Monday, 15 February 2010

Subcontractor Management Strategy: An Approach to Manage Subcontractors in Construction Projects



Subcontracting in the construction industry has greatly increased in recent years. Technology, size, and scale of construction projects are tending to be more specific and complex. As a result, main contractor prefer to subcontract the work because of insufficient resources or expertise in a specific area. Subcontracting is used much more extensively on housing and building construction projects than on engineering and industrial projects (Clough and Sears 1994). Arditi and Chotibhongs (2005) defined a subcontractor is a construction firm that contracts with a general contractor to perform some aspect of the general contractor’s work. Hsieh (1998) found the main missing element in the construction process is the disregard of the crucial role played by subcontractors who are hired to perform specific tasks on a project.

Subcontractors have also caused problems (Kumaraswamy and Matthew, 2000; Humphreys et al, 2000). Many of these subcontractor companies do not have the necessary capability to carry out the work satisfactorily. As a consequence, they are unable to give their clients the required service. Matthew et al (1996) believed that the increase in sophisticated technology-based products has required a high degree of design, manufacture, installation, and commissioning skills that have not been readily available to the industry’s clients, as the skill base has moved away from the main contractor’s organization. This has resulted in main contractors concentrating their efforts on managing site operation rather than employing direct labor to undertake construction work (Kumaraswamy and Matthew, 2000).

Furthermore, there are institutional gaps between the contracting parties (i.e., the general contractor and the subcontractors). These gaps may be inherent or established through time with little heed, but they have the potential to divide the construction team into “islands,” or self-centered decision-making units with conflicting interests (Hsieh, 1998).

Even though a large portion of a construction project is usually performed by subcontractors, the issues concerning subcontracting practice are seldom acknowledged and the ways to improve subcontracting practice are seldom discussed (Arditi and Chotibhongs, 2005).

Mr. Allan Janwar Tannaya conducted a research which objectives were to : (1) explore main contractor’s control strategy to manage subcontractors including procurement, cost, scheduling, quality control, and safety aspects; and (2) investigate main contractor-subcontractor relationship in terms of partnering, leadership style, and communication.

Conclusion

Conclusion for Subcontractor Control Strategy

Based on the result of data analysis, it can be concluded that subcontractor control strategy in terms of procurement and cost from local contractor has been aligned and organized, but, in terms of schedule, quality and safety aspects, it has been yet organized. Major improvements are needed for the subcontractor control strategy in local contractor in order to improve the subcontractor management performance. In contrast, it can be concluded that subcontractor control strategy from international contractor has been aligned and organized in all aspects. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance. Comparative subcontractor control strategy between local and international contractor are shown in table below.



Conclusion for main contractor-subcontractor relationship

It can be concluded that main contractor-subcontractor relationship from local contractor has been yet managed since main contractor does not implement partnering concept in practice. The reason is main contractor and subcontractor have a partnership temporarily only in the project. Moreover, task-oriented leadership style of project manager and site manager may create the distance between main contractor and subcontractor. Considering site manager has a lot of work to be cared, by assigning the site manager more responsible for maintaining the communication with the subcontractor may cause site manager work ineffectively. On the contrary, it can be concluded that main contractor-subcontractor relationship from international contractor has been managed by implementing partnering in practice. The reason is subcontractor has to be trained in order to understand the complicated system of main contractor. It also supported by relationship-oriented leadership style of project manager and site manager. Furthermore, by employing a person to be special coordinator, communication between main contractor and subcontractor can be managed effectively. The summary can be seen in table below.



Recommendation for subcontractor management improvement

After recognizing how main contractors managed their subcontractors together with the strength and weaknesses of each strategy, recommendation for improvement can be reliable proposed as follows:

1) It is important to have formally procurement standard for subcontractors. It helps main contractors to make decision easier and faster whether the subcontractors are qualified with the main contractor’s commitment.

2) Always have two-way lead times built into subcontract agreements. Two-way means that the main contractor and subcontractors agree on an appropriate time for the main contractor to notify the subcontractor when to begin work and an appropriate amount of time for the subcontractors to inform the main contractor of any conflict. Main contractor should monitor subcontractor’s schedule by developing a system or adopting advanced technology software that allows main contractor to track causes of schedule variance.

3) Top management should take a leader role in commitment toward quality. There should be quality policy and activities performed in an effort to implement the quality policy. Subcontractor should understand the quality policy and follow it as a quality standard of the work. The problems related with low quality can be prevented.

4) By establishing a subcontractor database, main contractors are able to know the information about subcontractors. It helps main contractors to have better understanding subcontractors’ performance.

5) Main contractor should develop comprehensive project safety policy and safety programs which make provisions for subcontractor safety. Subcontractor has to obey the main contractor’s safety policy and follow the main contractor’s safety programs by the inclusion of specific language to that effect in their contracts.

6) Main contractor may consider employing subcontract coordinator in order to improve coordination and communication with subcontractors.

His abstract is copied and posted.

ABSTRACT

Subcontracting in the construction industry has greatly increased in recent years. In most construction projects, especially building projects, it is common for 80 to 90% of the work to be performed by subcontractors. This has resulted in main contractors concentrating their efforts on managing site operation rather than employing direct labor to undertake construction work. Therefore, main contractor need to develop a strategy that allow him to control subcontractor effectively and efficiently including procurement, cost, scheduling, quality, and safety and manage the relationship in terms of partnering, leadership style, and communication. In order to understand how the current strategies are being operated together with the strengths and the weaknesses of the strategy, four local contractors and one international contractor were investigated through documentation, archival, and interview. The results shows subcontractor control strategy and relationship management from local contractor has been yet aligned and organized. Major improvements are needed for the subcontractor control strategy in local contractor in order to improve the subcontractor management performance. In contrast, subcontractor control strategy and relationship management from international contractor had been aligned and organized. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance.

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