ASSESSMENT OF CONTRACTOR/CLIENT CHOICE IN THE SELECTION OF SUBCONTRACTORS

ASSESSMENT OF CONTRACTOR/CLIENT CHOICE IN THE SELECTION OF SUBCONTRACTORS

ABSTRACT

Resulting from the shift from the norms of general contracting which involves a contractor supervising a broader project in most cases in the construction industry to subcontractor procurement, this study presents findings on the assessment of the choices influencing the selection subcontractors by construction clients and contractors. This was done with a view of improving contract administration in the construction industry. With a focus on a commercial nerve centre of Nigeria, Lagos state; the study presents findings on a survey of construction client/contractors and rank the factors they consider in the selection of suitable subcontractors for project execution. Data for the research was drawn through the use of well administered questionnaires. The results of the relative importance index used for this study identified the most important factors are: Quality standard, Competence hence minimum supervision required, Experience of subcontractor, Well trained, Works within budget, Price competition, Works within time and Size of work. It is concluded that premiums should be placed on these factors to improve contract administration.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

In a greater part of the Twentieth Century, small and medium-sized establishments (SMEs) are usually seen as be a conventional and diminishingareawhereby “informal” and “pre-modern” labour relations and technologies get in the way of the course of economic growth (Taymaz and Kilicaslan, 2002). Subcontracting is a type of job contract that strives to outsource particular  types of work to other companies. This is a shift from the norms of general contracting which involves a contractor supervising a more broader project in most cases. It is mostly done when the main contractor does not have the luxury of time or the required skills to handle the task in question. Subcontracting can be described as a system relating different firms based on the overall or fractional manufacture of  goods and works to be done (Taymaz and Kilicaslan, 2002). Subcontracting could also be seen as a condition when a company giving a subcontract requires an independent firm to embark on the construction process or execute the transformation of material, component, a part or the sub-assembly of it in accordance to the requirements or plans made available by the company making the offer for a subcontract (Holmes, 1986). The definition of a subcontractor is by virtue of specialization among the various trades, not wholly because of the financial and technical constraints (Lim, 2003).

The construction sectors of most countries have been restructured in such a way that subcontracting has become widespread in different areas of the industry than it was in the past (Creed, Seon and Joon 2008). Shimizu and Cardoso (2002) identified subcontractors as specialists in the performance of a distinct job, and may also be engaged for the supply of personnel, materials, equipment, tools, and designs depending on the speciality of the subcontractor. Matthews, Tyler and Thorpe (1996) see it as a more reasonable thing to do if main contractors put more attention towards where the lion’s share of the work takes place, so as to improve productivity. Creed, Seon and Joon (2008) further added that, this applies to subcontractors, meaning that main contractors should put more interest towards building better relationship with subcontractors. It is however conflicting to see that the relationship between contractors and subcontractors are usually tensed and confrontational (Dainty, Briscoe and Millett, 2001). Kumaraswamy and Matthews (2000) on the other hand noted that growing complication, the overflow of consultant companies, as well as the deteriorating construction productivity are the major reasons that cause such confrontational environment.Supplier subcontracting usually involves a self-supporting dealer that is in charge of the transformation, design and the mode of construction, who notwithstanding decides to go into a subcontracting agreement which involves delivering a specific or approved area to the main contractor (Taymaz and Kilicaslan, 2002).The primary function is to help the main builder lighten the load of full construction work by sharing it among the subcontractors (Pietroforte and Costantino, 2003).

Gidado (1996) reviewed the usage of otherprocesses of selection to execute jobs, and then deduced that their usageis void of any form of evident identification of, or amendment to suit indigenous conditions. Ojo (2009) investigated the requirements of clients involved with projects of building types and came to a logical conclusion stating that in Nigeria private and public clients have the same requirement. Ojo(2009) further deduced that this situation can be linked to the fact that clients and contractors in Nigeria have not been able to produce aprecise manner or procedure for the selection of a particular procurement method. Ogunsanmi(2000) made a study where he compared the effectiveness of labour subcontracting and direct labour systems in three states in Nigeria after which he made a logical judgement that labour contracting was more effective than direct labour system. The management of labour only contracts is not unfamiliar in Nigeria as was discovered by Adenuga (2003), where he said the system was in fact gaining prominence in the construction labour market. This has brought about the need to outsource in order to reduce the activities of the firm, so as to improve its efficiency. The main contractors are basically involved in the process of transforming resources in form of inputs such as materials, labour, and finance and so on, into a product. It is also commonly agreed among researchers that clients’ needs are generally in terms of time, cost and quality and usually, project success is measured on these terms. According to Chang and Ive (2002), clients whether private or public, intend to solve certain needs which is responsible for the client to make a decision to invest in construction. It is these needs that direct them towards the type of procurement method to be adopted for the project.

1.2 Need for the Study

This study is not only useful but timely due to the fact that subcontracting has become a popular norm in the construction industry. Selecting the best subcontractor is a complex decision process for construction clients. It requires a large number of criteria to be simultaneously measured and evaluated. Subcontractors are one of the major contributors to a project and might as well be the reason for the failure or success of the project. It is therefore important that contractors and clients are aware of the important factors to consider before involving any subcontractor in their projects. Although subcontractors are integral to the successful completion of most construction projects, few studies have examined issues related to subcontracting or to improving relationships between main contractors and subcontractors (Kumaraswamy and Matthews 2000; Arditi and Chotibhongs 2005).

This study intends to add to the existing body of knowledge as it partains to subcontractor selection.

1.3 Aim and Objectives

The aim is to assess the client/contractor choices in the selection of subcontractors with a view to improving contract administration. The specific objectives of the work are listed below:

1. To examine the various factors influencing subcontractor choice by clients and contractors.
2. To examine the needs of contractors and clients from subcontractor point of view.
3. To determine if the client and contractor influencing attributes are similar.
4. To determine the subcontractor selections methods that can be termed as best practices.

1.4 Methodology

The principal data was gathered by means of questionnaire administration. The research samples were randomly selected from clients and contractors of construction works found in the main commercial part of Nigeria which is Lagos. Architects, engineers and quantity surveyors will be given extensive interviews to find out their take on the subject matter. The questionnaire survey involved three sets of questionnaires that were organized in form of a likert scale type ranging from one to five used to draw out the views of three pecking order of stakeholders in the construction industry which are clients, main contractors and subcontractors. This was to ascertain the level of importance placed on the identified factors the in the selection of subcontractors by client/contractors for construction projects.

1.5 Scope

There are several contractors in Nigeria but the scope of this work is limited to contractors and clients that are based in Lagos state with emphasis on the assessment of their choice in the selection of subcontractor. It would involve private contractors as well as public and private clients.