procurement of building service subcontractors in u.a.e. : an evaluation of subjective factors for...

PROCUREMENT OF BUILDING SERVICE SUBCONTRACTORS IN U.A.E.: AN

EVALUATION OF SUBJECTIVE FACTORS FOR PREQUALIFICATION CRITERIA

SHIJO JOSEPH VADAKKEKUNNEL H00021529

A dissertation submitted in partial fulfilment of the requirements for the degree of

MSc in Construction Project Management

Dissertation Supervisor: Dr. Grant B. Wright

Heriot-Watt University School of the Built Environment

August 2011

Procurement of Building Service Subcontractors in U.A.E. : An evaluation of subjective factors for prequalification criteria 2011

ii Shijo Joseph Vadakkekunnel

DECLARATION

I, Shijo Joseph Vadakkekunnel, confirm that this work submitted for assessment is my

own and is expressed in my own words. Any uses made within it of the works of other

authors in any form (e.g. ideas, equations, figures, text, tables, programmes) are

properly acknowledged at the point of their use. A full list of the references employed

has been included.

Signed: …………………………….

11th August, 2011 Date: ……………………………....


iii Shijo Joseph Vadakkekunnel

List of Contents

Declaration ii

List of Contents iii List of Tables & Figures vi Acknowledgements vii Abstract viii Glossary ix

1.0 Introduction 10

1.1. Rationale for the Study 10

1.2. Aims 11

1.3. Objectives 11

1.4. Outline Methodology 12

1.5. Structure of the Paper 12

2.0 Literature review 14

2.1 Subcontracting in Construction Supply chain management 14

2.1.1 Supply chain management in construction 14

2.1.2 Subcontracting in construction supply chain 15

2.1.3 Advantages of subcontracting 17

2.1.4 Risks of subcontracting 17

2.1.5 Summary 19

2.2 Procurement of Building Service Subcontractors 20

2.2.1 Understanding the role of Building Service Subcontractors

in construction 20

2.2.2 Procurement of Building service subcontractor 20

2.2.3 Nominating Building Service Sub contractors 23

2.2.4 Shortcomings to current selection practises of building

service subcontractor 25

2.2.5 Summary 26

2.3 Prequalification of Building Service subcontractors in UAE 26

2.3.1 Understanding Prequalification of subcontractors 26


iv Shijo Joseph Vadakkekunnel

2.3.2 Factors affecting selection of prequalification criteria 27

2.3.3 Current Subcontractor selection models 28

2.3.4 Subjective Factors for Prequalification to procure

building service subcontractors in UAE 30

2.3.5 Summary 37

3.0 Research Methods 38

3.1 Research Process 38

3.2 Literature Review 40

3.3 Design of Questionnaire 40

3.4 Sampling of Respondents 41

3.5 Data Analysis & Recommendations 41

4.0 Data Collection and Analysis 42

4.1 Purpose of the survey 42

4.2 Responses to the Survey 42

4.3 Establishing Expertise and Knowledge of the Respondent 43

4.4 Establishing Company Profile and their Current Practises 45

4.5 Establishing Current Working Practises of the Company 47

4.6 Assessment of Factors for Prequalification Criteria 53

4.6.1 Rating Priority for Factors of Prequalification Criteria 53

4.6.2 Respondent’s Comment on the Subjective Factors for

Subcontractor Prequalification 55

4.6.3 Negative Implication of Improper consideration of the

Subjective Factors for Building Service Subcontractor

Prequalification 61

4.7 Discussion on the Subjective Factor for Building Service

Subcontractor Prequalification 63

4.8 Summary 67

5.0 Conclusion and Recommendations 69

5.1 Analysis of subcontracting practise in supply chain management

and study of their merits & challenges 69

5.2 Examining the role of building service subcontractor and their

procurement process 69


v Shijo Joseph Vadakkekunnel

5.3 Analysis of the Prequalification Criteria of BSC and the various

subcontractor selection models. 70

5.4 Evaluation of Subjective factors for prequalification criteria to

select the BSC 71

5.5 Recommendations 71

5.6 Limitation of Research 72

5.7 Recommendation for Future Research 73

Bibliography 74

Appendices

1. Appendix A – Covering Letter to Questionnaire Participants

2. Appendix B –Online Questionnaires

3. Appendix C – Surveyor’s Response to Questionnaire

4. Appendix D – Surveyor’s Response Analysis


vi Shijo Joseph Vadakkekunnel

List of Tables & Figures Page

Table 1 - Risks in Prime contractor and subcontractor relationships 19

Table 2 - Prequalification Subcontractor Selection Models 30

Table 3 – Rating of Factors for Prequalification of Building Service

Subcontractor 54

Table 4 –Respondent explanation of ratings provided 56

Table 5 – Rating of Factors for Prequalification of Building Service

Subcontractor with variance 63

Table 6 – Standard Deviation in Surveyor’s responses to ratings 66

Table 7- Ranking of factors for prequalification criteria 70

Figure 1 – Building Service Subcontracting Procurement through competitive tendering 21

Figure 2 - Procurement process of SC 23

Figure 3 – Subcontractor evaluation process 28

Figure 4 - Research Process 39

Figure 5 - Experience of Respondents 43

Figure 6 - Professional Roles of the Respondent 44

Figure 7 – Type of services 45

Figure 8– Type of projects executed by the company 46

Figure 9– Number of Employees in the company 47

Figure 10– Subcontracting practises with building service specialists 48

Figure 11– Exclusion of materials from the scope of works 49

Figure 12– Satisfaction of the current procurement practises by the respondent

with his organization 49

Figure 13– Nomination of building service subcontractors 50

Figure 14– Establishment of Procurement Route 51

Figure 15– Pricing mechanism established with the building service subcontractor 52

Figure 16– Average Value of Contracts (in Million AED) 52

Figure 17– Bar Chart of mean scores for factors of the prequalification criteria 55

Figure 18- Negative Implication of Improper consideration of the Subjective

Factors for Building Service Subcontractor Prequalification 62


vii Shijo Joseph Vadakkekunnel

Acknowledgements

I would first and foremost like to offer my appreciation to Dr. Grant B. Wright, who has

offered me guidance, support and enthusiasm over the previous months. I would like to

express my deep appreciation and gratitude to the Heriot-Watt University staff who

gave me the necessary support during my postgraduate studies till completing this

research successfully.

Also I would like to thank my classmates and my friends for their continual support and

optimism throughout the process of completing this dissertation.

I extend my gratitude to my parents and the family for their continuous moral support

and encouragement during the different stages of my education.

I give special thanks to all those who have participated in this survey and especially Mr.

Harikrishnan S., Mr. Nathan Wiles, Mr.Suresh Pillai, Mr. M. Shareef, Mr.David

Fulham, Mr.Harry Downie, Mr.Ian Traynor & Mr.Robert Hartle for helping me finish

my objective. I hope that this research shall promote best practises for procurement of

subcontractors at U.A.E. and abroad.


viii Shijo Joseph Vadakkekunnel

Abstract

The practise of subcontracting building service works in a booming construction sector

at U.A.E. is a commonly adopted strategy. The complexity and relative importance of

building services in the construction makes it important factor to adopt appropriate

strategies to procure building service subcontractors. Realizing the importance of the

building service subcontractors, the selection and appointment of building service sub

contractor has often been procured in consultation with the client and the contractor

through nominated sub contractor provision within the FIDIC contract. However, the

selection of the building service sub contractor cannot be based merely on the basis of

tender cost alone but also depends on the various factors that may have an influence

upon the project performance. The subjective evaluation of the building service

subcontractors for prequalification proves it to be a determinant factor for the project

success. The dissertation investigates the factors considered for prequalification criteria

to select building service subcontractors in the U.A.E. construction sector. An overview

of the general procurement processes, with attendant repercussions for subcontractor

procurement in terms of supply chain management in general is established. The

investigation was carried out by surveying the lead construction professionals in the

U.A.E. The results of the online survey found that the respondents agreed with the need

for better prequalification process which had lead significant losses of performance in

construction due to the improper consideration of the prequalification criteria. The

research completes with the rating and ranking the subjective factors of prequalification

criteria.


ix Shijo Joseph Vadakkekunnel

Glossary

FIDIC: International Federation of Consulting Engineers

Building Service: MEP (Mechanical Electrical & Plumbing) /

Electromechanical

Consultant: Architect or Engineer

AED: United Arab Emirates Dirham

Employer: Client / Owner

PC: Prime Contractor / Main Contractor / General Contractor

PQC: Prequalification Criteria

BSC: Building Service Subcontractor

NSC: Nominated Subcontractor

UAE: United Arab Emirates

DSS Decision Support System

H & S Health & Safety

1.0. Introduction

The performance of delivering successful construction project lies with the choice of the

best subcontractors in the construction industry. The establishment of the

prequalification criteria for the subjective evaluation of the subcontractor is critical for

the selection of the competent subcontractor. This dissertation will research on the

process of subcontractor selection through prequalification in terms of investigating the

best consideration of the subjective factors and the problems associated with it. The

study will seek the best practises to improve the selection of subcontractors through

prequalification in the UAE.

1.1. Rationale for the Study

Building services typically account for 25-35% of the capital value of a large

commercial scheme and their design and installation often sit directly on its critical path

(Building, 2007). On some specialist projects, such as collocation centers or clean

rooms, the value of the services component can exceed 75% and requirements for total

system reliability place huge demands on the ability of the services team to deliver. The

importance and value of building service are of high value towards the project

realization. Moreover, project life cycles are shortening, more new complex

technologies are being introduced at a quicker pace, clients are becoming more

demanding and further, and companies are attempting to improve the project

performance. As a result of these dynamics, and with the increasing complexity through

globalisation, building services is becoming more of a risk and as a result has assumed a

significantly higher position within a company's agenda, or if it isn't, it certainly should

be (Proffitt, 2007).

The majority of the building service works are carried out by subcontractors. The high

costs for the building service works relatively proves it essential to procure their service

at the best value without compromising the subjective elements of quality, expertise and

competence of the building service subcontractor (Ng & Skitmore, 1999; Arditi &

Chotibhongs, 2005; Tserng & Lin, 2002). The complexity in controlling the BSC and

their high priority in the project success factors had called for appropriate strategic

measures to choose the best specialists for the job (Holt et al., 1993; Ng et al., 2008).


11 Shijo Joseph Vadakkekunnel

However, the selection of the building service subcontractor persists to be reliant on the

cost at U.A.E. Appointing the subcontractor with the lowest tender sum is found to be

performing poorly in the performance of the construction project (Banaitienė &

Banaitis, 2006). Therefore, BSC selection process should also practise evaluation of the

BSC performance.

The current development of decision support systems have brought in new models using

neural networks employing artificial intelligence techniques like fuzzy logics to

replicate the decisions made by human. However, the factors considered for the

prequalification criteria remains unstudied within the building service sector for the

U.A.E. The construction service industries in U.A.E. have been facing myriad

challenges due to the lack of the expertise of the domestic building specialists. Faced

with the risk of poor quality of workmanship, requirements for resources, expertise in

design and installation of specialist systems; the grading of subjective factors to qualify

the BSC is essential to help decide using the decision support systems and neural

networks models which combines the cost and performance element of the bidding

contractor. The priority in consideration of factor proves critical to the overall success

of subjective evaluation of the subcontractor.

1.2. Aims

This study aims to critically analyse the procurement practises of subcontractor

selection and provide a set of recommendations for construction professionals that will

improve the practice of procurement of subcontractors through appropriate selection of

prequalification criteria in the U.A.E.

1.3. Objectives

The objectives are to

1. Determine and analyse the practise of subcontracting in supply chain

management and identify the merits and the challenges posed by subcontracting

to achieve the project success factors.



2. To examine the role of building service subcontractors in construction and study

the processes of procuring the building service subcontractors.

3. To study the criteria for qualifying building service subcontractors and identify

the various multiple criteria evaluation models for prequalification.

4. To gather information on the practises of building service SC prequalification

criteria from professionals in the construction industry with varying

experiences and roles within the U.A.E.

5. To evaluate the subjective factors for prequalification criteria to select the building service subcontractor.

1.4. Outline Methodology

This research paper will extensively review the literature; investigate the current

practises into procuring subcontractors in the construction sector. This research will also

identify the present multiple criteria evaluation models developed for selecting SC

while outlining the BSC selection in the process. The research will be carried out based

on the literature obtained from academic and professional publications along with a web

based survey. The online survey shall investigate the practises and the surveyors shall

be asked to review the prequalification criteria. This study will form the basis to

determine a conclusion and future recommendations.

1.5. Structure of the Paper

Chapter 1 provides an introduction to the research paper on the setting out of the aim,

objectives and the rationale for the research.

Chapter 2.1. will undertake a literature review to determine the construction supply

chain and will discuss subcontracting as a part of supply chain management in depth.

Further, it will determine the importance of the subcontracting in construction industry.

Finally it will analyse the risks associated with subcontracting in the construction

industry.

Chapter 2.2. will undergo a literature review to investigate the role of the building

service within the construction supply chain. The process of procuring subcontractors



will be evaluated and it will discuss the SC nomination within the construction supply

chain. The shortcomings to the current SC selection practises will be discussed

Chapter 2.3. will carry out a literature review to analyse the current SC prequalification

practise within the construction supply chain. An evaluation of the various multiple

criteria evaluation models will be discussed. Further, an in-depth study of the various

subjective factors for prequalification criteria will be carried out.

Chapter 3 will determine in detail, present the research methodologies and its design in

order to achieve the set of objectives and establish a framework for developmental

research.

Chapter 4 will review the primary data gathered from research through the means of

online questionnaire and will analyse the results in comparison to the literature study.

The analysis will examine the subjective factors for prequalification of BSC in U.A.E.

construction sector.

Chapter 5 will present a conclusion from the results of the data analysis in chapter 4.

Also recommendations and possible further research will be discussed to ensure that all

future construction projects takes advantage of the opportunities available by using the

recommended criteria for BSC selection.



2.0. Literature Review

2.1. Subcontracting in Construction Supply chain management

This section 2.1 will study in detail the concept of subcontracting and their role in

supply chain management. At first, an analysis is made into defining supply chain

management and their relevance in the construction industry, and their relevance with

the construction sector will be established. Further, this chapter will discuss the practise

of subcontracting in relation to the supply chain management concepts. The results

obtained will form the basis for a critical analysis of current trends and theories

providing an insight into current subcontracting procurement practises. The merits of

subcontracting and their risk associated with subcontracting will be identified and

analysed

2.1.1. Supply chain management in construction

Construction is an industry which is based on project based manufacturing where the

contractors build at the site. Being a mutli- skilled industry, there is an involvement of

large number of contractors who are specialized in their own fields. In the construction

industry, the client initiates the project and basic design is prepared with the help of

consultants and designers. The contractor realizes the project into actual by employing

various skilled employees and organizations. With time, the construction industry has

evolving into a much complicated scenario where the projects have to be completed

within the least time and cost and without compromising quality. Overtime, the prime

contractor who is employed by the client has now been acting the role of management

contractor who divides the project into various tasks. These tasks are assigned to those

organizations that are specialized and competent in their respective fields. Thus

construction project are witnessing many ‘temporary multiple organizations’ as stated

by Cherns and Bryant. (Kornelius & Wamelink, 1998)

A special management element in construction project management has evolved

through the lessons learned from the management industry for the delivery of project at

better performance. This element is known as supply chain management. Supply chain

management was initially inspired from the Japanese manufacturing industry who



adopted managing the multi level organization using keiretsu which involves the

business as a cohort and relies on cooperation, coordination, and control to

competitively position businesses and industry norms (Benton & McHenry, 2010).

Researchers from the U.S.A. introduced these management techniques into the western

world and adapted it to suit their conditions and coined it as supply chain management.

Supply chain management is constituted with the process and strategic coordination of

the various multi level organizations which involves the prime contractors, design

consultants, architects, material suppliers, subcontractors, , and information within the

supply chain to deliver employer satisfaction for the project. Because of the differing

interests and objectives by various level parties with the supply chain which has been

conventionally driven by self-profitability, the objective of supply chain management

involves optimising the synergistic relationships within the supply chain to ultimately

improve the performance of the project or in short to satisfy the client. The conception

evolves from the supply chain where it is controlled as a single entity instead of a

synergism of independent transactional relationships. The final result expected is a

mutually beneficial, win-win partnership that creates a synergistic supply chain in which

the entire chain is more efficient than the sum of its independent parts (Benton &

McHenry, 2010). Integration in a supply chain has been defined at three different levels

which include the co-operation, co-ordination and collaboration. They rely on trust,

flow of information, cash flow, and delivery to lower organizational barriers needed to

improve integration (Christopher, 1992; Levy et al., 1995; Spekman et al., 1998 via

(BRISCO et al., 2004))

Each company in the supply chain obtains its own profitability and success by creating

customer value in terms of a functional, high-quality project at an acceptable price.

Each organization within the supply chain can reduce its own costs and increase its

project performance through supply chain management, thereby enabling the supply

chain to deliver value to the project owner. The satisfied project owner in turn rewards

the supply chain with loyal contracting power, allowing profitability to be transferred

back down throughout the supply chain. This in turn fosters further supply chain

integration and responsiveness, causing the cycle to repeat. (Benton & McHenry, 2010)



2.1.2. Subcontracting in construction supply chain

The subcontract is a contract between the prime contractor and a lower tiered contractor.

Depending on the complexity of the project, subcontractors may also be held liable for

some or all of the provisions in the prime contract that are incorporated by reference to

the subcontract. (Benton & McHenry, 2010). Subcontracting on a broader spectrum is

about large contracts to do large amounts of work. For example in the construction

industry, contractors will subcontract different segments of their works like the painting,

electrical installations, heating and ventilation, masonry, cladding, floor screed etc. The

advantages reaped from subcontracting the works includes from risk transfer to improve

cash flows. Hence, many of the responsibilities of building are passed over to the SC. In

short, subcontracting is contracting an organization to do what the prime contractor

want, or don't want, to do within the business.

Unlike the purchasing of materials in a supply chain by the members of the supply

chain, the subcontracting tends to be more complex. This is due to the complex

relationship between the prime contractor and the SC. The selection of SC based on the

technical specifications build by the project sponsor and the prime contractor need not

be fully developed. The project owner initially seeks to source technical expertise that

will evolve into the desired specified structure or service. Considering the dollar value

and complexity of some construction-related subcontracts, the successful project owner

and prime contractor will spare no effort to ensure that the very best subcontract source

is selected. In routine materials purchasing, if a selected source fails to perform, the

materials supplier’s contract can easily be cancelled. (Benton & McHenry, 2010).

In a supply chain, there exist various levels of subcontracting arrangements which need

not always between the prime contractor and the SC. Edum-Forwe et al. (1999)

classified subcontract arrangements as follows.

• Subcontract arrangements between the PC and subcontractors and on the

initiative of the client, as in the case of nominated subcontractors for specialist

work.

• Subcontract arrangements between the employer and SC.

• Subcontract arrangements between subcontractors and sub-subcontractors on the

initiative of the PC.



• Subcontract arrangements between subcontractors and sub-subcontractors on the

initiative of the SC.

With the multiple levels of subcontracting existing within the supply chain, the

management of subcontracting is critical to successful project completion.

2.1.3. Advantages of subcontracting

It's not a secret that subcontracting building works is benefiting a number of contractors

globally. Reports from Gray & Flanagan (1989) shows that 90% of the building works

in construction are subcontracted

There are many advantages of subcontracting their works. Firstly, all the contractors do

not have the expertise or the required resources for every installation and building

works. Hence they subcontract their works to contractors who are competent in the

particular field of works. This helps the contractor to overcome problems caused by the

need for special expertise and shortage in resources (Elazouni & Metwally, 2000) cited

via (El-Mashaleh, 2009). The shortage of resources may be due to the lack of extensive

operations from the PC to employ full time skilled personnel for various jobs in each

specialization (Arditi & Chotibhongs, 2005). Moreover, most of the projects are not

always alike and usually have their own uniqueness. Arditi & Chotibhongs (2005) finds

that subcontracting optimises the utilisation of resources available. Competent

contractors can improve the project performance with reduced cost, lesser time and

better quality. It capitalizes on the skills of trade specialists and copes with the

fluctuating construction demand (Ng et al., 2008). Subcontracting has also been

practised to improve the cash flow within the company so that negative cash flow may

be minimised and hence the risks due to credit liability may be reduced. Thus prime

contractors with lesser capital may begin the works with lesser investment.

The other advantages of employing subcontractors are that it gives an opportunity for

prime contractors to employ lesser workforce in construction projects thereby

promoting the contractor to focus more on its specialization.



2.1.4. Risks of Subcontracting

Today, with the large percentage of works being subcontracted, there has been a

significant reduction in the complexity of the works undertaken by the prime

contractors. The complexities of the works are transferred downstream by hiring

subcontractors. Hence, there has been a change in the strategy of the integrated supply

chain management from the traditional supply chain models. While construction supply

chain relationship has been discussed in the earlier sections, there are many inherent

risks associated with subcontracting. Saad & Jones finds that the weaker link within the

construction supply chain is the downstream where lays a large opportunity for

improvement (Saad & Jones, 1999) .The focuses on improving operating efficiencies

have been downstream. With many benefits of subcontracting have been discussed in

the earlier sections, construction supply chain partnerships retain several inherent risks

which may have an adversarial relationship between the supply chain members and

hindering the performance of the project. One of the major risks posed by

subcontracting is that the project performance shall be highly reliant on the performance

of the SC. This might be a potential problem if the SC does not meet the required

expectations. It is also harder to control a SC by the PC in comparison to the internal

control within the organization. Thus entire partnership implementation process holds

many elements critical to the success of the relationship and several factors contribute to

success (see Table 1). In practice, overcoming the social and attitudinal barriers and

managerial practices may prove to be extremely difficult if not impossible. The most

important attitudinal factors involve cooperation, trust, and goodwill, as well as the

ability to be flexible and handle conflicts. Furthermore, attitude and shared goals are

described as success factors. Other critical success factors will include effective

performance measurement and proper establishment of boundary personnel and

procedures. Ultimate dissolution of the partnership may be necessary if the firms are

unable to successfully work through the critical steps of partnership formation or

synergies cannot be recognized (Benton & McHenry, 2010) (Malonia & Benton, 1997).



Table 1 – Risks in Prime contractor and Subcontractor relationships (Benton &

McHenry, 2010)

Initial Strategic Analysis Phase

• Social and attitudinal barriers • Procedural and structural barriers SC/Supplier Evaluation and Selection Phase • Total cost and profit benefit • Partner capabilities • Cultural compatibility • Management compatibility • Financial stability • Location Project Completion Time • Natural management support • Communication • Increased coordination

2.1.5. Summary

This section 2.1 defined the supply chain management and its relevance with the

construction industry. The study found that construction projects are characterised by

multiple temporary organizations and the supply chain management from the

manufacturing industry can be applied in the construction industry. The supply chain

management calls for integrating the multiple organizations within a supply chain. The

subcontracting process within the construction was studied in conjunction with the

supply chain management theory. Subcontracting helps the prime contractor to involve

deeper in the major works and leave them from free the hassles of minor risks which are

transferred to the SC. Subcontracting is found to optimise the usage of resources and

improve the cash flow with improved project performance. Subcontracting is practised

at various levels within the supply chain and were discussed in the chapter. However,

the subcontracting was found to be faced by myriad of challenges caused by the high

risk of uncertainties from the downstream. The control of subcontractors is more

complicated with multiple layers of subcontracting within the supply chain.



2.2. Procurement of Building Service Subcontractors

This section 2.2 will study the procurement of BSC within the construction industry. At

first, an analysis of the role of building service specialist in the construction is carried

out in. The procurement of the BSC will be discussed in detail with an analysis of the

nominating the BSC in U.A.E. Finally, an insight into the shortcomings of the current

procurement practises shall be carried out.

2.2.1. Understanding the role of Building Service Subcontractors in

Construction

A building service contractor is a contracting organization within the construction

supply chain who engages in the design, installation, operation and monitoring of

activities which coincide with the mechanical and electrical required for the safe,

comfortable and environmentally friendly operation of modern buildings. They are also

are responsible for ensuring the cost-effective, environmentally sound and sustainable

design and maintenance of engineering services in buildings. The term building service

engineering is commonly used in the Canada, United Kingdom and Australia.

Services within a building that enhances the comfort, safety, security are titled as

building services. The building service engineering is involved in the interfacing of the

building with the occupant. The services include energy supply (gas , electricity and

renewable sources), heating and air conditioning, water , drainage plumbing, natural and

artificial lighting, building facades, escalators, lifts, ventilation and refrigeration,

communication lines, telephones, IT networks, security alarm systems, fire detection

and protection. (Anon., 2011).

2.2.2. Procurement of Building service Subcontractor

The procurement of building service subcontractors is a critical process within the

construction. To improve project performance, the downstream process within a supply

chain should be improved as building service enhances the safe, comfortable and

environmentally friendly operation of modern buildings. Hence, it is essential to select

the best procurement process to appoint a SC to optimise project performance.



Traditionally, BSC were selected based on the cost alone by the process of competitive

tendering. Shash (1998) explains the model of competitive bidding where the PC invites

quotations from the subcontractors while the PC prepares his cost estimate for bidding

construction projects. The BSC submits quotations for the sublet works provided by the

bidding prime contractor. The bidding prime contractor selects the best quotation from

the BSC and bid for the project. After the contractor wins the bid, the quotations are re

evaluated for compliance with technical specifications and cost. Negotiations are made

with the prospective BSC and the BSC is appointed. Figure 1 shows the model of

competitive tendering practised traditionally in the construction industry.

However, the practise of selecting the SC on the basis of cost alone does not improve

the value. I.O.B. (1979) reported that competitive tendering in construction projects

does not necessarily achieve value for money. It was found that single stage tendering

proved to be lesser successful for procurement of contractors. The competitive low-bid

procurement process may produce poor quality of work, extensive delays in the planned

work schedule adversarial working conditions, higher number of variations from SC,

claims, dispute, litigation and cost overruns. (Ulubeyli et al., 2010). Thus two stage

tendering evolved which was found to be more successful than its predecessor. In two

stage tendering, the contractor is appointed at an early stage for lump sum contracts.

Figure 1 - Building Service Subcontracting Procurement through competitive tendering

(Shash, 1998)

The first-stage of two stage tendering involves selection of BSC from the deliverables

that includes a method statements and construction programme, detailed pricing of

preliminaries, overheads and profit. Often, the first stage may also include the

Building Service Sub contractor

Prime contractor

Invitation to bid

Submission of bid

Negotiations

Award of subcontract



competitive tendering of work packages, together with lump sums for pre-contract

services, engineering costs, risk margins for the works that are not provided in the

second stage (Rawlinson, 2006). During the first stage, the preferred BSC are also

selected by joint consultation with the employer and the contractor. The second stage,

which is also the final stage, is typically the negotiations between the prime contractor

and the employer for appointing the preferred BSC based on competition.

The selection of BSC may be based on the joint consultation by the employer allowing

the employer to be more deeply involved. In this process, BSC are shortlisted from a set

of predetermined criteria which is known as prequalification. The BSC are initially

chosen by assessing the performance based on a set of criteria by the PC. This process

allows the contractors to screen lesser performing subcontractors. Moreover, the two

stage tendering gives an opportunity for the BSC with design responsibility to input

their designs (Rawlinson, 2006). This improves the build ability of the project.

However, the practise of appointing the contractor after the awarding of the prime

contractor by the employer continues to persist. This causes an adversarial relationship

with the prime contractor and the SC (Arditi & Chotibhongs, 2005).



Figure 2 – Two stage tendering process of building service subcontractor

2.2.3. Nominating Building Service Subcontractors

The current interests by the employer to involve deeper into the construction project has

promoted the idea of nomination in the construction industry where the suppliers or

subcontractors are predetermined by the employer. To achieve maximum integration of

Prime contractor requests quotation from subcontractors

Prime contractor receives the tendering drawings and specifications

Client invites bid from prospective contractors

Prime contractor selects the quotations from prequalified subcontractors or nominated subcontractors

Prime contractor submits the tender quotations with markups from subcontractors

Prime contractor reviews tender stage SC quotation for validity, qualifications and cost

Contract is awarded to prime contractor

No New quotations

or best price required?

Review SC quotations and compare with rates, allowances, qualifications

Contract is awarded

Yes

Obtain Quotations

Purchase Order or Letter of Intent is issued



the supply chain team, the active involvement of the employer in the creation of

integrated teams is essential. (BRISCO et al., 2004). Nominated subcontractors are

employed when the employer executes the design for the project like in traditional

procurement. Nominated BSC are employed when

Advice for detailed design is required in critical specialist systems (Ranns &

Ranns, 2005).

To suit the plant and materials of the SC this needs to be matched with the

contractors existing plant and materials.

Effective Cost Management is required.

Delays in building service installations are to be avoided (Karnick, 2009).

Concurrent Engineering techniques are applied to start early production (Ranns

& Ranns, 2005).

The nominated BSC usually involves contractors who are specialised and critical to the

integrity of the project. These may include electrical transformer specialists, HVAC

specialists, and lighting contractors.

To facilitate nomination of subcontractors, there exist various forms of contract that has

provisions of including them. However the employer does not have any direct control

by contractual agreement over the SC. In the U.A.E., the widely used FIDIC contract

allows the employer to nominate the SC as a variation under clause 13 of the FIDIC

contract. This allows the PC to appoint the nominated BSC without the consent of the

Engineer as stated in sub-clause 4.4(a).

The nomination of BSC may cause serious confusions and risks of adversarial

relationship with the employer and the prime contractor (Wilkie & Walker, 2002). The

lack of direct contractual agreement with the BSC by the employer causes indirect

control through the PC. The sub-clause 4.4(a) makes the PC responsible for the actions

of the subcontractor in cases of default or breach of the contract by the BSC. The faults

shall be seen as if the PC had breached the contract irrespective of the defaults by the

BSC. The employers desire for control over the BSC whilst maintaining the contractor’s

sole liability for the risks from subcontracting causes tensions to raise (Loots &

Charrett, 2009). To avoid the adversarial disputes, the sub-clause 5.2(b) and (c) of the

FIDIC contract allows the PC to object the nomination of the BSC at circumstances

when the BSC do not indemnify for its defaults or breach of contract with the PC.



2.2.4. Shortcomings to current selection practises of building service

subcontractor

The selection of BSC has been a big challenge for the construction managers. While

Holt et al. (1995) cites various risks in contractor selection, the risks remains the same

for the selection of BSC. The lack of universal methodology in BSC selection continues

to be a hurdle in procurement. The contractor selection criteria vary with organizations.

Holt et al. (1995) finds that most of the construction professionals were not satisfied.

Construction practitioners although are satisfied with their contractor selection process,

however they are not satisfied with the performance of the contractors (Holt et al.,

1993). Latham (1994) recommended the rationalisation of prequalification within the

U.K. construction industry and he recommended the application of Decision Support

Systems using information systems. The implementation of a universal contractor

selection method will help the contractor in improving their standards from the

feedback. This will give the BSC to improve their areas of weakness and would benefit

and encourage positive performance of the contractors.

The lack of long term confidence from unqualified BSC is found to be another

drawback of the system. Employers are found to be less confident to reconsider BSC

who has lost in the prequalification process because of the lack of regular

prequalification. The prequalified BSC should be regularly reviewed so that new SC can

have the opportunity to compete. Moreover, the prequalified BSC may lose their

competence in their runtime which has to be regularly be updated. This may be due to

the loss of financial stability of the contractor, changes in the organization, etc.

Holt et al. (1993) also identified that the subjective evaluation of contractor is an art

based on the decision maker’s experience. The decision made on selection relies heavily

on the human factor rather than on actual tools (Banaitienė & Banaitis, 2006). Hence,

the selection of BSC may not be based on the quantitative techniques as the evaluations

of subjective factors are based on human perceptions. Moreover the expenses in

retrieving information for the rating of subcontractor is high, thereby employers are

prompted to procure subcontracting services on the basis of human perception skills.



2.2.5. Summary

The section 2.2 provided an insight into the procurement practises of BSC. At first, the

role of building service subcontractors was studied dictating the importance of building

service in the construction process. Building services were found vital to improve

safety, comfort and environmentally friendly operations for modern buildings. The

building service subcontractors who performed these works were discussed and they

were procured through single stage or two stage tendering of BSC. The single stage

tendering procures BSC based on the lowest bidder. Since the performance of the BSC

are not being considered in the procurement, the second stage tendering is a more

effective method of procurement where the bidders are initially evaluated depending on

the predetermined factors for prequalification. An analysis of the nomination process of

the BSC was made, establishing the role of the client in procuring a BSC. The

involvement of client in the procurement of BSC helps in improving the build ability

and reduces the time in procurement life cycle. However, the nomination practises were

found subject to abuse where the PC may be punished due to the defaults by the

nominated BSC. The shortcomings of the current selection methods of BSC were

discussed.

2.3. Prequalification of Building Service Subcontractors in UAE

This section will discuss on the prequalification process within the construction supply

chain. A study of the various subcontractor selection models will be carried out. The

various factors considered in the prequalification for the subcontractor selection process

will be identified and explained in detail.

2.3.1. Understanding Prequalification of Subcontractors

It is an accepted fact in the construction industry that delivery the employers

expectations can only be met by contracting organization with proven expertise and

competency. Hence, the selection of a SC based on their potential is a critical factor for

achieving the required client satisfaction. The traditional method of selection of

subcontractors based on the tender sum is far being replaced by two stage tendering

where the SC is evaluated based on the subjective evaluations (Banaitienė & Banaitis,



2006). These evaluations provide an opportunity for the employer to screen the SC

based on their competency or expertise so as to carry out the work effectively. This

process of selection by assessing various subcontractors who are each financially and

technically competent which can satisfy the employer’s needs is known as

prequalification (ST et al., 1995). The SC prequalification is compared with a set of

predetermined criteria which is known as Prequalification Criteria.

The Prequalification criteria are cited in the tender documents which will explain the

process of prequalification. European Union public procurement legislation requires

tender documents to explicitly define the prequalification criteria so as to improve

transparency and clarity in the procurement process (Ng & Skitmore, 1999).

Investigation from Banaitienė & Banaitis (2006) finds that inorder to procure a qualified

contractor, a multi criteria evaluation method must be adopted to evaluate the SC.

2.3.2. Factors affecting selection of prequalification criteria

The prequalification criteria vary with organizations and the type of the contracting

service being procured. Ng & Skitmore (1999) identified the variations for criteria as to

be attributed by the type of client or the type of the decision makers. The client criteria

play a vital role with the selection of SC (Russell & Skibniewski, 1998). The decisions

may vary with the type of client whether being a public or private sector enterprise.

Decisions made by public sector enterprise must be transparent for being accountable to

the public. Hence, the selection process is more clarity and shall be subject to the local

government regulations and the local procurement policies. However, the private sector

enterprises need not be more precise in selection of the SC as they are usually

independent in taking decisions and need not be accountable to the general public

(HOLT et al., 1995).

The criteria for selection of SC are vastly influenced by the type of decision maker who

decides upon the final winner. The decision maker need not be the employer always as

project management consultants or the architects may have a role in the selection of the

SC (Russell & Skibniewski, 1998) (Ng & Skitmore, 1999). In a case when the design

consultant has a choice to influence the decision, he may choose to go with the

contractor who has more expertise in design. Likewise, the employer may prefer to

employ contractor who have bid the contract with a lesser tender sum. Thus, the



decision maker makes a high influence in the selection criteria depending on his

expertise, position within an organization, or the differences in their perception.

2.3.3. Current Subcontractor Selection Models

The interests in prequalifying subcontractors have introduced many SC selection models

which evaluate the subcontractors based on various criteria considered to be relatively

important for consideration. These factors were rated based on the subjective decision

of the experienced construction professionals. Figure 3 shows the process of SC

evaluation process performed by construction industry for procuring SC services.

Figure 3 – Building Service Subcontractor evaluation process

The subjective considerations such as financial position, reputation of the contractor,

resource capabilities, safety and environmental consideration are important to decide

upon the selection of the SC. The integration of Decision Support Systems (DSS) and

Expert Systems (ES) into SC rating has improved the SC selection process. These are

information systems which are designed to propose solutions for management issues.

The initial model from Albino & Gravelli (1998) proposed a neural network for

selection of SC. The neural network was based on a application case where management

Identify evaluation factors for

prequalification

Evaluate BSC performance

by rating

Summarize the ratings

for BSC performance

Judge the rating

according to expertise and

with the assistance of

DSS & ES

Appoint the prequalified

BSC



and techinical innovations to an assembly operation in construction site. This proces

was proposed to formalize SC rating so as to reduce the expert's subjectivity. But KO et

al. (2007) criticized the neural network model by Albino as membership function and

network topology are hard to be identified. (El-Mashaleh, 2009).

Okoroh & Torrence (1999) proposed SC Performance Evaluation Model (SPEM) by

employing the Evolutionary Fuzzy Neural Inference Model (EFNIM) which synergises

Genetic Algorithm, Fuzzy Logic, and Neural Networks, proposed by Ko (2002). The

SPEM model overcomes the disadvantage of the primitive practices that includes the 1)

elimination of repeated evaluation process, 2) consideration of inter-dependency

between final scores and factors, 3) manifestation of larger impacted factors in decision

maker's perceptions, and 4) subjective evaluation of performance. This model was again

criticized by Lin & Chen (2004) citing that membership function of natural language

expression depends on the managerial perspective of the decision maker. Further, the

computation of a fuzzy weighted average is still complex and are not appreciated by

construction managers. Lin & Chen (2004) proposed a fuzzy linguistic approach which

was simpler and allows the evaluator to analyse the scores and weigh directly using

linguistic terms. Mohan and Matthews (2000) put forth an improved system for

selecting and partnering with subcontractors. That research first put all of the multiple

partnering relationships between subcontractors into a complete package to make a

comprehensively integral evaluation (Tserng & Lin, 2002). Tserng & Lin (2002)

developed Accelerated Subcontracting and Procuring (ASAP) model based on a web

based DSS XML and portfolio theory in financial management. It considered

subcontracting and procuring process into re-engineering through omnipresent Internet.

The ASAP models assumes that all the SC considered are prequalified. This advantage

of this model is that the SC can be selected by deciding on a selective trade-off between

profit and risk for different combinations.



Table 2 - Prequalification Subcontractor Selection Models (Mangitung, 2010)

Prequalification Contractor Selection Models

Simple structured models (linear models):

• Dimensional Weighting (DW) (Russell 1988; Russell et al. 1990a)

• Multi-Attribute Analysis (MAA) (Holt 1993; Holt et al. 1994a)

Complex structured models:

• Multi-Attribute Utility Theory (MAUT) (Hatush 1996; Holt 1993; Holt et al.

1994b)

• Analytical Hierarchical Process (AHP) (Abudayyeh et al. 2007; Alarcon and

Mourgues 2002; Al-Harbi 2001; Fong and Choi 2000; Mahdi et al. 2002)

• Evidential Reasoning (ER) (Sonmez et al. 2001; 2002)

Artificial Intelligence (AI) models:

• Fuzzy Sets (FS) (Nguyen 1985)

• Knowledge-Based Expert System (KBES) (Russell et al. 1990b)

• Cased Based Reasoning (CBR) (Ng 1996)

• Artificial Neural Networks (ANN) (Elazouni 2006; El-Sawalhi et al. 2006;

Khosrowshahi 1999; Lam et al. 2000; Taha 1994)

Statistical models:

• Cluster Analysis (CA) (Holt 1996)

• Discriminant Analysis (DA) (Wong et al. 2003)

• Logistic Regression (LR) (Wong et al. 2003)

• Hybrid models (combination of two or more modelling techniques) (El-

Sawalhi et al. 2006; Holt 1993; Russell 1992)

2.3.4. Subjective Factors for Prequalification to procure building service

subcontractors in UAE

The selection of prequalification criteria varies with the type of organizations, client

interests, decision maker’s perceptions and also the type of contracting service being

procured. However there are a few set of criteria which are common in SC selection.



Choosing the right prequalification criteria is an underlying factor in the successful

procurement of a subcontracting service. Following are the list of factors identified

crucial to evaluate the performance of BSC.

i. Quality Management Systems & their policies

The quality policies and the quality management systems are critical in determining

the success of the project. Quality ensures the fulfilment of meeting the employer’s

purpose. The effective management of quality requires appropriate quality policies

and quality management systems. Quality management systems in U.A.E. have

been predominantly adopting ISO 9000 which attempted to establish Europe wide

standards of quality that apply across industries and countries. The practise of

adopting ISO 9000 has been popular in the U.A.E. construction; however the ISO

9000 is a minimum quality management standard and does not guarantee the

project performance.

With the ISO 9000 quality management systems being bear minimal for assuring

quality, there have been relatively newer successors like the Total Quality

management system. But the relative acceptances of the successive models to ISO

9000 have been slow to adopt. It is very crucial to understand the quality policies

and their compliance to the standards to ensure the acceptance of quality within a

construction project.

ii. Health & Safety Practises

The construction industry have been notorious in the health and safety records

because of the higher number of accidents and the health issues associated with the

construction works. The growing concerns of safety practises inspired by

predominantly western health and safety management practises have lead the

U.A.E. to adopt health and safety regulations guided by the federal laws within the

state.

The Department of Municipal Affairs at Abu Dhabi has recently implemented a

code of practice for health and safety in construction sector. However, the code of

practises for health and safety in construction are not fully enforced in law, but it



represents a radical change from current practices (Anon., 2007). However the code

is a local law and remains applicable to the emirate of Abu Dhabi only. Moreover

there is no statutory body dealing with the monitoring of health and safety issue in

the construction sector. Even though, there is a marked improvement in the

construction safety records, but the numbers is still a concern (Redfern, 2010).

Dealing with the absence of clearly established laws for health and safety in

construction industry, the importance of selecting a subcontractor on the rating of

their health and safety performance is very essential.

iii. Environmental Management

Environmental management is part of good business management ethics and is

widely an important strategy for corporate social responsibility. Due to the direct

environmental activities as a result of the construction related activities from the

building services, environmental management is an important part of the company

policy. The sustainable practises for construction of building services have its

footmark from the design to the construction. Adverse environmental impacts of

construction such as sound and vibration, pollution to water resources, demolition

and construction waste, soil and gas contamination, dust, hazardous emissions and

odours, demolition of wild life, and natural features and destruction of

archaeological relics have been major affects of the construction works. To mitigate

the level of environmental carbon footprint and damages, it is important to carry out

sustainable practises as a commitment to the corporate social responsibility.

In the U.A.E., there are Federal Laws and local laws for the environmental

regulations. However, there are no laws for monitoring of environmental

management or codes of practise for the construction sector (Zarouni, 2009). The

environmental management systems generally adopted by the U.A.E. construction

companies includes the international standard BS7750 and the ISO 14001. Hence,

the selection of building service SC should provide a high priority in the practise of

sustainable practises by the BSC. Within the supply chain, it is imminent to

integrate the environmental management policies so as to achieve overall

sustainable development.



iv. Human Resources

Construction industry is a labour intensive service industry where the human

resources are critical to the success factor for the construction project. To achieve

the required project performance, the quality of attracting and maintaining human

capital is critical. Levy & Sydney (2000) finds that the lack of competent managers

and highly skilled employees has placed the contracting organizations to focus on

training of personnel to improve productivity and qualified workers.

The human resource management practise in a BSC construction can be checked

for the employee motivation, worker participation, worker recognition practises,

management commitment and effective training of the employees. (Yankov &

Kleiner, 2001) (Olomolaiye et al., 1998) (John, 1996). These factors are to be

considered while assessing the human resource potential of a BSC.

Scarcity and quality of the human resources have been hampering the U.A.E.

building service construction industry (Anon., 2008). Many BSC are not training

there staff properly despite of the poor quality of the workmanship in the U.A.E.

building service sector. Since the majority of the building service subcontractors are

relatively smaller in size in comparison to the general contracting organizations,

there have been lack of investment by the companies in improving it human

resources. Moreover, the labour wages and the employee satisfaction of the U.A.E.

construction workers are poor leading to repetitive strikes at construction sites

(Anon., 2006). Care should be taken to analyse the Human resource management

policies and the management commitment towards achieving the required goals.

v. Financial Status

The financial implications of an organization demonstrates it credibility as a

successful performing contractor. The financial function plays a significant role in

achieving the objectives of the contracting organization from its financial resources.

(EDUM-FOTWE et al., 1996). The performance of the construction project may be

stalled if the subcontracting organization becomes insolvent. The strategy in

analysing the financial data remains critical to the assessment of the resources.



There exists a variety of strategic tools for analysing the financial position of a

contracting organization. Traditionally, the financial functions are determined by

employing traditional ratio analysis of the financial data obtained from the balance

sheet of the subcontractor. Traditional ratios include the Liquidity ratio,

profitability ratio, leverage ratio and activity ratio. The liquidity is measured

traditionally by calculating the current ratio or the solvent ratio. The liquidity

demonstrates how a company can meet its liability. The leverage shows the capital

structure of the company, which is an implication of the company financial risk.

Profitability is determined traditionally by calculating the profit margins, return on

assets, return on equity and earnings per share. Leverage is measured traditionally

by determining the gearing ratio. Finally, the interest cover and the activities can be

determined from the asset turnover and the stock turnover. The interest cover is

focussed on analysing the relationship between profits available from the

organization’s business and the operations liabilities of interest payments.

vi. Performance records of past works

Studies from previous authors have ascertained that assessment of the contractor’s

past project is an important function for contractor selection. Tam & Harris (1996)

highlights the function of past project performance is high in terms of standardized

discriminant function coefficients. This shows that failures from the past project

have a higher probability of repetition with companies performing specialised

service that are highly repetitive in characteristics.

Building service sector being a highly specialised job have a habit of repeating the

past faults if the company do not take appropriate measure and changes in its

policies to improve quality control and key performance indicators.

vii. Records of disputes in previous projects

The construction industry is known to be notorious for high level of disputes caused

by lack of cooperation, limited trust, and ineffective communications leading to an

adversarial relationship among all project stakeholders (Chan et al., 2004) (Moore

et al., 1992). These disputes have caused various projects to lose it required



performance and have resulted in a burden to the construction supply chain.

Building service sector being a highly specialised job have a habit of repeating the

past faults if the company do not take appropriate measure and changes in its

policies to improve quality control and key performance indicators.

viii. Plant & Equipment

With the increasing sophisticated technologies for construction, the reliance on

plant & equipments has been increasing. The plant & equipment is learned to have

a direct influence on the time and quality of the construction project (Hatush &

Skitmore, 1997). To improve the success factors, it is essential that the BSC shall

have the appropriate plant & equipment. The required plant & machinery should be

anticipated, identified and the responsible personnel for handling the equipment.

Appropriate working method statements are to be assessed where the commitment

and understanding of the infrastructure shall be known. The BSC should establish

clear and precise policy of using safe plants & machinery with trained operators, to

ensure safety at site (Sawacha et al., 1999).

ix. Professional Accreditation

Continual professional development is critical to the overall development of the

competency of the staff. Professional membership and accreditation alleviates

innovation within the company and allows for adopting international standards of

practise. The personnel are educated with the current and emerging trends within

the building service industry and helps improving the work ethics and practises for

better performance. In the current period of recession, the competition has sparkled

interests in companies to try new methodologies to improve the quality and cost.

Further, the accreditation of the contractor shall boost confidence in the employers

which demonstrates their capability in their works. The common professional

membership for the building service industry includes the ASHRAE, CIBSE, APM,

CIOB, RICS, etc. In the U.A.E., the practise of professional development has been

lesser practises in comparison to the contractors in the West. However, building



service industry have been showing keen interests to associate and build knowledge

for improving best practises and boost innovation.

x. Training of Personnel

Adapting to the changes in the construction industry requires the personnel in

construction to be educated and made aware of the emerging trends. Training of

employees is required to establish good practises and not to be fallen behind the

latest technologies. Edum-Fotwe & McCaffer (2000) finds that to maintain the

competency of the staff, the knowledge and expertise should be achieved through

training. The management should be committed to invest resources for professional

development of their staff.

xi. Company Ownership

The relationship of the company ownership with performance has been established

by various authors. Since many of the building service subcontractors are of smaller

sizes, it is important to know the owner proprietors and senior managers are capable

of leading their staff through the new disciplines which might entail (Briscoe et al.,

2004). In the U.A.E., there are semi government and private owned BSC. Ke &

Isaac (2007) finds that the performance of firm improves with higher managerial

ownership but that, after a point, managers become entrenched and pursue private

benefits at the expense of outside investors. Moreover, the company ownership may

be a single ownership or a joint stock company. It is seen that the breakdown of the

sole control of the single shareholder and the presence of the other block-holders

may enhance the supervision and monitoring of the management and improve the

corporate governance.

xii. Method Statements of the works to be executed

The method statement is a set of instructions written to explain the process of the

works to be carried out by the SC. These documents are submitted to the employer

prior to the start of the works. It gives the employer or the prime contractor to



identify the process that shall take place when the work is awarded. Method

statements in construction are generally undertaken to address the risks to health

and safety. It provides a clear idea about the quality process carried out so that the

employer or the PC can check for compliance with its policies. A method statement

shall specify the processes to be carried out at various stages and the appropriate

measures to protect the site personnel, the employer representatives and members

of the public who could be affected by the construction activities.

The work method statement comprises of the following data : a) purpose b) scope

of works c) references from previous employers d) defines the various activities and

the allocation of risk and responsibilities e) Plant & equipments required to carry

out the works f) risk assessment and management processes g) health and safety

processes.

During the prequalification process, it is essential to screen out the subcontractor

whose method statements do not comply within the interests of the employer. The

performance of the works can be assessed in advance, from the subcontractor’s

declaration on its statement. Hence, subcontractors with better method statements

can be given higher rating which shall establish the required performance levels for

the project.

2.3.5. Summary

The section 2.3 focussed and studied in depth the prequalification process of procuring a

BSC. Initially, the process of prequalification for selecting the BSC was discussed. The

factor affecting the decision for selecting prequalification process was analysed and it

was found that the factors were subjective and the ratings to the factor depends on the

perception of the decision maker. An insight into the current multiple criteria evaluation

models were carried out based on various journals and professional publications. It was

understood that integration of Decision Support Systems (DSS) and Expert Systems

(ES) into SC rating has improved the SC selection process. The models were found to

be applied using fuzzy logic, neural network, generic algorithm for analysis. Finally,

twelve numbers of major subjective factors were identified and discussed in detail

highlighting the significance of each factor in relevance to their relation with

subcontracting success factors.



3.0. Research Methodology

This research paper aims to evaluate the current methodologies in sub contracting

procurement practises while establishing a set of recommendations to set out the

priorities for considering subjective factor of prequalification criteria required;

improving the selection of prequalification criteria on a more advantageous approach. In

order to achieve the objectives of the research, the strategies for the research should be

clearly structured, efficient and well defined. This chapter aims to present the research

methodologies and its design in order to achieve the set of objectives and establish a

framework for developmental research.

3.1. Research Process

The research process explains the strategy for the study. The initial research on the

subject area will be studied to establish the aims, objectives, and the rationale for the

research. Depending on the initial research, an extensive study on the literature review

will be undertaken. The prime research methodologies to be carried out in the

dissertation are preparation of literature reviews for subcontracting practises and the

prequalification criteria for BSC selection in the UAE. The study involves investigating

the sources of theory and previous researches to examine and establish the bases for the

subsequent, detailed work and finding the necessary alternatives, data collection through

means of investigation with various construction professionals from the U.A.E. and an

analysis of the findings. The online survey will be conducted to investigate the current

practises and their thoughts and perceptions on the current research subject. The data

obtained from the survey and the literature review will be compared and evaluated. The

analysis made from the comparative evaluation study will be undertaken from the

results to provide the conclusion and recommendations. Figure 4 demonstrates the

process of the research study for the preparation of the dissertation.



Figure 4 – Research Process

Identify Research Area

•Develop Aims & Objective•Identify the rationale for the study

Extensive Literature

Review

•Investigate & critically analyse the current practises for subcontracting•Research through web based and desk based study

Design Questionnaire

•Identify Qualitative & Quantitative data•Design for analysis of current practises•Design for analysis of suggested practise

Data Collection

•Identify & sample the construction profesionnals for survey•Send questionnaire online•Collect the survey results

Data Analysis

•Evaluate the data using comparative evaluation•Prepare statistical data and graphical analysis

Conclusion & Recommendatio

n

•Develop the findings from the investigations•Prepare recommendations based on the study from investigations and literature review



3.2. Literature Review

The development of the extensive literature review aims and objectives follows the

extensive literature review. The literature review is prepared prior to the development of

the questionnaire. The literature reviews aims to discuss the published data on a relevant

subject data or area which may also be taken from a certain time period (Anon., 2007).

The literature review discusses the current practises, the authors, the prevailing

hypotheses and theories, the current topics to be reviewed, relevant methodologies that

are appropriate. It also addresses the gaps in the current studies and reveal suggested

areas for improvement. The literature review shall be done using the following methods

- a) Web based study, b) Interviews & c) Desk based study.

The literature review will utilise the web based study to investigate academic journals

and professional publication to finding the relevant information regarding the subject.

Also, the data from desk based study using professional publications, academic text

books and journal from the library will be used to prepare the literature review.

3.3. Design of Questionnaire

The technique used for the research method are classified under two strategies;

quantitative and qualitative research (Fellows & Liu, 2009; Sanders et al, 2009). Due to

the synergism of technical and managerial aspect of the subject study, the strategy

required to analyse the data was concluded to combine the qualitative and the

quantitative strategy. The questionnaires are grouped under three sections. Section 1

requires the personal profile of the surveyor, while section 2 investigates the profile of

the company and their practises. The section 3 surveys the criteria for prequalification

based on the perception of the surveyor and the current practises of the respondent’s

company. Hence, section 1 and 2 are strategically analysed using the quantitative

analysis while the section 3 analyses the data qualitatively. The quantitative approach

enables the information gathered in the initial literature reviews to be utilised to

determine the reality of subcontracting procurement practises in practice (Fellows &

Liu, 2009) while the qualitative data explores the observation from an experienced

construction practitioner and identify the explanations and their possible concerns.



In view of the diverse range of construction practitioners surveyed within the U.A.E.

construction sector, the questionnaire has been designed to keep the language simple

and easily communicated with the surveyor.

3.4. Sampling of Respondents

To investigate the current established practises in the procurement of subcontractor and

explore the observations from various construction professionals within the U.A.E.; the

respondents have been sampled from various aspects of the construction industry. The

surveyors targeted for the questionnaire involves such as clients, project management

consultants, consultants, contractors and subcontractors. The survey will mail through

webmail to 225 construction professionals within the construction supply chain of

varying roles and with proven expertise. The mailing list of the respondents was

obtained from the RICS website and CIOB website. The sampling of the construction

practitioners have been identified by random selection while only screening out

practitioners who are not involved in the construction industry and have not worked in

the U.A.E. The information collected from the respondents will critically analyse the

procurement practises of subcontractor selection and will provide a set of

recommendations for construction managers.

3.5. Data Analysis & Recommendations

The data analysis will focus on a review of the current practises of the subcontractor

prequalification practises from the participating surveyor and his/her organization. The

qualitative data indicating the personal profile and the profile of the respondent’s

current organization will be compared with the quantitative data for the ratings and

comments to the prequalification criteria; and comparative evaluations will be made to

explore the current practise of subcontractor prequalification criteria selection and

determine the reason for practise. To analyse the qualitative scores, the average Likert

scores will be calculated by finding the mean of the rating indicated by the respondent

to the subjective factor considered. The gathered data will be evaluated in relation to the

literature reviews to identify how the building service subcontractor selection practises

relates to the construction industry as a whole.



4.0. Data Collection and Analysis

This chapter will discuss the purpose and the responses to the survey. The respondent’s

personal profile will be analysed along with the profile of the respondent’s current

company. The ratings indicated by the respondents for the subjective factors of

prequalification criteria will be analysed and will be ranked in accordance to their

significance. The ratings will be analysed and discussed in relation to the literature

review and the surveyor’s comments. The implications caused by the improper

consideration of the subjective factors will be analysed and discussed.

4.1. Purpose of the Survey

There have been extensive researches on the contractor selection method by

prequalification method. These researches were focussed on the selection of the

contractor from the perspective of a project sponsor or the owner of the project. From

the literature review, there have been multiple theories on the prequalification process

and as a result many models have been developed with varying strategy. However, these

researches were focussed on the contractor selection by the contractor. Further, the

suitability of these models varies with countries due to the different environment,

culture and the domestic politics. This survey shall evaluate the current practises of

prequalification for selecting BSC for U.A.E. construction projects.

4.2. Responses to the Survey

The survey was published online on 27th June 2011 online at Questionform.com . The

survey questionnaire was send to 225 construction professionals within the U.A.E.

chosen from the sampling of construction practitioners within the U.A.E. There was an

overall response of 37 people to the survey. The responses received were from leading

construction practitioners and having a diverse range of professionals with varying roles

and experience within the construction sector of U.A.E. The online survey was

published online for 30 days and was closed on 26th July, 2011.



4.3. Establishing Expertise and Knowledge of the Respondent

The Section 1 of the online questionnaire was intended to determine the personal details

and the professional expertise of the respondent. This section aims to identify the

personal profile of the respondent as well as determine whether the personal profile of

the respondent meets the expectations of the survey. It also helps in comparative

evaluation of the quantitative analysis from the levels of the respondents expertises. To

comply with the confidentiality policy, the personal details of the respondent are not

revealed and shall be kept in confidence with the author.

The personal details determined the name of the respondent, current designation of the

respondent’s job, email id, contact telephone number and the name of the current

organization of his / her. However, the personal details were not mandatory and

decision to fill within the discretion of the respondent to reveal his personal details.

To identify the professional competence of the respondent, the respondent was asked to

provide his / her experience in the construction sector and the roles that he had played

during his career in the construction sector. From the survey, 36 respondents indicated

their experience as shown in the figure 5 below.

Figure 5 - Experience of Respondents

Respondents were asked to provide their experience. From the Figure 5, it is noted that

largest group of the respondents whom constituted 36% of the respondents were having

< 5 years22%

5 - 10 years17%

10 - 15 years25%

>15 years36%

Experience of Respondents



an experience of more than 15 years within the construction field while the least

response were from the respondent with an range of experience within 5 – 10 year with

a score of 17%.

It is noted that the cream of the responses were shared by the group of professionals

with an experience level of more than 15 years experience validating the quality of the

data received from the survey. The author is satisfied by the nature of the expertise of

the respondents and their fairly equal distribution of the result from different groups of

expertise.

The final question from the section 1 was to identify the various roles that the

respondent had worked demonstrating his working knowledge within the sector. The

respondents were requested to provide the current and his past roles within the

construction sector. The following figure displays the results from the roles provided by

the respondent.

Figure 6- Professional Roles of the Respondent

Respondents were asked to provide the various roles that they had worked during the

career in the construction industry. From the figure 6, it is noted that the 21% of the

respondents have worked in the role of project management, with estimation &

tendering, procurement, and quantity surveying having 15%, 15% and 14% share

respectively. Since, project management, estimation & tendering, procurement and

Project Management

21%Human Resources

2%

Quantity Surveying

14%Estimation

& Tendering15%

Buyer2%

Procurement15%

Design / Technical

16%

QA/QC6%

Health & Safety3%

Other6%

Professional Roles of the Respondent



quantity surveyors are directly involving with the subcontractor which constitutes 65%

of the respondents, it demonstrates that the responses have been made from a diverse

range of construction professionals who have direct involvement with the procurement

of subcontractors. The respondents who dealt with design and technical (16%), human

resources (2%), QA/QC (6%), health and safety (3%) and buyer (2%) formed 29 % of

the respondents. It is noted that a respondent need not have taken single roles but also

multiple roles. Moreover, there are chances where the respondents may have worked in

two or more roles simultaneously. In the present days of economic recession within the

U.A.E., companies within the U.A.E. have been adopting multitasking roles for

improving productivity and reduce the running costs of the organization.

4.4. Establishing Company Profile and their Current Practises

The questions from section 2 of the online questionnaire investigated the nature of the

company that the respondent is currently working. The brief profile of the company was

determined by asking the type of services, type of projects executed, employee strength

and the value of the contracts executed by the company.

Figure 7 – Type of services

The above Figure 7 displays the type of services executed by the company. The figure

shows that largest group of the respondents were working for contracting organization

Engineering (Design

Consultancy)20%

Quantity Surveyor

13%

Project Management

20%

Contractor39%

Material Trading4%

Other4%

Type of Services



which constituted 39% of the respondents while 20% of the respondents were working

for Design Consultant & Project Management Consultants each, while 13% of the

respondents worked for Quantity Surveyors and 4% worked for trading companies. It is

noted that 1 respondent that he worked for the dispute resolution consultancy.

Figure 8 – Type of projects executed by the company

Respondents were asked to provide the type of projects executed by their current

company. The above figure 8 displays the type of projects executed by the company.

The figure shows that largest group of the respondents were working for building &

infrastructural projects which constituted 48% and 28& of the respondents respectively;

while 18% of the respondents were working for industrial projects. However, 6% of the

respondents indicated that they working for airport, marine and oil & gas project.

Interestingly, these projects are categorised under infrastructural projects.

Infrastructural28%

Building48%

Industry / Factory

18%

Other6%

Type of Projects executed



Figure 9 – Number of Employees in the company

Respondents were asked to provide the number of employees working within his

organization. The above Figure 9 shows the number of employees working in the

respondent’s current organization. The figure shows that almost half of the respondents

were working for contracting organization having more than 1000 employees while

21% provided that they work for company with lesser than 50 people. This wide

disparity in the employees maybe owing to the type of organization they work.

Contracting companies requires larger number of employees to execute their work in

comparison with consultant firms who require only lesser number of people. However,

it is noted that there are contractors within the survey who have employees between 50

– 199 employees. This shows that contracting organizations of large and smaller size

have participated within the survey.

4.5. Establishing Current Working Practises of the Company

The section 2 of the online questionnaire investigates the current practises employed by

their companies. An evaluation of the current practises established in procurement of

subcontractors is carried out. The evaluation is done to make a comparative evaluation

and base for the analysis to the prequalification criteria selection.

< 5021%

50 - 19911%

200 - 49911%

500 - 9998%

> 100049%

Employee Strength



There were six questions asked based on the procurement practises by the respondent’s

organization. The questions included whether the company subcontracted the building

service contractors, exclusion of materials from the scope of the subcontractor,

satisfaction of the respondent with the current procurement of the building service

subcontractor, nomination practises of the subcontractor, procurement route established

by the contractor and the client, pricing mechanism with the building service

subcontractor and finally the average value of the contracts executed by the

respondent’s company.

Figure 10– Subcontracting practises with building service specialists

The above figure 10 shows the subcontracting patterns practises by the company in

employing subcontractors. 51% of the BSC who surveyed did not subcontract the entire

building services while 38% procured the building service subcontractors. 11% of the

respondents procure the BSC seldom. This figure indicates that 49% of the respondents

were employing building service subcontractors for their projects. One respondent

indicated that his company did not employ building service subcontractors had in-house

building service division. Hence, they do not procure the building service

subcontractors.

38%

51%

0%11%

Q) Do you subcontract the entire building services?

Yes

No

Unsure

Sometimes



Figure 11– Exclusion of materials from the scope of works

The above figure 11 shows whether the respondent’s company had excluded the

materials from the scope of the works of the BSC. 57% of the respondents had not

excluded materials from the scope of work while 30% of the respondents had excluded

materials from the scope of works of building service subcontractors who surveyed did

not subcontract the entire building services while 38% procured the building service

subcontractors. 11% of the respondents were not aware whether the materials had been

excluded from the scope of works while 2% responded that they sometimes exclude

materials from the scope of works.

Figure 12 – Satisfaction of the current procurement practises by the respondent

30%

57%

2%11%

Q) Have you excluded material prices from the scope of building service contractors?

Yes

No

Unsure

Sometimes

43%

22%

5%

30%

Q) Are you satisfied with the the procurement practises of sub contractors in your company?

Yes

No

Unsure

Sometimes



The figure 12 evaluates the satisfaction of the respondent with the current practises of

procuring subcontractor by their companies. 43% of the surveyors responded that they

were satisfied with the current practises while 22% were not happy with the

subcontracting procurement practises by their company However 30% responded that

they were not always happy with the subcontracting practises. The figure indicates that

52% of the respondents were found not satisfied in the subcontracting procurements

always or seldom. This shows that there is a need for evaluating the current practises

and make appropriate changes to the strategy for procuring contractors must be

implemented to improve BSC selection.

Figure 13– Nomination of building service subcontractors

The above figure 13 investigates the nomination practise of the BSC by the employer or

the project sponsor. It was found that 65% of the respondents indicated that client had

not always nominated the subcontractor and 6% claimed that their client had nominated

the subcontractor sometimes, while 23% of the respondents said their client had always

nominated the subcontractor. Since the majority of the respondents indicated that the

client did not always nominate the building service subcontractor, the choice of

selecting the building service subcontractor lies with the prime contractor. The results

also shows that the majority of the clients are not involved in nominating the

subcontractor. This may cause delays in project and may also have an impact on the

build ability of the project.

6%

65%

6%

23%

Q) Does the client always nominates the building service sub contractor?

Yes

No

Unsure

Sometimes



Figure 14 – Establishment of Procurement Route

The above figure 14 determines the procurement routes established by the employer

with PC. From the figure, it was found that 41% of the respondents indicated traditional

procurement route, 43% with design and build while 16% of the respondent’s followed

management contracting. It shows that the majority of the contractors were procured by

design and build. This may be due to the fact that 52% of the respondents were working

on infrastructural or industrial projects. Since, majority of the industrial and

infrastructure projects requires higher quality in design and the quality of the work, the

commonly adopted procurement route is the design and build, while housing projects

are commonly known to be procured through traditional procurement. But, the

respondents working for infrastructure projects have shown that the procurement route

established were management contracting.

41%

43%

16%

Q) Indicate the Procurement route that the respondent's company had established with the client

Traditional

Design & Build

Management Contracting



Figure 15 – Pricing mechanism established with the building service subcontractor

The above figure 15 investigates the establishment of the pricing mechanism by the PC

with its BSC. The figure shows that 46% of the respondents were following lump sum

contracts while remeasurement and priced activities were having almost equal share of

19% and 18% respectively. Target costing and cost reimbursable pricing occupied 10%

and 7% respectively.

Figure 16 – Average Value of Contracts (in Million AED)

46%

18%

19%

10%7%

Q) Indicate the Pricing mechanism established by the respondent's company with building service sub contractor

Lump sum

Priced activities

Remeasurement

Target costing

Cost reimbursable pricing

13%

14%

27%

27%

19%

Q) Indicate the Average value of contract executed (in Million AED) by the respondent's current company

< 10

10 - 100

100 - 500

500 - 1000

> 1000



The figure F16 shows the average value of the respondent’s company in million AED.

The statistics helps in establishing the complexity and size of the projects being

executed. It was found that 27% of the respondents indicated that they are executing

projects within the value of 100 to 500 million AED and 500 to 1 billion AED each.

19% of the respondents were working with project higher than 1 billion AED while 14

% and 13% of the respondents indicated that they were working for projects with an

average value of lesser than 10 million AED and 10 to 100 million AED respectively.

4.6. Assessment of Factors for Prequalification Criteria

The section 3 aims to evaluate the prequalification criteria by assessing the rating for

factors required to assess the subcontractor. This assessment shall be the basis for

adding data into the subcontractor selection models to procure the best possible BSC.

The analysis of the reasons for ranking the factors and impacts from improper

consideration of these factors are evaluated from the respondents.

4.6.1. Rating Priority for Factors of Prequalification Criteria

In section 3(a) of the online questionnaire, the respondent was asked to give individual

ratings for the factors considered in selection of BSC by the respondent’s organization.

The ratings provided in the table 3 indicate the scores provided by the respondents to

each factor. The factors were sorted and ranked in accordance to the factor significant

indexas shown in the Table 3 . As per the results from the survey, it is understood that

the respondents have provided the highest rating towards Health & Safety while

company’s professional membership and accreditation has been given the least priority.

The priority given to Health & Safety indicates that there is a significant level of

priority required for considering the factor.



Table 3 – Rating of Factors for Prequalification of BSC

Factors for Prequalification Factor

Significance Index

Rank

H&S 4.054 1 Performance in previously similar contracts 4.027 2

Method Statements 3.946 3 Quality 3.811 4 Human Resources 3.595 5 Financial Status 3.514 6 Environment 3.459 7 Training of Personnel 3.27 8 Plant & Equipment 3.27 8 Previous or Current records of legal disputes 3.27 8

Company Ownership 3 11 Professional Company membership 2.892 12

The Factor Significance Index is determined from the mean of the ratings to Likert scale

provided by the respondents. The Likert scale was scaled in a range from 0 to 5 with 0

being the least significant and 5 being the most significant. The mean of the Likert scale

was calculated by adding the ratings indicated by the respondents to the Likert scale and

the result was divided by the number of respondents. The means score for each factors

were calculated and tabulated in a chart. A bar graph representing the factors given to

determine the mean score for prequalification criteria is shown in figure 17.

Factor Significant Index = ∑

Where Ri is the rating provide by the respondent i towards the Likert scale.

Since the total number of the surveyors who respondents to the survey were 37, the

limits to i ranges from 1 to 37.



Figure 17 – Bar Chart of mean scores for factors of the prequalification criteria

A - Quality B - H&S C - Environment Management D - Human Resources E - Financial Performance F - Previous or Current records of legal disputes G - Plant & Equipment H - Performance in previously similar contracts I - Professional Company membership & accreditation J - Training of Personnel K - Company Ownership L - Method Statements

4.6.2. Respondent’s Comment on the Subjective Factors for Subcontractor

Prequalification

In section 3(b) of the online questionnaire, the respondents were asked to briefly explain

the reason for the ratings provided for the subject factors provided in the previous

question, since the ratings provided by the respondent were subjective. This will give

the author an insight to the explanation to the surveyor’s perception of the factor. The

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

A B C D E F G H I J K L

Fact

or Si

gnifi

canc

e In

dex

Factors for Prequalification Criteria



question was however not mandatory and the response rate for the questionnaire was

51.3% where 19 surveyors responded to the question.

The Table 4 indicates the general reasons for indicating the rating provided in the Likert

Scale at section 3(a) of the online questionnaire by the respondents

Table 4 –Respondent explanation of ratings provided

Sl No.

Factor evaluated Key Comment to the factors with ratings in brackets

1 Quality

• To comply with the standards of the prime contractor (5) • To comply with local regulations.(5) • To standardise the business processes for mutual understanding. (5) • To improve first time delivery as too much time and money is wasted by rectifying defects.(3) • Ensures independently audited standards. (5) • Important to know that they take quality of work seriously and they are officially certified.(4) • To get deliverables at a certain level of standard.(3) • Important to know procedures are in place(4)

2 H & S

• Safety performance and policy is the No 1 consideration in any contract award (5) • Absolutely paramount in 21st century construction(5) • Safe work practices in their organisation cascades to our projects through the material we procure. (5) • A safe company who look after their employees is traditionally a good company. (4) • Essential for securing our own policy requirements and low accident rates. (5) • Should be confident in ability to deliver works safely. (4) • Ensures independently audited standards. (5) • This is the basis for any sort of construction. (5) • To boost confidence in delivering project safely. • Accidents affect people’s lives, cause delays and cost money.(3)



Sl No. Factor evaluated Key Comment to the factors with ratings in brackets

3 Environment Management

• Viewed with ever growing importance by Employers.(4) • Essential to maintain our own ISO 14001 policy and improve sustainable practises.(5) • Although, the factor needs to be given higher priority, but environmental practises are in a embryonic state at UAE (2) • Due to commitment to environment set up in our policy(5) • We don’t consider environmental concerns seriously as the clients haven't insisted on sustainable practises. Besides there are no incentives from the local authorities to promote sustainability in construction(3) • This is important to a UK business operating a JV in UAE(3) • It is one of an internationally-recognised practise that is required for evaluating how well an organisation manages its environmental responsibilities.(2)

4 Human Resources

• Academic qualification or experience is valid (4)• The company is primarily concerned with the competence of the management. (3)• Contractor looks for cheaper options(4)• To assure that the right people are employed in delivering the correct material(4)• To ensure a quality product(5)• Fundamental to ensure quality delivery on time and within budget(3)• Level of technical knowledge(4)• Need to demonstrate that they have appropriately qualified staff to perform the various roles(4)• This describes how you plan different tasks and coordination effectively(4)• to get smooth flow of work(3)• Human resources were well established in our organisation in addition to that the well experienced and qualified engineers were appointed to design the projects(4)• Experience of personnel is essential for delivery of large complex schemes(4)




5 Financial Performance

• The company wish to manage their exposure to contractor insolvency / bankruptcy(4) • Needed to ensure confidence that the SC has the financial means to successfully deliver(4) • To assess the stability of the BSC(4) • To establish the BSC are financially sound(2) • To get smooth flow of work(2) • During the current recession time, many reputed contractors are struggling with insufficient resources as a consequence of losing contacts and has seriously affected the quality of works performed. (4) • Level of turnover important s important to judge their capability to handle work(3) • Confidence in financial position of contractor must exist(3)

6 Previous or Current records of legal disputes

• A good record of paying sub-contractors is paramount. (3) • Important that projects start out with the parties cooperating as a team. (4) • When a vendor is serious about customer satisfaction it shows in the antecedents.(5) • We do not wish to subject ourselves or the Employer to any unnecessary risk from an unscrupulous subcontractor(5) • Assists in gaining an understanding of the way the Company is likely to operate(2) • Ability to resolve disputes(3) • Important to establish that there are no legal claims(4) • To minimise risk of un-necessary legal complications(5) • To get smooth flow of work • With projects being bid at very competitive rates, companies have lowered their profit margins to low levels so as to survive. This has caused many contractors to reduce their performance because of their money saving measures. This has been an issue for disputes with the clients and main contractors. Also the clients in UAE are repeatedly missing regular payments which are one of the major reasons for disputes. (5) • Good contract should obviate disputes(2) • Legal disputes can present a risk if not closed out before commencement on your project(3)




7 Plant & Equipment

• Most SC buy this service from the PC. (2) • Insufficient resources may severely affect progress(5) • To ensure that the supplier has the where-with-all to deliver as agreed(5) • We can assist with our own plant and equipment should the need arise(3) • Considered with similar rating as Human resources(2) • Auditable level of resources and well maintained p & e is important(4) • Essential time schedule effectively(5) • To get smooth flow of work(2) • Important need plant to do job(4)

8 Performance in previously similar contracts

• A good track record of past performance builds confidence in the contractor’s ability to deliver. This would, however, be offset against their value for money.(4) • Past record is one of the most tangible factors(5) • Excellence desired, but not mandatory.(4) • Although not totally necessary, one has to start somewhere; experience of the problems that may occur is extremely useful.(4) • Relevant to gain an understanding of the Companies capabilities.(4) • Critical, particular in terms of a healthcare project(5) • To have a better mind set about them(4) • To reduce supervision and monitor cost(4) • Main qualification related to performance on M & R or JV partner contracts(4) • The past performance dictates the factors of H&S, Quality, Programme and Commercial. (5)




9

Professional Company membership & accreditation

• Accreditation is important with the relevant trade institutions, however, quality / environmental certifications are more important (2) • Some companies do not register with all the trade institutions for their particular discipline. The registration with an essential institution for the particular Project would be required. (3) • Helps support suitability and capability of the Company to perform and deliver successfully(2) • Promotes development (4) • Good to know that companies are taking this seriously and also means a that they have reached a certain standard in terms of best practice (4) • To have better understanding how they meet different international standards(3) • To get deliverables at a certain level of standard. (1) • Past performance more important than letters after name(2)

10 Training of Personnel

• The company have an obligation to ensure contractor's employ a training programme. This is dependent on the project funding mechanism as third party funders such as councils mandate training programmes under their master funding agreements. (3) • As long as the personnel on site are trained and not unskilled, whosoever instigated that training, albeit a previous employer of the personnel, is not fully important(3) • Essential as it shows a commitment to keeping and developing resource plus commitment to continually improve and keep pace with development in the industry(4) • Important to keep knowledge up to date by CPD and/or up to date plant and equipment training (4) • To meet new tasks in time(3) • To get a smooth flow of work(1) • Says a lot about progressive nature of company(4) • Training is important but experience of management more so. (4)




11 Company Ownership

• It is not a problem providing that a Parent Company Guarantee is provided pre contract award(1) • Capability is more important than the nature of the company ownership(1) • The ability to perform the contract with quality and health and safety in mind is of more importance than the constitution of the Company. (1) • Relevant in terms of overall security and financial standing(2) • Creditability(4) • To know if company how management can support in the event of any legal issues(3) • Must verify to ensure to face any situation in future. (4) • This needs to be considered due to any potential politics. (4)

12 Method Statements

• Methodology is important but the technical evaluation of bids only carries a 30% weighting (3) • To ensure that the what-why-how of things are clearly understood(5)k • Essential to carry out good working practice and ensure health and safety issues are addressed.(5) • Fundamental to show a clear understanding of the project and how it has to be built(4) • Good to see how they envisage the installation being under taken to establish their professionalism(5) • To plan and prepare each and every items - to avoid surprises during execution(5) • Must verify and check before execution of all activities at site.(4) • Full understanding by subcontractors at tender stage are insisted(4) • Not so important as long as the experience and track record of the business exists. (2)

4.6.3. Negative Implication of Improper consideration of the Subjective Factors

for Building Service Subcontractor Prequalification

The question was constructed to investigate if there were any negative implications

caused as a result of improper consideration of the factor for prequalification of BSC.

From the literature review, it is understood that improper subjective evaluation of a BSC



on the selection shall cause a significant reduction in the successful performance of a

project. The figure 18 below shows the graphical representation of the responses.

Figure 18 - Negative Implication of Improper consideration of the Subjective Factors for

Building Service Subcontractor Prequalification

The surveyors were asked to comment on their experiences from improper

consideration of BSC. It was found that 46% of the respondents indicated that they had

experiences negative implications due to improper consideration of the PQC; while 38%

of the surveyors were not aware about the problem. But 16% of the respondents said

they have not faced any problems due to improper consideration of PQC. The general

responses are summarised from the surveyors are listed below.

Due to procurement of subcontractor with lesser experience which was chosen

solely on price caused the project to perform badly in relation to time, cost and

quality.

Little emphasis was placed on the method statements and technical evaluation of

a bid. This resulted in poor contractor performance during the construction

phase, which resulted in programme delays, cost escalation and disputes.

The subcontractor was not able to deliver the required performance as a result of

improper consideration of factors.

38%

16%

46%

Negative Implication of Improper consideration of the Subjective Factors for Building Service Subcontractor Prequalification

Yes

No

Unsure



A contract signed without verifying the antecedence of a subcontractor resulted

in loss of profits, unnecessary stress on our team and delay in project execution.

Bad results happened due to low quality policy because of urgency to meet

deadlines or mile stones.

Subcontractors went bankrupt part way through major contracts due to

inconsideration of the subcontractor’s financial capabilities.

During the times of economic crisis, the profit margins are reduced so as to

survive. Hence, the priorities have been given to procure BSC on the basis of

cost and lesser consideration of the factors of quality.

Management with insufficient experience and inability to drive the project.

4.7. Discussion on the Subjective Factor for Building Service Subcontractor

Prequalification

The studies on the theories for the Subcontracting practises were carried out in the

literature review at Chapter 2. From the studies, it was established that selection of the

appropriate BSC is critical to the successful performance of a project. The practises of

procuring subcontractors within the construction supply chain was discusses. The

various subcontractor selection models were investigated and the various factors for

subjective evaluation were determined. From the research of primary data, the rating

criteria for the selection of the building service subcontractors were not available from

the academic or professional publications. However, the rating mechanism is critical to

the appointment of the building service subcontractor. Although there are various

models for subjective evaluation of a subcontractor, but in reality the judgment of the

ratings are developed from the perceptions of the procurement team.

The core objective of the study is to investigate the current practise of rating the

subjective factors while prequalifying a BSC. The questionnaire for the survey was

constructed to provide a rating mechanism for the selection of the building service

subcontractor. The answers provided to the key questions will be critically analysed

with the theory from literature review. However, it is not possible to benchmark the

criteria with a model because there is not a rating criteria devised for subcontractors by

any academicians.



The rating from the surveyors seems to demonstrate that the participants have a fair

knowledge in terms of procurements of BSC. There ratings indicated as shown in the

Table 5 shows that the variances between the respondent’s scores were not wide

relatively.

Table 5 – Rating of Factors for Prequalification of Building Service Subcontractor with variance

Factors for Prequalification Factor Significance Index Rank Variance

H & S 4.054 1 0.545 Performance in previously similar contracts 4.027 2 0.518

Method Statements 3.946 3 0.437 Quality 3.811 4 0.302 Human Resources 3.595 5 0.086 Financial Performance 3.514 6 0.005 Environment 3.459 7 -0.05 Training of Personnel 3.27 8 -0.239 Plant & Equipment 3.27 8 -0.239 Previous or Current records of legal disputes 3.27 8 -0.239

Company Ownership 3 11 -0.509 Professional Company membership 2.892 12 -0.617

Respondents have selected that H & S as the highest priority and should be the most

valued while assessing a BSC with a mean score of 4.054. This shows that construction

safety is a considered important to construction practitioners and the lives of people are

valued with higher regard. The respondents stated that H&S boosted confidence and is

absolutely paramount in achieving the targeted time, cost and quality aspects. The

performance in the previous projects is considered to be the second highest priority for

subjective assessment with a mean score of 4.027. The respondents commented that the

good performance of a BSC in its previous projects builds confidence in the contractor’s

ability to deliver. The other advantages listed by the respondents were that there will be

a reduction in supervision and monitoring costs; and there results dictate the H&S,

Quality, Project delivery schedule and the commercial aspects. It is noted that the



respondents agreed to Tam & Harris (1996) who determined the coefficient of relation

between the past project performance and the predicted project performance. The

difference between the factors is relatively lower which shows the importance of both

the entities. There was only a marginal difference between both the factors. However, it

is noted that the variance between the respondents results were comparatively higher for

both the factors.

Method Statement was ranked third in the rating criteria with a mean score of 3.946

followed by the Quality with a mean score of 3.841 having a marginal difference. Both

of the factors are known to be directly influencing quality and duration of the works and

the ratings indicates that the respondents find that quality is essential. Method

Statements demonstrates the work that a contractor shall perform at site and hence the

required performance can be evaluated from the method statements.

Human Resources and Financial Performance ranked 5th and 6th in the rating scale with

a mean score of 3.595 and 3.514. The variances for the ratings by the respondents were

relatively lower to the top three factors. Human resources and financial performance

demonstrates the capability of the BSC in terms of their human and financial resources

respectively. It is essential to maintain the human resource efficiently and the

management should be committed to alleviating the human capital. It is also equally

important to determine whether the BSC are maintaining their financial position intact

to keep the project insulated from the turbulence of economic bankruptcy existing

within the U.A.E. Many projects have known to fail due to the depression of financial

resources by the contractor. It is also understood from the lower variance index with a

variance of 0.086 and 0.005 respectively that the respondents had an equal voice on the

priority for the human resource and the financial performance while procuring a BSC.

The environment policies and management practises were ranked 7th in position of

ratings having a mean score of 3.459. The variance for the factor was -0.05 and this

depicts that the environmental policies were considered only moderately significant

with the majority of the respondents rating it to 3. This may be due to the employer’s

commitment to the environment and their compliance to the ISO14001 environmental

policy. The subjective factors of training of personnel, plant & equipment and previous

or current records of legal disputes shared the 8th respectively with a mean score of 3.27



each. The results show that all the participants found that the three factors are of equal

significance.

Company ownership is ranked 11th in the ratings indicated by the respondents with a

factor significant index of 3. The result indicates that company ownership of the BSC is

of lesser significance while considering the BSC selection but should also be valued in

the criteria. The least rating was given to the BSCs professional membership and

accreditation with a mean score of 2.892. As per the literature review, company

membership is of importance in establishing innovative practises and developing the

professionals. But it is understood from the variance score of -0.617 that the

respondents had a wide opinion on its significance. This shows that there is a difference

in opinion about the consideration of its rating while selecting a BSC.

The Table 6 shows the standard deviation of the responses by the participants on the

ratings for subjective evaluation of BSC. It is seen that the respondents R6, R31 and

R33 were display to a high level of deviation from the mean score. This indicates that

they had generally a higher difference in opinion in contrast to the other respondents.



Table 6 – Standard Deviation in Surveyor’s responses to ratings

4.8. Summary

This chapter analysed and discussed the survey results. The subjective factors were

graded with the scores provided by the surveyors. The factors were ranked and the

R1 0.741R2 0.983R3 0.978R4 1.166R5 0.622R6 2.537R7 0.917R8 1.104R9 1.21

R10 1.299R11 1.03R12 0.524R13 0.809R14 0.885R15 1.123R16 1.017R17 1.225R18 1.105R19 1.125R20 1.044R21 0.694R22 0.915R23 0.871R24 0.776R25 0.842R26 1.097R27 1.089R28 1.136R29 0.782R30 1.07R31 2.537R32 1.537R33 2.209R34 0.837R35 1.108R36 0.885R37 0.849

Respondent Standard Deviation



scores were discussed in relation to the literature review. The construction

professional’s explanations were gathered for analysing the scores provided. The impact

of improper consideration of the subjective evaluation was analysed. The results

obtained from this chapter will help the researcher to draw research conclusion.



5.0. Conclusion and Recommendations

This chapter aims to present a conclusion to the set of aims and objective mentioned in

Chapter1. The conclusions shall be drawn from the research for the literature review in

conjunction with the results obtained from the data analysis of the survey. A set of

recommendations shall be presented to achieve the best possible approaches and

measures to improve the practice of selection of building service subcontractor in

U.A.E.

5.1. Analysis of subcontracting practise in supply chain management and study of

their merits & challenges

Construction projects are characterised by multiple organizations with the relationship

being temporary. The supply chain management calls for integrating the multiple

organizations within a supply chain. Subcontracting is a common practise adopted in

construction supply chain where services are procured from specialist contractors or

suppliers. This enables the prime contractors to focus on the major works and the prime

contractors to optimise the usage of resources and improve the cash flow with improved

project performance. However, the subcontracting is faced by the myriad of challenges

caused by the high risk of uncertainties from the downstream. The control of

subcontractors is more complicated with multiple layers of subcontracting within the

supply chain.

5.2. Examining the role of building service subcontractor and their procurement

process

Building services required for the safe, comfortable and environmentally friendly

operation of modern buildings. The building services subcontractors are responsible for

ensuring the cost-effective, environmentally sound and sustainable design and

maintenance of engineering services in buildings. Hence, it is important to ensure a high

level of quality in the building service during construction. Procuring the right

subcontractor is critical to achieve the client’s expectations for building services. One

stage tendering and two stage tendering are the current procurement practises within the

industry with the latter being more efficient in procurement. Two stage tendering



screens the lesser performing subcontractor based on a set of predetermined factors for

evaluating the subcontractor performance.

Realizing the importance of the building service in construction, the commonly used

construction contract in U.A.E., like the FIDIC, allows employers to nominate their

building service subcontractor to ensure the right subcontractor for the job. It improves

time, build ability of the project and an effective cost management program can be put

in place. But nomination practises can be set to abuse as the prime contractor may be

entitled to problems caused by the defaults of the building service subcontractor

although the prime contractor can object the nomination based on indemnity.

It is understood that the current prequalification practises have many shortcoming due to

lack of a universal approach to prequalification methodologies. The qualified

subcontractors may lose their competency in the long run and also there are higher

chances of new subcontractor being unable to qualify. However, the subjective

evaluation is an art based on the perceptions of the decision maker or the employer.

5.3. Analysis of the Prequalification Criteria of BSC and the various

subcontractor selection models.

Selecting the qualified building service subcontractor is established to hire building

service subcontractors with the desired performance. Subcontractors are screened under

various factors which are predetermined by the decision maker or the employer

depending upon their perception. The decisions of the factors are reliant upon the type

of employer or the type of the decision maker. The public sector decisions depend upon

the procurement practises and regulations of the country.

To facilitate prequalification, there have been various subcontractor selection model

which employ Decision Support Systems (DSS) and Expert Systems (ES). These are

designed to propose solutions for management issues. They simplify and help in

analysing the qualification of the BSC. Many models using neural network, fuzzy logic,

and generic algorithm are employed for performance evaluation of the BSC.



5.4. Evaluation of Subjective factors for prequalification criteria to select the

BSC

Selection of BSC based on the lowest bidding subcontractor shall hamper the

performance of the project. Hence, the contractor’s qualification, and project

characteristics are to be considered in selecting the BSC. The performance of a building

service subcontractor for prequalification is determined by the multiple criteria

evaluation. The decision maker evaluates the performance by grading the subjective

factors. The literature review investigated the various factors for prequalification criteria

and the factors were asked to be rated by the lead construction practitioners within the

U.A.E. The following table 7 indicates the results of the ratings indicated by the

respondents.

Table 7- Ranking of factors for prequalification criteria

5.5. Recommendations

To improve the practises of building service subcontractor selection in U.A.E., the

author finds many recommendations from the context of the literature review and the

data analysis. The following recommendations are believed to improve the project

performance from the perspectives of good practises of subcontractor selection.

Factors for Prequalification Rank Factor

Significance Index

H & S 1 4.054 Performance in previously similar contracts 2 4.027

Method Statements 3 3.946 Quality 4 3.811 Human Resources 5 3.595 Financial Performance 6 3.514 Environment 7 3.459 Training of Personnel 8 3.27 Plant & Equipment 8 3.27 Previous or Current records of legal disputes 8 3.27

Company Ownership 11 3 Professional Company membership 12 2.892



From the survey, it was understood that major group of the respondents

experienced negative implications from poor qualification of building service

subcontractors. Two stage tendering need to be practised by screening the

building service subcontractors who do not attain the prequalification score and

the qualified subcontractors to be evaluated from their bids.

Qualified building service subcontractors need to be appointed to attain the

required project expectations. The subjective factors shall be derived from

evaluated and predetermined criteria.

Building service subcontractors shall be qualified using multiple criteria

evaluation methods for selection and should not be on the basis of cost alone.

Prequalification score shall be evaluated using the decision support systems

combining the elements of cost and subjective factors.

5.6. Limitation of Research

Walker (1997) states that the quality of the results from an investigative research

depending on the research methodology, the data collection techniques and the tools for

analysis of the findings. This investigative research for the evaluation of

prequalification criteria is a subjective area where the results are determined upon the

perception of the surveyor.

The results from the survey could not be compared with the rating criteria of present

practise due to the lack of academic data on the subject. The rating criteria currently in

practise is based on the perception of the decision maker or the procurement team based

on their experience and varies with organization and their scenario.

The absences of professional guidelines in procurement and construction processes

within the U.A.E. construction sector have caused wide range of practises within the

U.A.E. The majority of the construction works are carried out by overseas contracting

firms in joint venture with local contracting firms. The construction practises by the

overseas contractor vary with differing contracting organizations. They bring the

construction practises established in their parent country. It was not possible to sample

organizations based on the country of the parent company of the surveyor.



Due to restrictions in time and resource, the survey was only able to explore the

subjective factor as a general scenario rather than evaluating the factors based on the

type of project being executed.

5.7. Recommendation for Future Research

The research had identified that there exists many multiple criteria evaluation methods

employing decision support systems and experts systems. However, the focus of the

application was on selection of contractors from the perspective of the employer. There

exist issues in subcontracting which are confined to subcontractors and there exists a

wide opportunity for research in studying their practical application towards

subcontractor selection. Moreover, the author suggests similar in-depth studies by

applying various analytical tools like artificial intelligence, fuzzy logic, artificial neural

networks, etc toward selection of subcontractors.



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Appendix A – Covering Letter to Questionnaire Participants

09 June, 2011

Dear XXXXX,

As a reputed construction industry personnel, I would request you to support me by filling my online survey provided in the link below. I am currently preparing my dissertation for the masters in construction project management at Heriot- Watt University (U.K.) which investigates the priority considered for procuring building service sub contractors at U.A.E.

The survey is intended for construction professionals who are dealing with procurements, tendering, supervision and management of construction projects. The online survey takes only ten minutes to complete the questionnaire.

The online questionnaire surveys the various factors, their priority and their reason behind the selection of building service subcontractors. As a part of my research for my dissertation I want to establish the views of professionals within the construction sector. This information will allow me to ascertain the current approach to the criteria determined to procure building service sub contractors in the U.A.E. and how it may be improved to benefit all in future projects. I will be happy to hear any other comments/questions you have or should you wish to discuss any of the points raised.

Link to the questionnaire: http://shijpi.questionform.com/public/Online-Survey-_-Managing-Procurement Thanks & Regards,

Shijo Joseph V. MSc. Construction Project Management Heriot Watt University (U.K.)



Appendix B –Online Questionnaires



Appendix C – Surveyor’s Response to Questionnaire



Appendix D – Surveyor’s Response Analysis



Appendix E – Dissertation Preparation Program

procurement of building service subcontractors in u.a.e. : an evaluation of subjective factors for...

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rating of factors

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subcontractor relationships