchy. Axiom 4 - All criteria and alternatives that have an impact on the given decision problem are represented in the hierarchy. That is, all the decision maker s intuition must be represented (or excluded) in the structure in terms of criteria or alternatives. These axioms can be used to described the basic principles in the AHP; formulating and solving the problem as a hierarchy (3 and 4) and eliciting judgments in the form of pairwise comparison (1 and 2). Saaty (1980) developed four basic principles for AHP models. These principles including decomposition, prioritization, synthesis and inconsistency measurement. The detail of the principles is discussed in the following section Decomposition Like MAUT, the AHP define the frameworks with a hierarchy of objective. It help the user to achieve the goal from the attributes of problems, by decompose into a hierarchy. A hierarchy is a three-like structure that represents a complex problem

80 62 on a number of levels (Saaty 1994). The hierarchy develop consists of several levels. The top level represents the goal or the objective in terms of a problem statement. At the next level, the major criteria are defined is broad terms. Each criterion may be broken down to smaller level or individual parameter depending on the how much details is called in the model. The bottom level of the hierarchy contains the actual condition of the alternatives which under laying the problem. Figure (3.1) presents a sample of hierarchy developed by Al-Subhi Al-Harbi (1999) for selecting the most suitable contractor. Saaty (1994) emphasizes that the hierarchy provides on overall view of the complex relationship inherent in the situation and in the judgment. Level 1: Goal Selecting the most suitable contractor Level 2 : Criteria Exp. F.S. Q.P M.P.R E.R. C.W.L Level 3: Alternatives A B C D E Exp. - Experience F.S - Financial Stability Q.P - Quality Performance M.P.R - Manpower Resources E.R - Equipment Resources C.W.L. - Current Works Load A,B,C,D and E are the contractor being pre-qualified Figure 3.1 Hierarchy of the project example (Al Subhi Al-Habi, 1999)

81 Prioritization Procedure Once the hierarchy has been structured, the next step is to establish the priority each factor on a given level of the hierarchy. The decision-maker make judgments about the relative importance of the element with respect to elements at the higher level in the hierarchy using pairwise comparison. According to Muralidhar (1990), the advantage of using a pairwise method is that, it allows the decision-maker to focus a comparison of two objects and the observation can be made free from extraneous influences. Saaty (1995), describes that the pairwise is used because only two elements are involved in the comparison at same time. In additional, Saaty stressed that a trust worth decision support theory must be uniqueness in the representation of judgment, the scale derived from these judgments and the scale synthesized from these scale. In the AHP pairwise comparison a nine-point scale. (1-9) ratio be used to quantify the decision make s strength of feeling between any two alternatives with respect to given criterion. An explanation of this scale is presented in table 3.1. AHP proposed the nine-point scale because of the psychological limit of 7 ± 2 items in simultaneous comparison are meaningful in practice and have an element of precision. In the pairwise comparison a matrix is the preferred form. According to Saaty (1994), the matrix is a simple and well established tool that offers a framework for testing consistency, getting the necessary comparative data and providing sensitivity analysis of the overall priorities when judgment are changed. In general, if n (elements) are being compared for given set of matrix, a total of n(n-1)/2 judgments are necessary to fill in the matrix. Saaty (1995) describes pairwise comparison on matrix as the element that appears in the left hand column is always compared with the element appearing in the top row, and the value is given to the element in the column as it compared with the element in the row.

82 64 Table 3.1 AHP pairwise comparison Scale ( Source : Saaty 1994a) Intensity of Definition Explanation importance 1 Equal importance Two activities contribute equally to the objective 3 Weak importance of Experience and judgment slightly one over another favor once activity over another 5 Essential or strong Experience and judgment strongly importance favor one activity over another 7 Demonstrated An activity is strongly favored and importance its dominance demonstrate in practice 9 Absolute importance The evidence favoring one activity over another is the highest possible order of affirmation. 2,4,6,8 Intermediate values When comprise is needed between the two adjacent judgment Reciprocals of above nonzero If activity has one of the above nonzero numbers assign to it when compared with activity has the reciprocal value when compared with I A reasonable assumption The reciprocal value is entered in the position where the second element, when it appears in the column, is compared with the first element when it appears in the row.

83 65 To illustrate the pairwise comparison matrix observe the following examples: suppose we wish to compare a set of n objects in pairs according to their relative weight. The objects are donated by A1, A2.An, which can be represented by construct a set of matrix size n x n, which has elements a ij. If the relative weights of the elements of matrix A are represented as a ij = Wi/Wj, the following matrix may represents the pairwise comparison. In pairwise comparison matrix, the elements in the lower triangle are simply the reciprocal of those lying above the diagonal ( i.e. a ij = 1/ a ij, in accordance with axiom 1)... A1 a11 a12..an w1/w1 w1/w2..w1/wn A2 a21 a22.a2n w2/w1 w2/w2..w12/wn A = = An an1 an2.ann wn/w1 wn/w2..wn/wn The pairwise comparison are done in terms of which elements dominates the other. The process can be done from the top of the hierarchy to downward or otherwise from the bottom upward to evaluate the importance of criteria towards the available alternatives Synthesis of Results Synthesis is a process to complete the relative weights of the elements with regard to an element on the next level. This process must be performed for all matrix

84 66 developed in the pairwaise comparison, by using normalized eigenvector associated with the longest eigenvalue of their comparison matrix. The following steps defined the synthesis process for pairwise comparison: 1) To obtain the normalized matrix Synthesizing the pairwise comparison matrix is performed by dividing each element of the matrix by its column total. This will provide a meaningful comparison between the elements in the hierarchy. 2) To obtain the priority vector The value of each rows of the normalized matrix should be added and dividing the rows by the number of entries. 3) To obtain the vector of composite weight Aggregated the relatives weight of various levels of the is to serves as ratings of decision alternatives in achieving the most objective. The repetitions of the aggregation produce the relative weights of elements at the lowest level of hierarchy with respect to the most general objectives at the first level Measuring Inconsistency One of the advantage of the AHP is that it provides consistency checking of judgments call consistency Index (CI). Saaty (1995), define the consistency as the intensities of relations among ideas or objects based on a particular criterion justify each other in same logical way.

85 67 In practice, the decision maker is only estimating the true elements of a matrix by assigning them value obtain from pairwise comparison scale (refer table 3.1). Therefore as an approximation the elements of the matrix, can be thought to satisfy the relationship:- a ij = w i /w j + ij Where ij is the error term representing the decision maker s inconsistency in-judgment when comparing factor i and j. According to Saaty (1983), this leads to the definition of a consistency index, which can be used to evaluate the quality of the matrix. I max - n CI = Where : n = Matrix size n - 1 I max = Eigenvalue max The difference of (I max -n) can be used to measure inconsistency. The perfect consistency arise when (I max n) will be zero, however in many cases (I max n). The closer the CI value to zero, the better the overall judgment made by the decision maker. The value of I max can be found by calculate the weighted sum matrices by multiplying each weight in the pairwise comparison matrices with each of the priority vectors. Then I max, can be calculate by dividing all the elements of the weighted sum matrices by their respective priority vector elements and then compute the average of these values. To add perspective, the consistency index can be verified in terms of inconsistency ratio (IR). Through simulation, Saaty has obtained the following results. Consistency Ratio (CR) or Inconsistency Ratio IR = CR RI

86 68 Where n represents the dimension of the particular matrix and RI denotes the random index computed from the average of the CI for a large sample of random matrices. The value of such standard RI are given in table 3.2. Experience suggest that the CR or IR value should be between 0 and 0.10 or within ten percents of what would be the outcome from random judgments is acceptable (Saaty 1980) Decision Support System The ability to make sound decision is very important to the success of a project. The decision support system is a computer-based systems that provide a useful tools for users to improve the quality of the decision making. It operates by using model and algorithms, to execute, interpret and systematically analyzed the information but the decision maker s judgment is need to control the process. One of key important aspect of DSS is that it incorporate the human judgment and using the role of computer in supporting decision making. The are various DSS product have been developed and commercially available such as Analytical, Decision Pro, Decision Programming language, Precision three and expert choice professional. In this research the expert choice (EC) software package that represents the AHP methodology is choose for developing a model for selecting the most appropriate sub-contractor. The expert choice, developed by expert choice Inc. intents to simplifies the AHP s steps and

87 69 Table 3.2 Random Index RI Size of matrix (n) Random index (RI)

88 52 automates many of its computations. Expert choice is an ideal tool especially for generating group decision making, through a cohesive, rigorous process and maximized communication as well as reduces the influence of groupthink and dominances. It offer s user friendly, not required numerical judgment, re-examination of judgments, reducing complex decision and synthesizing the results. 3.3 Summary This chapter has discussed in details on knowledge acquisition process, to capture the experts knowledge through questionnaires survey & interview and transforming the information to a manageable form for developing a theoretical model represents the AHP methodology. The AHP is a decision aiding tools based on multicriteria decision making for dealing with complex and multi attribute decision. The AHP process is simplifies using a decision support system. The expert choice software is a Decision Support System that based on AHP methodology is used in the research to synthesizing and automates AHP computation and eliminate tedious calculation. The next chapters discussed on the data collecting and result obtained from the knowledge acquisition.

89 71 CHAPTER 4 KNOWLEDGE ACQUISITION FOR MODEL DEVELOPMENT 4.1 Introduction This chapter presents the results obtained from the knowledge acquisition phases, which is used to develop a theoretical model for subcontractor selection using the AHP methodology. The chapter focused on two main section which include: a) Knowledge acquisition - Survey sample - Questionnaire surveys - Interview surveys b) Data Analysis - Analysis on questionnaire surveys - Analysis on interview surveys Finally this section also discussed the results and described the findings.

90 Knowledge Acquisition The initial stage of knowledge acquisition phases involved the literature review on the topics of the research. A relevant information has been studied through journal, books, research project, Phd thesis, articles & paper and searching information from internet. The purpose of the literature review is to understand the background of the research and able to provide a foundation for the preparation of survey sample, designing questionnaires and conducting interviews Survey Sample Subcontractor s selection process involved various stage of levels and required many personnel input and management decision skill. Therefore the survey population was confined to a group of targeted respondents, which is directly involved in subcontractor s selection process. This research focused to capture the experts knowledge, mainly the contractor working in Putrajaya Development project. An information of these contractors were obtained from directories, walk-out survey, Architect & Engineer s firms and the Authorities. The consideration to choose Putrajaya as a survey sample for the research is based on the following reasons: a) Various type of construction project is undertaken in Putrajaya. Therefore the survey sample will cover various type of construction project. b) Majority of the contractors employed in Putrajaya are classified as a main player in Malaysian Construction Industry. Therefore the data obtained will able to provide good results on the subcontractor s selection process.

91 42 c) The client is very emphasized on good performance of contractor in terms of quality, safety, environmental and work performance. As such it will meets the objective of the research which consider various criteria in the selection process. d) Putrajaya is a government interest project in achieving the Vision Therefore the government will make sure all the project successfully completed. This research is aimed to collect the data from the project that is successfully implemented. The convenience sampling method were used to identity the respondent s willingness to participate in the questionnaires survey and interviews. All the targeted respondents were contacted by telephone to make sure that they have been involved in the subcontractor selection process. Finally, thirty two contractors employed in Putrajaya projects, were identified but only twenty six contractors agreed to participate in the questionnaires survey for the research (see Figure 4.1). Respondent's Acceptence to Participate Disagree 19% Agreed 81% Figure 4.1 The respondent s acceptable to participate in the research

92 Questionnaires Survey The relative important s of subcontractor selection process was obtained through the questionnaires survey. The questionnaires survey is aimed to achieve two main objectives of the research. a) To understand the nature of subcontractor selection approaches practiced by various contractor. b) To explore and define the potential criteria which affect the selection of subcontractor. To achieve these objectives, the questionnaires were designed according to the recommended procedure available in internet questionnaires design and survey sampling. Then a pilot survey was conducted before the questionnaires distributed to the attributes Questionnaire Design In order to capture the experts knowledge, the questionnaire was designed in five parts as shown in Appendix A. Part 1 - Introduction of the research & aim of the questionnaire survey. Part 2 - It capture the background of the respondents such as profession, the roles in the selection process and their experience.

93 44 Part 2b - Understanding the organization background in terms of business experience, type of project and number of project undertaken. Part 2c To capture the nature of tendering process implemented by the organization. Part 2d To analysis on pre-qualification system, methodology implemented and selection criteria guidelines. Most of the question were designed as closed-ended question with a space provided as an option for respondent s to give details on certain information. Only one question was designed as open-ended question using Likert-type scale to reveal the relative important of criteria with regards to the contractor selection attribute. A Likert Scale of 1 (least important) to 5 (most important) is used for eliciting respondent s perceived importance. A total of thirty four questionnaires were distribute to the target sample on 2 nd January 2005 to 14 th January Twenty two questionnaires were distributed by hand and remaining twelfth questionnaires were send by postal mail with a self addressed stamped returned envelope. Most of the questionnaires were send by hand to avoid any misinterpretation of the question and to make sure the respondents well understand on the question. A follow-up telephone call was made on a weekly basis to those who had not response in the stipulated time frame. A pilot survey was conducted to check the layout, order, complexity and clarity of the questions. Two senior manager in the Contract Department were selected to verify the appropriateness of the questions. The comments received from the pilot study was reviewed and several modification were incorporated into the final version of the questionnaires.

94 Interview Surveys The interviews survey is done to corroborate the findings and views of the earlier analysis on questionnaire survey. The main objective of the interviews was:- a) To define and verify the relevance important of the identified criteria that resulted from the questionnaire survey. b) To define the information (sub-criteria) that is used to access the main criteria. In additional, the information obtained from the interview will be used to achieve the final objective of the research:- c) To develop theoretical model that represents the appropriate subcontractor selection based on the AHP process. In order to achieve the objectives, the interview was conducted in an open semi structure manners, allowing the respondents to introduce more details information on the relevance issues. Basically the major issues were considered during the interview season are:- a) To verify the important criteria for selection of subcontractor obtained from the questionnaires survey. b) What the information (sub-criteria) is used to access the main criteria. c) The outcome of current practices in the selection of subcontractor by the contractor.

95 46 d) The possibility application of decision support tool in the selection process. A semi structure interview template (see Appendix B) was prepared prior to interview in order to make it effective and to save the time of the interviews. Ten contractors were identified for the interview survey base on the experience, knowledge and cooperation. Out of the ten respondent s, eight interviews were conducted by face to face method and the remaining two interviews were done using telecommunication method. 4.3 Data Analysis The data collected through the knowledge acquisition phases were analyzed and presents in the following section. The description on the results and discussion on the findings are split to two main parts which include the questionnaire survey and interview survey Analysis on Questionnaire survey a) Responses A total of thirty four questionnaires were distributed to twenty six main contractors, comprising from various occupational background. Only twenty nine questionnaires were returned out of a thirty four questionnaires delivered. One

96 47 questionnaires were rejected on the basis that respondents fail to complete the information which may impeach their company policies. Table 4.1 describes the summary of the response during the questionnaire survey. Table 4.1 Response from the questionnaire survey Number of listed contractor 32 Number of contractor participated 26 Number of questionnaire sent 34 Number of replies received 29 Number of unusable replies 1 Percentage of total replies 85.3% Percentage of usable replies 82.3% Over role a good replies rate of 82.3% was obtained from twenty one contractor identified in the targeted sample. b) Respondent s background information The survey indicated that there are four groups of respondent based on their profession or designation. Over half of the respondents were employed as a quantity survey (see figure 4.2), fifty seven percents of the respondents belongs to a group called quantity survey, followed by project manager or senior manager with 29%, while project director contribute 7% and the remaining 7% represented by the contract manager.

97 48 Respondent's Profession Project manager/senior manager 29% Quantity surveyor 57% Contract manager 7% Project director 7% Figure 4.2 The composition of respondent s by profession The observation from the respondent s experience in the selection process indicated that the majority of the respondents had experience more than three years (see figure 4.3). A total of 61% of respondents had experience between 3 to 5 years, followed by 25% with 5 to 10 years, while 7% with 1 to 3 years of experience. The remaining of 7% of the respondents had experience more than 10 years. Respondent's Experince Between 5-10 years 25% Between 1-3 years 7% Between 3-5 years 61% More than 10 years 7% Figure 4.3 The range of respondent s experience in the selection process

98 49 This survey also observed the roles of respondents for deciding which subcontractor to be selected. The respondents position as a implementation were the longest group constituting 72% of the total respondents (see figure 4.4), while 21% of respondents evaluate the tender and the lowest group of respondents which contributes 7% make decision to award the tender. Respondent's Roles Evaluation 21% Implementation 72% Decision making 7% Figure 4.4 Respondent s roles in the selection process c) Type of construction in the past 5 years Figure 4.5 shows that the building works were most common type of structure constructed by the respondents, which represent 42% of the respondents choice. Closely followed by civil Engineering works with 38%, while landscape works constituting 12% of the total constructed works. The fourth common type of works was the maintenance activities which represent 4%, followed accordingly by specialist works with 4% in total.

99 50 Type of Construction Works 42% 45% 38% 40% 35% 30% Percentage% 25% 20% 15% 10% 12% 4% 4% 5% 0% Type of works Building Civil Engineering Landscape Maintenance Specialist Figure 4.5 Respondent s involvement in the type of construction works. d) Procurement System Figure 4.6 shows that the most common practice of procurement system applied by the respondents were the tradition method, followed by management system and design & built. About 83% of the procurement system were based on traditional method, closely followed by management system with 10% while 7% done based on design and built.

100 51 Procurement's System Applied Management method 10% Design & Built 7% Traditional Method 83% Figure 4.6 Procurement system applied by contractor e) Tender arrangement method The respondents highlighted that open tender method were used for the most of the tender arrangement with subcontractor. The tendering arrangement method can be divided into three group. Firstly the open tender method (58%), negotiated tender (27%) and selected tender with 15%, as shown in figure 4.7. Tender Arrangement Method Selected tender 15% Open tender 58% Negotiated tender 27% Figure 4.7 Tender arrangement method in the selection process

101 52 f) Type of list for pre-qualification Figure 4.8, shows two type of list mostly used by contractor for prequalification of subcontractor. The result indicated that the standing list of subcontractor (80%) and an ad-hoc list of subcontractor (20%) were the common documents used in the pre-qualification. Type of List in Pre-qualification 80% Percentage% 80% 70% 60% 50% 40% 30% 20% 10% 0% A B 20% Type of list A- Standing list of subcontractor B- Ad-hoc list of subcontractor for particular project Figure 4.8 List applied in subcontractor pre-qualification g) Guidance on the choice of selection criteria Result from figure 4.9 shows that more than half of respondents used their inhouse guide to select the subcontractor criteria. The in-house guide or standard internal guideline contributes 63% as a source of reference in the selection process. Twenty percents of respondents used the company s corporate quality procedure, while 7% refer to their experience and professional judgment. Only 7% based on the client requirements and the remaining 3% based on the project requirements.

102 53 Source of Selection Criteria Percentage% 70% 60% 50% 40% 30% 20% 10% 0% 63% 20% 7% 7% 3% A B C D E Sources A- Standard internal guideline B- Corporate quality system C- Experience D- Client requirement E - Project requirement Figure 4.9 The source used in the selection criteria h) Sub-contractor selection criteria Since the objective of the research is to focus on capturing the contractor s experience in the selection of subcontractor, a total of twenty eight respondents had given their preference on selection criteria adopted by their company. Table 4.2 shows the respondents justification on the important of selection criteria. About sixteen criteria were identified from the questionnaire survey. Table 4.2 Respondent s preference of selection criteria Past performance Reputation Previous Work Experience Financial soundness Stability of firm Track record Project complexity Technical expertise Managerial capability Subcontractor workload Resources Price Relationship Stand of quality

103 54 The survey also provide the respondents to rate the importance of the criteria in the selection process using the Likert type scale of 1 to 5. The data obtained from the Likert type scale question was used to rank the criteria using relative index value. In the relative index value, the criteria qualitatively would be according to highest total score and the second is the one that follow descending and so on. Table 4.3 shows the relative index value for each criterion. Table 4.3 Total score value for each criteria Criteria Relative Index Value Rank Price Past performance Financial soundness Technical expertise Managerial Capability Subcontractor workload Previous work experience Track Record Standard of quality Resources Stability of firm Project s complexity Relationship with client Failed contractor Client requirement Reputation

104 55 i) Criteria Evaluation Results from the figure 4.10 shows that almost half of respondents (45%) did not have adequate weightage system to evaluate the selection criteria. Most of the respondents (55%) evaluate criteria using the rating with designated weight, whereas (21%) based on rating with no weight. About (14%) of the respondents point out that they used the professional judgment and a small group (10%) based on their previous job experience in evaluating the criteria. Criteria Evaluation Rating with no weight 21% Rating with designated weight 55% Rating based on experience 10% Rating on professionnal judgment 14% Figure 4.10 Method of evaluating the selecting criteria j) Application of Decision Support System When referred to the application of decision support system in the final selection process, non of the respondents applied the decision support system. The majority of the respondents agreed that the final selection was depends to the management decision based on the evaluation criteria and the recommendation made by the staff. However the result shows that 34% of respondents agreed that decision support system is important for the decision making, whereas 55% answer

105 56 not necessary as the current practices is good enough. The remaining respondent s view on the decision support system is neutral (see table 4.4). Table 4.4 Application of DSS in selection process Contractor applied DSS 0% Contractor not applied DSS 100% Contractor consider DSS important 34% Contractors consider DSS is not necessary 55% Contractor no idea on DSS (neutral) 11% Discussion on Findings This section discussed the finding from the questionnaires survey. In general the convenience sampling method adopted have proved to be appropriate for the research, as all the respondents have enough knowledge and experience in the selection process. In additional the number of usable replies received is consider very high. The finding shows that most of the procurement system was done on traditional method. The majority of the subcontractor s selection were based on open tender system and selected tender system. Other interesting fact that most of the contractor has the pre-qualification list to quality the subcontractor for selection process. However the research shows that almost half of the contractor did not have adequate weightage system to evaluate the selection criteria.

106 57 Our finding reveal that the design of question using Likert-Scale, presented a better preferences on the importance of selection criteria, whereby more than 70% of respondents choose the same selection criteria. Even though sixteen criteria were identify during the questionnaire survey, but only eight criteria score more than 70% of preferences. The most notable aspects in the questionnaire survey result is that non of the contractor has applied the decision support system during decision making process. In conclusion the role of decision is made by the top manager with the supporting documents in terms of evaluation and recommendation prepare by the quantity survey or senior manager Analysis or interview survey a) Response The interview survey was conducted to corroborate the findings and resolved the limitation of the questionnaire survey. About ten experts were interviewed and all of the interviewees are clear about the information required for the research. The following section presents the result of the interview. b) Justification of the identified criteria About sixteen criterion are consider in form the questionnaire survey. However, after an intensive interview with the experts, eight-criteria was were selected as a main criteria for subcontractor s selection (see table 4.5). The eight-

107 58 criteria identify obtained the highest relative index value based on questionnaire survey analysis. All the interviews agreed on the selection of the eight criterion and justified that the price should be considered as the primary criteria. The study also point-out that past performance and financial soundness play the biggest part in the selection process. Table 4.5 Justification of the identified criteria Price - Price is the important aspect in awarding the contract. - The lowest tender price tends to attract the contractor s interest. - Majority contractors looking for maximum profit margin. Past performance - Past performance at work is a guide to check the subcontractor capability to execute the works. - Previous certification on quality and safety is a plus point in the selection process. Financial soundness - It is a evidence to show the financial standing of the company - If a measurement to define how the subcontractor prepare the case flow to execute the works. - The capability of the company to secure necessary loan. Technical expertise - Adequate resources in terms of human resources and physical resources to carry-out the works. - Technical skill and application of latest technology will be an assess for executing the work.

108 59 Table 4.5 Justification of the identified criteria (cont d) Managerial capability - The knowledge and capability of the management to manage the business. - The management commitment in terms of quality and safety performance. - How effective the organization to resolved the problems and take the risk. Subcontractor workload - Whether enough resources will be available for the projects. - How strength is the organization to undertake the project depends on the subcontractor workload. Previous work - Past experience in executing the similar project always win experience tender. - The available experience to undertake the project able to tackle difficulties encountered during construction. Track record - Previous job track record in terms of safety, quality work and performance able to convince the management during decision making. c) Information to assess the main criteria Once the main criteria were identified, the relative importance in measuring the criteria need to be justified. The result of this interview survey, indicated that there are several points to be considered in the assessment of the main criteria. Since each construction project is unique, the final sub-criteria identified in the interview survey gives the flexibility to add and reduce the element to assess the criteria. In general, all the interviewees agreed that twenty two criterion should be considered during the assessment (see table 4.6).

109 60 Table 4.6 Sub-criteria for the assessment of main criteria Main criteria Price Past performance Financial soundness Technical expertise Managerial capability Subcontractor workload Previous work experience Track record Sub-criteria - Schedule of rate - Preliminary cost - Completed project - Quality achievement - Safety achievement - Past failure project - Financial stability - Credit facility - Debit to equity - Human resources capability - Level of technology - Machinery and testing facilities - Organization strength - Management knowledge - Quality and safety performance - Present contract works - Human resource availability - Percentage of work to be subcontractor - Number of years in business - Similar project experience - Previous construction record - Relationship with outsider d) Efficiency of current selection process In the interview survey, the respondents were asked on the efficiency of the current method. Six interviewees agreed that the current selection method implemented by their company are efficiency. However the remaining four

110 61 interviewees considered that an improvement is needs in term of method of evaluation the subcontractor, which may be uncompleted or not accurate. e) Possibility of the application of DSS On the application of DSS during the decision making process, nearly half (6 interviewees) agreed that DSS should be consider as a tool in Decision making especially involved critical project, and no track information about the subcontractor. They also highlighted that decision making based on the personnal judgment is not the best decision in the selection process. However two interviewees indicated that DSS is not necessary and the current method is sufficient. Another two interviewees suggestion that DSS should only be applied on the certain project, whereby the management unable to make decision on the selection of subcontractor Discussed on findings The interview survey justified that the most common criteria considered are those pertaining to price, past performance, financial soundness, technical expertise, management capability, subcontractor workload, previous were experience and track record. The definition and rationales of the criteria are discussed in the following section. a) Bid price Bid price is main factor considered by the contractor during selection. The lowest tender price usually attract the contractor as to fulfill the objective of the

111 62 project and make the necessary profit margin. However not all the lowest tender always win the tender as the contractor will evaluate the preliminary cost, plants & machinery cost, material cost and the labour cost submitted by the subcontractor. The contractor considered the accuracy in tendering as a key issue to justify the bid price. Any tender that is very low compared to the evaluate tender price, basically will be rejected. b) Past performance Past performance of the subcontractor is guide to measure the ability of the subcontractor to perform the job. The past performance is measured in terms of work performance, completed project, past failure project, quality certification, safety achievement, delay project or LAD imposed. Majority of the contractor always consider the price and past performance as two key plays to justify the awarding to subcontractor. In most cases, even though the price submitted by the subcontractor is the lowest, but they have not perform well in the previous project, than the subcontractor will be failure to win the tender. c) Financial soundness The financial strength of the subcontractor is one the important factor considered in the selection process. The subcontractor needs to sustain some amount of money in the initial stage of the project in order to make sure the project successful implemented. The previous, present and future financial status of the subcontractor is measured in terms of credit rating, net assets, debt to equity and bank statement. Insufficient financial strength of a successfully selected subcontractor can lead to late completion, unsatisfactory quality & safety performance and arise contractual issues.

112 63 d) Technical expertise In principal the technical expertise is concerned on the ability of subcontractor to satisfy the requirements of the contract and handle the works in terms of size, quality, specification, technologies and skill. It is assess by visiting the completed project site subcontractor s office, meeting to discuss the construction method work programme and specification. e) Managerial capability It is proven that many construction projects are able to achieve the project objective, if they have good management strategies. The project management structure, human resources and quality management are considered by identifying the contractor s managerial approaches applied in construction project. The ability of the management to use their knowledge in planning, coordination, supervision, controlling and responding to all the elements arise in construction project are identified by studying the management behavioral. f) Subcontractor workload The status of current position of the subcontractor to perform effectively the contract are considered in terms of human resources capabilities, plant and machinery availability, testing facilities and financial stability. The subcontractor s workload is definitely affect the performance of the subcontractor to fulfill the project objective and goal.

113 64 g) Previous work experience The construction project encountered various unanticipated problems. The knowledge in solving difficulties is an asset for the organization. Basically the previous work experience is measured on the size of subcontractor organization, technical skill, image and reputation that are reflected by the scale and type of projects carried out or completed, Length of time in business, type of project conducted and place of working (local or foreign country) will be advantage for subcontractor during selection process. h) Track record Subcontractor s track record in the construction industry is another criteria considered in the selection process. In this respect, a study is performed on previous construction record, the relationship with outsider, safety and quality achievement and penalties and blacklisted record. It justified the subcontractor s background and the capabilities to perform the jobs. 4.4 Summary This chapter has view the results capture during knowledge acquisition phase. The questionnaire survey was conducted to capture the preliminary information and to collaborate the finding the follow-up semi structure interview survey was conducted with several identified experts.

114 65 Our finding reveal that both survey have fulfilled to meet the design research objective. The results presented in the study show the actual criteria and sub-criteria used in the selection of subcontractor. In summary the two information can be adopted in the development of the theoretical model represents the AHP methodology. The next chapter discuss on the theoretical model development.

115 42 CHAPTER 5 DEVELOPMENT OF THEORETICAL MODEL 5.1 Introduction This chapter described in detail the development of theoretical model for the appropriate subcontractor selection using the AHP methodology. It also demonstrates the operation of the theoretical model and highlight the key function of the system. 5.2 Modeling The ability to make sound decision is a critical in the selection process. It involved Various choice, multiple objective, intangible factors, unstructured problems and subjected to uncertainty and risk. A model is representation of an object or idea that helps to bring order to the unstructured chaos of the usual decision making situation.

116 42 The proposed model is to help procurers in selecting the most appropriate subcontractor for the various alternatives and identified multiple criteria using the Analytic Hierarchy Process. Figure 5.1, presents the functional architecture of the proposed model. In this research the expert choice software package is choose as a decision support system for the proposed theoretical model. To select the most appropriate sub contractor Problem Definition To develop AHP hierarchy to decompose a decision problem AHP model based on the Expert Choice Software Pairwise comparison of criteria that affect the selection process Synthesis of the AHP model to get overall priotization of the Sensitivity analysis to see how the alternative change with respect to criteria The most appropriate subcontractor will be selected from the alternative Figure 5.1 The functional architecture of theoretical model Expert Choice Software Expert choice is a group meta decision support software product based on a decision making methodology, the Analytic Hierarchy Process. It was used in the research to automate the AHP and it is an ideal tool for generating group decision. Expert choice helps the procurers to systematically framework the element of hierarchy, making consistence judgments and drive priorities for action. It then synthesizes all the judgment into a united whole in which the alternatives are clearly prioritized form best to work.

117 Development of the AHP model The first step in the model development involves identification of the problems. In the research, the problem starts when the procurers has to make decision to select the most appropriate subcontractor from the number of alternative. In additional, the procurers should be able to be identified a number of criteria that affect the selection decision. Finally a strong judgment needs to be made in order to support the selection process. However, the judgment was normally based on the procurer experience or professionals judgment. The theoretical model proposed in the research actually focused to resolve the difficulties faced by procurers in making the judgment from the multi-criteria choice. The decision model based on AHP involved four main steps, which include: a) Developing the hierarchy b) Pairwise comparisons c) Synthesis of the AHP model, and d) Sensitivity analysis Developing the AHP hierarchy The AHP helps the user to achieve the goal from the attributes of problems, by decompose into a hierarchy. A hierarchy consists of number of levels which involves a goals, objectives and alternatives of choice. The first level indicate the goal to be achieved, followed by the main criteria, sub-criteria and down to the last level whereby the alternatives are choose. In this research, the design of AHP hierarchy was done after obtained the expert s idea on the subcontractor selection process through the questionnaire survey and structured interview. This process involves creating, reviewing and modification of the decision hierarchy with the experts contribution. Figure 5.2 illustrates the hierarchy structure, which consists of the goal, criteria, sub-criteria and alternatives for this research. At the level O, the goal of the appropriate subcontractor selection is located. Followed by the next level (1), the criteria that affect the selection which have been classified into eight categories. Level 2 of the model defines sub-criteria that used to assess the main

118 44 criteria in the level (1). About 22 types of documents were used to assess the main criteria. Finally the alternative solution to choose the best of the subcontractor are located at level 3 of the hierarchy. GOAL Level 0 (1 nodes) CRITERIA Level 1 (8 nodes) SUB-CRITERIA Level 2 (22 nodes) ALTERNATIVE Level 3 Financial Soundness Financial stability Credit facilities Debit to equity Managerial Capability Organization strength Management Knowledge Past Performance Quality and safety performance Completed project Quality achievement Safety achievement Past failure project Select the most appropriate subcontractor Previous work experience Number of years in business Similar project experience No. of subcontractor Price Preliminary cost Schedule of rate Subcontractor work load Presents contract works Human resource availability Work to be subcontracting Technical expertise Human resources capability Level of technology Machineries and testing facilities Track record Previous record Relationship with outside Figure 5.2 Criteria and sub-criteria identified

119 The pairwise comparison The pairwise comparison is a process of making judgment about the relative importance of the elements in each level in respect of the higher level of the hierarchy, using the AHP pairwise comparison scale. For example, in the research, element on the second level of the hierarchy (Price, financial soundness, managerial capability, past performance, previous work experience, subcontractor work load, technical expertise and track record) are arranged into a matrix. Then the decision makers make judgment about the relative importance of the elements with respect to the overall goal of selecting the most appropriate subcontractor, using the pairwise comparison scale. Figure 5.3, shows the pairwise comparison between element in second level and level one in respect to the goal. In this figure, when compared the criteria of financial soundness and the managerial capability the user assigned a rating of 5. This indicates that the financial soundness is strongly important compared to goal of selection. The same procedure can be repeated for the next level of the hierarchy. The comparison between level 1 with level 2, and level 2 with level 3 are shows in Figure 5.4 and Figure 5.5. Figure 5.3 Strong rating (5) in pairwise comparison between financial soundness and managerial capability ( level 1 with respect to the goal)

120 46 Figure 5.4 Pairwise comparison level 2 element in respect to level 1 Figure 5.5 Pairwise comparison level 3 element in respect to level 2

121 Synthesis of the AHP model It is a process of synthesized the judgments throughout the model using a weighting and adding process to derived the overall weight for the alternatives. The synthesis process converts all the local priorities of each element into global weights of the alternative for the research. The highest weightage from the synthesis process, indicate the preferred alternative for the research. There are two ways of synthesizing and either can be viewed using the expert choice: Distributive synthesis and ideal synthesis. a) Distributive synthesis - It distributes the priority of each covering objective among all the alternative under it, thereby dividing the full criteria weights into proportions relative to the percentage of preference of each of the alternatives (Abdullah 2003). b) Ideal synthesis - Assign the full priority of each covering objectives to the best alternatives under it and assigns a proportionately smaller share of the priority to the remaining alternatives. The ideal mode is more appropriate when the decision makers are concerned with choosing only one alternative and the other alternatives will no longer matter (Abdullah 2003). In this research, the ideal synthesis is used to chose the best subcontractor from the list of the alternatives. Figure 5.6 and Figure 5.7 show the distributive mode and ideal mode for the research. Generally the two methods of synthesis yield provide a close results.

122 48 Figure 5.6 Distribute synthesis mode Figure 5.7 Ideal synthesis mode

123 Sensitivity Analysis One of the advantage of expert choice software is that it province tools for performing sensitivity analysis. The expert choice graphical sensitivity analyses provides a ready answer how the different weight assigned to each criterion could effect the outcomes of the model There are five types of sensitivity analyses that can be performed in expert choice (Abdullah 2003). a) Performance sensitivity : Display how the alternatives perform with respect to all criteria. b) Dynamic sensitivity : Displays how the choice priorities of alternatives changes when the priority of criterion is varied. c) Gradient sensitivity : Display the composite priority of the alternatives with respect to the priority of a single criterion. d) Head to head sensitivity : Displays how any two alternatives compare with respect to each criterion and the goal, and e) Two dimensional sensitivity : Displays how alternatives perform with respect to any two criteria. 5.4 Operation of the theoretical model The operation of the theoretical model helps the procurers how to use the model to select the most appropriate subcontractor for the specified project. Figure 5.8 shows the flowchart of the operational model.

124 50 (Expert choice 2000) Start expert choice software Data input Assigned judgment in pairwise comparison (Expert choice 2000) Satisfied with the results from sensitivity No Yes (Expert choice ) The most appropriate subcontractor selection Figure 5.8 The operational flowchart The operational objectives of the system were used to : a) Provide a clear decision making to users in selecting the most appropriate subcontractor from the choice of alternatives. b) Provide information and justification on the selection criteria and the alternatives.

125 51 c) Provide a justified decision by using graphical reports and sensitivity analysis. d) Provide full documents for all the elements of the model, that can used to defend the decision. The operational system involve the following steps on how the user can assess the system : a) User requirements b) System requirements c) Starting the system d) Data information input e) Assigned judgment in pairwise comparison f) Synthesize to get results User requirements The end user of the theoretical model must have relevant experience in subcontractor selection, in order to incorporate their judgment in the selection process. The end user of the system can operate to system individually or as a group thinking decision making using network or the web. In-experience users can be also use the system as a training tool to understand the selection criteria System requirements The theoretical system can be operate on a personal computer (PC) running windows 2000 or better, to support the expert choice 2000 software. About 37mb of RAM is required to operate the expert choice software in personal computer.

126 Starting the system The system is stored as an expert choice file in the C drive of the P.C computer. To start the expert choice, click the start button, then select the programs-expert choice Then select the file subcontractor 1. When the file is opened, the window that appears is a model view. Figure 6.9 shows the model view panel that is divided into three major section or panes: - Three view (the left pane) - It displayed the hierarchy, consists of eight main criteria Alternatives pane (top right) It shows the active alternatives. The list of subcontractor to be chose are the alternatives (subcontractor X, subcontractor Y and Subcontractor Z). Information document (lower right pane) Displays information about the main criteria and alternative, to view this information, the user has to click on the red book icon on the tool bar. Information document icon Tree view pane Information document pane Alternative pane Figure 5.9 Subcontractor selection model

127 Data input The system provides a tool to perform the data input workbook, to add the necessary information such as the detailed information on the alternatives and justification of the criteria. To open this workbook, the user needs to go to the information document pane, by clicking the red book icon on the tool bar (Figure 5.10). Figure 5.10 The information data input Assigned judgment in pairwise comparison Once the data information is completed, the next step is to evaluate the elements by making pairwise comparison. A pairwise comparison is the process of comparing the relative importance, preference or likehood of two elements with respect to another element in the level above. There are three paiwise comparison assessment modes in EC 2000, verbal judgment, graphical judgments and numerical

128 54 judgment. The following steps shows how the pairwise comparison can be assigned in EC2000. a) For example, the users make judgment about the preference with respect to the goals click the goal, from the tree view. b) Then from the menu, select assessment, then select pairwise. The window will display the verbal comparison window. (figure 5.11) c) Since the user compares the criteria with respect to the goals, the judgment type is important. d) Now select the judgment that best described your feeling by dragging the verbal scale indicator up or down to the appropriate position. Figure 5.11 shows the example of judgment; it means that financial soundness is strong importance compare to managerial capability. e) Repeat the process above until all comparisons for each element is made. f) The inconsistency icon shown in the bottom left cell of the matrix. It is used to measure the possible errors in judgments as well as actual inconsistencies in the judgments themselves. If the inconsistency is higher than 0.1, the user need to check the judgment if there is any error or did not truly represent their feeling. g) After all the judgments have been made, the user will be promted to record judgment and calculate select Yes; the user will be returned to the model view.

129 55 Figure 5.11 The verbal comparison window Synthesize to get results After all the judgments in the model have been made and the priorities calculated, a synthesis is automatically performed. Figure 5.12 shows the synthesized result with respect to the goal. Figure 5.12 Model view showing the synthesized results with respect to the goal.

130 56 To examine the synthesis: select synthesize, with respect to the goal to produce the display shown in Figure Figure 5.13 Synthesis window After examining the synthesis, the user can examine the graphic sensitivity analyses of the results. The user must close the synthesis window and return to the model view. The users can use five of graphic sensitivity analysis (performance, dynamic, gradient, head to head and two dimensional plot) to show how the alternatives change when the priorities increase or decrease. To see the dynamic sensitivity graph : from the tree view, click on the goal, and from the menu select sensitivity graphs, then select dynamic. Dynamic sensitivity analysis is use to dynamically change the priorities of the objectives to determine how these changes affect the priorities of the alternative choice. By dragging the objectives priorities back and forth in the left column, the priorities of the alternatives will change in the right column (Figure 5.14).

131 57 Figure 5.14 Dynamic sensitivity graph The performance sensitivity analysis, displayed in Figure 5.15, shows how the alternatives were prioritized relative to other alternatives with respect to each criterion as well as overall. Dragging the criteria bars up or down can temporarily alter the relationship between the alternatives and their criteria. Figure 5.15 Performance sensitivity graph

132 58 Figure 5.16 shows the gradient sensitivity graph. This graph shows the alternatives priorities with respect to one alternative of a time. The vertical solid are represent the priority of the selection criteria ( financial soundness) and is read from the X Axis intersection. The priorities for the alternatives are read from the Y- Axis. To change an objectives priority, drag the vertical solid bar to either the left or right; then a vertical doted bar showing the new objective s priority will be displayed. Figure 5.16 Gradient sensitivity graph Figure 5.17 shows how two alternatives compared to one another against the criteria in a decision. One alternative is listed on the left side of the graph and the other is listed on the right. The alternative on the left is fixed while the alternative on the right can be varied, by selecting a difference tab on the graph. Down the middle of the graph are listed the criteria in the decision. If the left-hand alternative is preferred to the right-hand alternative with respect to a criterion, a horizontal bar is displayed towards the left. If the right-hand alternative is better, the horizontal bar will be on the right. If the two choices are equal, no bar is displayed. The overall result is displayed at the bottom of the graph and shows the overall percentage by which one alternative is better than the other; in this example, subcontractor X is better than subcontractor Y.

133 59 Figure 5.17 Head to head graph Table 5.18 shows the two-dimensional sensitivity graph. This graph show how well the alternatives perform with respect to any criteria. In this example financial soundness is represented on X-Axis and managerial capability on Y-Axis. The alternatives represented by the circle. The area of the 2D plot is divided into quadrants. The most favorable alternatives as defined by the criteria and judgments in the model will be shown in the upper right quadrant ( the closer to the upper right hand corner the better) in this case subcontractor Y, while in opposition, the least favorable alternative will be shown in the lower left quadrant (subcontractor Z). Alternatives located in the upper left and lower right quadrants indicate key tradeoffs where there is conflict between the two criteria.