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Article
Publication date: 15 July 2014

Huimin Li, David Arditi and Zhuofu Wang

Transaction costs arise from economic exchange rather than production activities. However, the term “transaction cost” is not consistently defined in the construction…

Abstract

Purpose

Transaction costs arise from economic exchange rather than production activities. However, the term “transaction cost” is not consistently defined in the construction industry because the concept of transaction cost is not universally accepted by all stakeholders in construction projects. As a result, empirical studies are few and conflicting because accessing data on transaction costs is problematic, and the interpretation of the data is difficult. The purpose of this paper is to analyze the transaction costs borne by the owner in a construction project from the perspective of transaction cost economics and construction project characteristics.

Design/methodology/approach

A questionnaire survey was administered to construction owners. The factors that impact transaction costs were analyzed in the context of human-related issues (the owner's and the contractor's positions in the transaction), and environment-related issues (the transaction environment, and project management efficiency). Statistical analyses were conducted to compare the transaction costs incurred in the pre- vs post-contract phases of a project relative to the private vs public sector, different project delivery systems, different procurement methods, and different types of contracts.

Findings

The owners surveyed believe that transaction costs may be reduced if the owner and the contractor follow some basic guidelines (e.g. experience in similar projects, prompt payment, good relationship with project participants, no irregularities in bidding, and only few material substitutions and claims), if the project is well-run (e.g. technical competency, strong leadership, prompt decision-making, effective communication, and fair/speedy conflict management), and if the transaction environment is favorable (e.g. fair risk allocation, early contractor involvement, and complete design documents). The findings of the survey also indicate that post-contract transaction costs are much higher than pre-contract transaction costs expressed as percent of project value and that transaction costs are affected by the owner (public vs private), the procurement method, the project delivery system, and the type of contract.

Originality/value

The primary contribution that this research makes to the body of knowledge is a better understanding of transaction costs incurred by construction owners in the USA. The highest transaction costs are to be expected in the post-contract phase of public projects awarded on a unit price basis, but can be reduced, hence reducing overall project cost.

Details

Engineering, Construction and Architectural Management, vol. 21 no. 4
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 23 April 2019

Abdullahi Babatunde Saka, Fatai Oladayo Olaore and Timothy Oluwatosin Olawumi

This paper aims to assess the level of awareness of quantity surveyors in material management and their key roles in waste minimization during the post-contract stage of…

Abstract

Purpose

This paper aims to assess the level of awareness of quantity surveyors in material management and their key roles in waste minimization during the post-contract stage of the project with a view of achieving value for money in their roles.

Design/methodology/approach

This involves administering a questionnaire survey to registered members of the Nigerian Institute of Quantity Surveyors, the only recognized professional body of quantity surveyors in Nigeria, within Lagos state. The empirical questionnaire survey succeeds a literature review that isolates the key strategies used by quantity surveyors in material management and waste minimization at the post-contract stage. The validity of the questionnaire was carried out by two experienced construction industry researchers and three experienced professional quantity surveyors to ensure that the questionnaire was not ambiguous and that it consists of the right questions in tandem with the research. The respondents were grouped into consultant’s QS and contractor’s QS.

Findings

Key roles of quantity surveyors during the material management process are proper material storage, and material inventory and accounting are the most important material management and waste minimization practices during the institute stage. It revealed that there is a lack of material waste documentation practices during the construction stage. In addition, there is no statistically significant difference in the responses of the two groups. This may be because there is no clear compartmentalization between the practices of the two groups. In addition, these two groups had the same education training, as there is no difference between the educational training of the consultant’s QS and contractor’s QS.

Originality/value

This study assessed the quantity surveyors’ roles with regard to material management and waste minimization. It would add to the scanty research work in this area. The study has also successfully revealed the strategies that are to be adopted by the quantity surveyors to achieve value for money during the post-contract stage.

Details

Journal of Engineering, Design and Technology, vol. 17 no. 4
Type: Research Article
ISSN: 1726-0531

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Article
Publication date: 9 October 2020

Terence Y.M. Lam

This research examines what key performance indicators (KPIs) and drivers should be applied at the post-contract phase of construction development to monitor and drive…

Abstract

Purpose

This research examines what key performance indicators (KPIs) and drivers should be applied at the post-contract phase of construction development to monitor and drive project outcomes in sustainable design and construction. It supplements the previous research which focuses on pre-contract sustainable procurement of competent professionals. Consequently, optimal sustainability can be achieved for the overall sustainable development process.

Design/methodology/approach

A review of empirical work was conducted to consolidate the holistic aspects of sustainability that should be considered for design and construction and their project outcome KPI measures. Based on a country-wide questionnaire survey of the university estate sector in the UK, a quantitative hierarchical regression analysis was conducted to identify the performance drivers for those KPIs.

Findings

The empirical work review demonstrates that holistic sustainability for development can be measured by project outcome KPIs: economic sustainability by cost KPIs; functional, social and environmental sustainability by quality KPIs. The quantitative hierarchical regression analysis confirmed that these four aspects of sustainability could be significantly driven by task performance and contextual performance drivers, as supported by the job performance theory.

Research limitations/implications

The investigation was undertaken within the context of university estates forming a unique public sector in the UK. The findings form a baseline upon which further research can be conducted in other organisations in the wider public and private sectors. Ultimately, holistic sustainability can be fully driven by construction professionals to achieve government and corporate construction strategy for the benefits of sustainable built environment.

Practical implications

The findings inform project managers and construction professionals that they should apply clear, measurable cost and quality KPIs and focus on significant performance drivers in tandem to drive holistic sustainability for design and construction. Project staff should have a high commitment, technical expertise and experience, execute the project with proper design and management methods and provide a high level of trust and collaboration to the client. Clients, designers and contractors are key stakeholders in the development process so they should be consulted for forming the contract KPIs to monitor the sustainable project outcomes.

Social implications

The generalised results confirm that task and contextual performance drivers can be applied as project management tools for managing the professional team members to achieve sustainability deliverables in terms of KPIs. Such findings will enhance the government or corporate construction strategy for managing and achieving holistic sustainability for construction developments.

Originality/value

This research identifies post-contract performance monitoring measures (cost and quality KPIs as well as task and contextual performance drivers) that can be adopted for driving sustainable design and construction for sustainable development.

Details

Smart and Sustainable Built Environment, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2046-6099

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Article
Publication date: 16 March 2015

Mohammed Rajeh, John E. Tookey and James Olabode Bamidele Rotimi

Within construction procurement, transaction cost economics offers a mechanism to understand “unseen” costs associated with the pre- and post-contract work. Pre-contract…

Abstract

Purpose

Within construction procurement, transaction cost economics offers a mechanism to understand “unseen” costs associated with the pre- and post-contract work. Pre-contract, these include costs related to information gathering and procurement. Post-contract they include activities of contract administration and enforcement. The purpose of this paper is to estimate the magnitude of transaction costs (TCs) for different procurement systems used in construction projects in New Zealand. Specifically estimating the relative values of TCs for Traditional and Design-Build delivery systems for the purpose of comparison.

Design/methodology/approach

This study develops a conceptual model for the relationship between procurement systems and TC. The model was operationalized and developed into a questionnaire. A cross-sectional sample approach was deployed, involving pilot and survey questionnaires, and results verification through “real world” cases. Data were sought from construction professionals in management, design and operations (i.e. project managers, architects, engineers, quantity surveyors, and procurement officers). TCs were measured using time-spent conducting procurement-related activities as a surrogate for cost. Professionals evaluate their time-spent in procurement activities using a Likert scale 1-5, comparing the Traditional and Design-Build delivery systems. Data were triangulated with “real world” cases to test and explain the developed model. The test included validity and reliability, path analysis, regression analysis, factor analysis, and structural equation modelling (SEM). The primary analytical technique used was SEM to yield information on goodness-of-fit, model development and comparison, and confirmatory strategies. SPSS Amos 21 statistical software was used for data analysis and model development.

Findings

The results suggest that procurement systems have indirect impact on TCs. The relationship between procurement system and TCs is fully mediated by costs of information, procurement, administration, and enforcement. Applying the developed models (the Traditional and Design-Build) to “real world” cases, it was found that TCs in the Traditional system amounts to 18.5 percent of the annual salary cost of a project manager (as an indicator quantum), while in the Design-Build system, it amounts to 14.5 percent of the annual salary cost of a project manager. TCs were calculated using regression equations based on factor loadings in the Traditional and Design-Build models.

Practical implications

This study applies new theoretical model for the link between procurement system and TCs, investigating and empirically demonstrating the influence of procurement system on TCs in construction. It also offers a new plausible explanation for the factors influencing TCs in procurement. The study emphasizes “in-house” TCs from the perspective of the professionals. The findings have practical implications on construction business practice due to their robust empirical nature and theoretical framework, which might enhance the performance of the construction industry.

Originality/value

This study contributes to the procurement selection in construction, by introducing a new conceptual model for the link between procurement system and TCs. It has extended the current practices for procurement selection by estimating TCs for the Traditional and Design-Build systems for comparison.

Details

Engineering, Construction and Architectural Management, vol. 22 no. 2
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 29 May 2009

Peter R. Davis, Peter E.D. Love and David Baccarini

Traditional Lump Sum (TLS) methods have been the primary procurement method within Australia. Yet, their use is beginning to wane in states such as: Queensland, New South…

Abstract

Purpose

Traditional Lump Sum (TLS) methods have been the primary procurement method within Australia. Yet, their use is beginning to wane in states such as: Queensland, New South Wales and Victoria where Design and Construct, Construction Management and hybrids thereof have become the norm. Considering the demands of clients, the increasing propensity to use non‐traditional methods, the quality of drawings that are being produced, and the role of software applications such as Computer‐Aided Design in directly generating quantities, this paper seeks to examine the role Bills of Quantities (BoQs) serve and how effective they are as a pre‐contract and post‐contract tool.

Design/methodology/approach

Only limited empirical research has addressed the role and effectiveness of BoQs, particularly in Australia. With this in mind, the research adopted an exploratory approach to gain insights from industry practitioners about BoQs. A questionnaire survey was developed from the literature and used to solicit the opinions of practitioners about their role and effectiveness as a pre‐contract and post‐contract tool.

Findings

The distributed questionnaire survey resulted in 86 responses from industry practitioners – quantity surveyors, building contractors, and project managers. The findings fundamentally reveal that the use of Bill of Quantities prepared in accordance with the standard method of measurement is on the decline and only useful as a tool for post‐contract control.

Originality/value

The research has revealed that there is a need for industry to embrace alternative forms of measuring quantities in building projects. Abridged bills and builders' quantities are being increasingly demanded in Australia. Thus, it is suggested that this demand could drive the need for alternative forms of pricing in building projects and lead to the increasing use of non‐traditional methods of measurement.

Details

Structural Survey, vol. 27 no. 2
Type: Research Article
ISSN: 0263-080X

Keywords

Content available
Article
Publication date: 21 February 2018

Manda Broekhuis and Kirstin Scholten

The purpose of this paper is to investigate purchasing practices in service triads by exploring the link between ex ante contracting and ex post contract management and…

Abstract

Purpose

The purpose of this paper is to investigate purchasing practices in service triads by exploring the link between ex ante contracting and ex post contract management and how these practices influence the satisfaction of buyers and suppliers (in concessionary arrangements) with their relationship in terms of meeting the needs of the buyer’s customers.

Design/methodology/approach

An in-depth exploratory multiple case study was carried out in a shop-in-shop context. Multi-method and multi-source data collection included interviews, documents and the contracts between buyer and supplier, providing evidence of the formal and relational structures in both the contracting and contract management stages.

Findings

The case findings provide evidence that behavioural standards established in a social contract are important prerequisites for the establishment and subsequent management of a formal contract. Second, this study shows that, when outsourcing core services in a service triad, a combination of performance-oriented and behavioural-oriented contract terms, covering a mix of topics related to both the customer-experience and to buyer-supplier-oriented aspects, contribute to aligning the buyer’s, suppliers’ and customers’ interests. The main findings are presented in a causal model and formulated as propositions.

Originality/value

This paper is one of the first studies to explore how core services are outsourced in a service triad. It provides evidence that the social contract between buyer and supplier influences the establishment of the formal contract as well as contract management, and a mix of contract topics, some related to the customers’ experience and others purely buyer-supplier oriented, contribute to the alignment of buyer’s, suppliers’ and customers’ interests.

Details

International Journal of Operations & Production Management, vol. 38 no. 5
Type: Research Article
ISSN: 0144-3577

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Book part
Publication date: 17 October 2014

James W. Bono and David H. Wolpert

It is well known that a player in a non-cooperative game can benefit by publicly restricting his possible moves before play begins. We show that, more generally, a player…

Abstract

It is well known that a player in a non-cooperative game can benefit by publicly restricting his possible moves before play begins. We show that, more generally, a player may benefit by publicly committing to pay an external party an amount that is contingent on the game’s outcome. We explore what happens when external parties – who we call “game miners” – discover this fact and seek to profit from it by entering an outcome-contingent contract with the players. We analyze various structured bargaining games among such miner(s) and players that determine such an outcome-contingent contract before the start of the original game. These bargaining games include playing the players against one another as in the original game, as well as allowing the players to pay the miner(s) for exclusivity and first-mover advantage. We establish restrictions on the strategic settings in which a game miner can profit and bounds on the game miner’s profit. We also find that game miners can lead to both efficient and inefficient equilibria.

Details

Entangled Political Economy
Type: Book
ISBN: 978-1-78441-102-2

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Article
Publication date: 3 July 2020

Temitope Omotayo, Ayokunle Olanipekun, Lovelin Obi and Prince Boateng

Continual cost reduction of overhead costs of building projects can realign the concept of post-contract cost control towards value-driven construction projects and…

Abstract

Purpose

Continual cost reduction of overhead costs of building projects can realign the concept of post-contract cost control towards value-driven construction projects and stakeholders’ satisfaction. This study synthesised and analysed the viable continuous improvement measures critical for waste reduction during the execution phase of a building project.

Design/methodology/approach

A review of existing literature facilitated a list of continuous improvement measures. This literature review findings enabled a Likert-scale questionnaire which was administered to two-hundred and fifty (250) small- and medium-scale construction companies (SMSCC) in Nigeria. Multiple linear regression statistical tests deduced the significant cost reduction measure from which a causal loop diagram was designed to indicate continuous improvement measures during the execution phase of a building project.

Findings

Cogent construction activities associated with overhead costs were deduced from the statistical tests as being payment of suppliers and sub-contractors and purchase orders. An all-inclusive casual loop model for cost reduction through waste minimisation in construction projects as a viable oriented mechanism for meeting clients' requirements was developed.

Practical implications

The causal loop continuous improvement model recognised external and internal factors which are crucial for SMSCC to focus on for their organisational growth and performance enhancement.

Originality/value

A focus on non-physical waste in construction organisations potentially addresses behavioural challenges for continuous improvement.

Details

Built Environment Project and Asset Management, vol. 10 no. 4
Type: Research Article
ISSN: 2044-124X

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Article
Publication date: 17 July 2007

Andrew Ross and Jack Goulding

The purpose of this paper is to provide a better understanding of the factors that can influence the availability of cost information to support design and production…

Abstract

Purpose

The purpose of this paper is to provide a better understanding of the factors that can influence the availability of cost information to support design and production decision making at the early stages of project team formation.

Design/methodology/approach

An investigation of the current practice of the exchange of financial information between supply chain organisations in the UK construction industry that was undertaken using a portal survey with 710 estimators. The survey sought data on the extent and maturity of the relationships that existed between contractors and their supply chain, and the effect this had on the gathering of subcontract price information.

Findings

The data analysis established that a significant difference existed in the approaches adopted by respondent organisations to the collection of subcontract price data for three different procurement approaches, and that main contracting organisations were developing closer relationships with their supply chain.

Practical implications

The paper concludes by suggesting that the use of supply chain price information for pre‐contract negotiation and post‐contract governance can influence the propensity of the supply chain to provide “richer” information on the costs assumptions made within their estimates to improve the empirical basis for future decision making.

Originality/value

The paper takes an original approach to the construction estimating process by considering supply chain price information available to the estimator.

Details

Construction Innovation, vol. 7 no. 3
Type: Research Article
ISSN: 1471-4175

Keywords

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Article
Publication date: 1 January 2006

Udayangani Kulatunga, Dilanthi Amaratunga, Richard Haigh and Raufdeen Rameezdeen

The construction industry consumes large amounts of natural resources, which are not properly utilised owing to the generation of waste. Construction waste has challenged…

Abstract

Purpose

The construction industry consumes large amounts of natural resources, which are not properly utilised owing to the generation of waste. Construction waste has challenged the performance of the industry and its sustainable goals. The majority of the causes underlying material waste are directly or indirectly affected by the behaviour of the construction workforce. Waste occurs on site for a number of reasons, most of which can be prevented, particularly by changing the attitudes of the construction workforce. Therefore, the attitudes and perceptions of the construction workforce can influence the generation and implementation of waste management strategies. The research reported in this paper is based on a study aimed at evaluating the attitudes and perceptions of the construction workforce involved during the pre‐ and post‐contract stages towards minimising waste.

Design/methodology/approach

A structured questionnaire survey was carried out to understand and evaluate the attitudes and perceptions of the workforce. Four types of questionnaires were prepared for project managers/site managers, supervisors, labourers, and estimators.

Findings

The findings indicate the positive perceptions and attitudes of the construction workforce towards minimising waste and conserving natural resources. However, a lack of effort in practising these positive attitudes and perceptions towards waste minimisation is identified. The paper further concludes that negative attitudes towards subordinates, attitudinal differences between different working groups, and a lack of training to reinforce the importance of waste minimisation practices have obstructed proper waste management practices in the industry.

Originality/value

The paper reveals the effect of the attitudes and perceptions of the construction workforce towards waste management applications, which would be of benefit to construction managers in designing and implementing better waste management practices.

Details

Management of Environmental Quality: An International Journal, vol. 17 no. 1
Type: Research Article
ISSN: 1477-7835

Keywords

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