Partnering In A Malaysian Construction Industry Construction Essay

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Construction industry involves several parties including suppliers, clients, contractors and consultants in which each party has different organization cultures, goals and objectives. This results in conflicts among the industry players, i.e. adversarial relationships. Since Malaysia is striving to be a developed country, which resulting in a competitive high-risk business in the Malaysian construction industry, partnering seems as an alternative to create good relationship among the industrial players. Subsequently, it will reduce litigation and adversarial relationship and contributes to problem resolution. JKR has decided to make a change in its project management in order to improve its project delivery, which, in this case, partnering approach has been selected as per identified by Controller and Auditor (2001) that described partnering as a tool key in delivering better public projects. This is supported by the National Audit Office (2005) which mentioned that partnering had had a demonstrable benefit within the public sector.

There are a lot of literature studies and researches worldwide regarding to partnering approaches which tell the history, evolution, benefits, success factors and barriers to the success of partnering. According to Matthew (1999), partnering is originated in the US and has gained popularity and worked well in a variety of countries.

However, there are differences between partnering arrangement and partnership. Ward and Chapman (2003) distinguish partnering arrangement from partnership by suggesting that the members of a joint venture have teamed together for a particular purpose or project, while the members of partnership have joined together to run "a business in common".

Definition of Partnering

There are several perspectives on the definition of partnering by previous researchers and studies. This includes Reading Construction Forum (1995) that defines partnering as "a managerial approach used by two or more organizations to achieve specific business objectives by maximizing the effectiveness of each participant's resources. The approach is based on mutual objectives, an agreed method of problem resolution and active search for continuous measurable improvements".

However, the United Kingdom Construction Industry Board's (CIB) Fact Sheet on Partnering (1998) provides more authoritative definition of the term partnering, which reads "a structured management approach to facilitate team working across contractual boundaries. It should not be confused with other good project management practice, with long-standing relationships, negotiated contracts, or preferred supplier arrangements, all of which lack the structure and objective measures that must support a partnering relationship".

Meanwhile, Ronco (1998) stated that partnering provides a forum in which stakeholders can work together to identify and address new opportunities. This is followed by Scott (2001) who defines partnering as a relationship between two or more companies or organizations which is formed with the express intent of improving performance in the delivery of projects.

Generally, partnering establishes the working relationships among the parties (stakeholders) through a mutually developed, formal strategy of commitment and communication, which the relationships are based upon trust, dedication to common goals and objectives, and understanding of each other's individual expectation and values.

The Aims of Partnering in JKR

Basically, partnering relationship aims at:

Looking for win-win solutions through the partnering process;

Putting value on long-term relationships;

Developing trust and openness between parties;

Establishing an environment for long-term profitability;

Encouraging addressing problem openly in order to search for improvement and helps problem resolution;

Encouraging innovation among partners for example in problem solving;

Making partners aware of each other's needs, concerns and objectives through follow-up workshops and meetings in order to avoid adversarial relationships; and

Improving overall performance such as the duration of the project, cost, quality and safety.

However, the aims of partnering in JKR are actually:

to develop a cooperative culture which involves a change in mindset among partners;

to encourage team building and foster long term relationships;

to establish a dynamic organization structures and clear lines of communication; and

to develop a more stakeholder focused project environment for better project success.

Basic features of Partnering Arrangement

The United Kingdom Construction Industry Board's (CIB) Fact Sheet on Partnering (1998) explained that the fundamental components in partnering arrangement are formalized with mutual objectives, agreed resolution methods to problems, and an active search for continuous measurable improvements.

Mutual

Objectives

Problem Resolution

Continuous Improvement

Figure 2.0 : Basic features of a partnering arrangement.

2.4.1 Mutual Objectives

In the construction industry, partnering can be used to simplify the way the business is conducted. It requires organisations making joint commitments to achieve mutual vision, goals and objectives and changing adversarial relationships into team-based relationships. This helps to gain a success in the delivery of the project and to achieve a good project performance.

Actually, mutual objectives are determined, agreed and commit at the outset of the project, through an explicit intervention called initial partnering workshop. In order to ensure it is sustained at all times during projects, meetings, follow-up workshops and effective communication will be carried out to keep it under review and monitored. Mutual objectives also help to sustain a reasonable profitability rather than quick profits which benefits from open communication. It treats mutual confidentiality which results in working for each other's success and best between business with similar cultures and styles.

2.4.2 Problem resolution

ECI (1997) stipulated that the avoidance or early resolution of contentious issues is one of the primary aims of partnering and the extent to which it is achieved is a key objective measure of the success of the partnering arrangement. It is suggested that it is essential to install a dispute avoidance or resolution procedure that can be accommodated within the construction contract.

Problem resolution in partnering arrangement includes establishing a systematic approach to problem solving, seeking for solution instead of parties to blame, having more and better discussion as well as providing win-win solutions. In partnering, all partners will together anticipate problems or conflicts; it is more effective to be done at the outset of the project. Subsequently, develop a mitigation plan in order to resolve the problems and to avoid snow ball process of disputes or conflicts.

Consequently, the problem resolution in partnering is three tiered in its approach to dealing problems (Nur Emma and Maizon, 2007), which disputes can be resolved on site whereas a further two levels will be resolved off site. The aim of the problem resolution in partnering is to understand the problem correctly and to be resolved at the lowest possible level within the given time scale. If a condition in which a solution cannot be found at one level, the problem should immediately escalated to the next higher level for resolution. This is also known as disputes escalation ladder process in partnering arrangement. The preferred method of non-contractual disputes avoidance or resolution usually involves bringing the individuals concerned face to face (ECI, 1997).

2.4.3 Continuous Improvement

Abdul Rashid (2000) stated that an effective partnering arrangement should always bring about continuous improvement throughout the relationship. In order to achieve continuous improvement in partnering projects, four (4) elements need to be taken into consideration, i.e. attitude, knowledge, techniques and training and coaching. However, the most important driver of continuous improvement is attitude (ECI, 1997). Every partner or stakeholder should put serious effort to sustain continuous improvement of the projects in order to meet client's expectations.

2.5 Forms of Partnering

According to ?? There are two types of partnering which are :

Strategic Partnering

Strategic or long term partnering has duration of several projects or contracts. It is used as an element of organizational cultural change process.

Project Specific Partnering

Project specific partnering is used for a single project or contract. According to Zawiyah (2002) project partnering is more appropriate than strategic partnering in public sector's projects as public accountability will discourage the establishment of a long term collaboration and commitment to specific number of contracting company. In Malaysia it must be in line with the Treasury Requirements in which all projects must be let through open tender unless otherwise specified or approved by them.

2.6 Benefits of Partnering to the Stakeholders

Previous researchers and studies have identified several benefits of partnering approaches to various parties such as the contractors and subcontractors, the owner and the management, as well as on-site employee (Larson and Drexler ,1997). Meanwhile, Bresnen and Marshall (2000) noted that partnering in construction has been presented as a potentially important way of improving construction project performance through the direct benefits it can bring to both clients and contractors. This is followed by Bresnen, M. and Marshall, N. (2000) stated that partnering in construction has been presented as a potentially important way of improving construction project performance through the direct benefits it can bring to both clients and contractors. Walker et al. (2002) established the advantages of partnering as a concept that delivers considerable benefits to clients, contractors and designers that participate.

2.6.1 Categories of Benefits

Basically, partnering process resulting in several significant benefits which Kadefors (2002) stated that partnering is a way to avoid litigation, allows lower incurred costs and helps to keep projects within the time frame or as per schedule. The positive partnering on cost, time and logistics were over $10 million, saved for the largest project. This was followed by a study (Barlow et al, 1997) that showed project partnering contributed to a cost reduction between 5 to 30 percent and time saving between 10 to 40 percent. Weston and Gibson (1993) reported projects that utilize partnering have less cost and schedule growth, fewer claims and change orders, and greater value engineering. Generally, benefits of partnering can be commonly categorized into thirteen (13) categories (Chan et al., 2002) which can be segmented into tangible benefits and intangible benefits (Beach et al., 2005) as shown in Table 2.0.

Tangible Benefits

Intangible Benefits

Reduced litigation

Efficient problem solving

Improved cost control

Closer relationships

Improved time control

Enhanced communication

Improved product quality

Continuous improvement

Lower administrative costs

Potential for innovation

Improved safety performance

Increased satisfaction

Improved culture

Table 2.0 : Thirteen (13) Benefits of Partnering (Chan et al., 2002)

2.6.1.1Tangible Benefits in Performance of the Project

Egan (1998) outlined a number of tangible benefits in the form of annual targets for continuous performance improvement as shown in Table 2.1.

2.6.1.2 Intangible Benefits in Performance of the Project

Black et al. (2000), Scott (2001) and Haksever et al. (2001) were able to identify a number of intangible benefits. It encompasses an increased willingness to share risk, increased confidence of success, reduced exposure to project risk, enhanced transfer of practices and processes to other projects, improved co-operation, increased understanding of parties/ less adversarial relationships, better team spirit, more effective communication, learning from partnering improving overall company competitiveness, increased customer satisfaction, improved employee skills and motivation. From a survey carried out by Chan et al. (2006), found that there are four (4) major benefits of partnering projects including improved relationship amongst the project participants, improved communication, better productivity was achieved and reduction in litigation. This is supported with a recent research on construction partnering in Malaysia by Azlan et al. (2010) who identified three (3) dominants benefits of partnering; improved culture, increased satisfaction and potential for innovation which can be considered as intangible benefits.

Area

Outlined

by Egan(1998)

Improvement Reported Black et al. (2000), Scott (2001) and Haksever et al.(2001)

Improvement

per year

Detail

Detail

Capital Cost

10% Reduction

All costs excluding finance

Lower bidding prices

Reduced costs

Fewer disputes

Reduced claims and litigation

Construction Time

10% Reduction

Time from client approval to practical completion

Improved time-scales

Reductions in design cycle

Predictability

20% Increase

Number of projects completed on time and within budget

Fewer programme overruns

Improved quality

Improved design

Defects

20% Reduction

Reduction in number of defects on hand-over

Fewer defects

Accidents

20% Reduction

Reduction in the number of reportable accidents

None

Productivity

10% Increase

Increase in the value added per head

Reduced supervision costs

Turnover and Profits

10% Increase

Turnover and profits of construction firms

Fewer cost overruns

Improved return on resources

Increased market share

Table 2.1 : Tangible Benefits of Partnering in Performance of the Project ((Egan, 1998), Black et al. (2000), Scott(2001) and Haksever et al. (2001) as in Beach et al. (2005))

2.6.1.3 Benefits of Partnering as a Problem Resolution

Lazar (1998) suggested that partnering is a dispute prevention method that is proactive and followed by Nael G. Bunni (2003), suggested that partnering offers a solution into 'how to stop a simple problem spiraling from breeze into a whirlwind'.

Nur Emma and Maizon (2007) found, from their survey on partnering projects in United Kingdom that types of problems that occur are substantially the same in partnered and non-partnered projects that compromises of client's expectations, non - availability of information and design changes are problems with the highest frequency of occurrence. Thus, it shows that types of problems that occur in partnering projects do not differ from the traditional procurement projects. However, the advantage of partnering is found as an effective arrangement to avoid disputes compared with traditional arrangement. This results from the involvement of several parties (stakeholders or partners), opinions and ideas are shared and exchanged which enables one party to learn from another to improve the available problem-solving methods and obtain maximum results.

2.6.1.4 Benefits to project delivery

There are several researches and study that had identified the benefits of partnering arrangement to the project delivery. According to Bennet and Jayes (1995), partnering can give potential benefits in project delivery such as increased productivity and reduced cost. From the shared understandings and the pursuit of common interest in partnering arrangement it can result in numbers of other virtues which are reduced project duration (CII, 1991), improved quality, improved safety (CII,1991; NEDO, 1991 and Loraine, 1996), improved customer focus and client satisfaction, as well as better responsive to changing market conditions (Bennett and Jayes ,1995 and Bennet et. al ,1996) and more effective resources deployment.

This is supported by Barlow et al.(1997), who stated that there are three (3) mutual benefits of partnering which are improved quality, reduced claims, and litigation. This is followed by Bresnen and Marshall (2000), who suggested that partnering has also been used as a mean to improve working relationships and project performance in terms of quality, cost, time, safety, customer satisfaction and productivity. Recently, Swan and Malik (2007) stated that the key issues of time, cost and quality are still central to what teams identify as successful project delivery. From these literatures, it clearly portrays that partnering gives significant benefits to project delivery especially in terms of time, cost, quality and safety.

2.7 Critical Success Factor Of Partnering

Zawiyah (2002) found that there are five (5) areas considered to be most significant features in adapting partnering concept. They are:

Communication of all parties

Cooperation between clients and contractors or suppliers

Performance

Organizational structure

Cost

Beach et al. (2005) has studied that there is a variety of studies on the elements of successful partnering which includes management commitment, equity, mutual vision, goals and objectives, trust, continuous evaluation/ improvement of performance, good communication, conflict resolution process, early implementation of the partnering arrangement/ involvement of key participants, education, training and preparation, innovation, long-term commitment, partnering workshop, mutual rewards and benefits, shared risk, integrated team, investment and learning culture/ exchange of knowledge.

From Chan et al. (2006) survey, it is found that the top-4 critical success factors of partnering projects based on ranking are mutual trust amongst the project participants, early implementation of partnering process, commitment to win-win attitude, establishment and communication of conflict resolution strategy.

From a survey done by Black et al. (2000), there are five (5) main factors for success partnering which includes mutual trust, effective communication, commitment from senior management, clear understanding and acting consistent with objectives.

Meanwhile, CPMD PWD (2008) stated that the prerequisites of partnering are commitment from top management from the initial stage, focus on the bigger picture, a partnering champion for every involved party, assume that the other party is honest and intends to do a good job, equity, educate the project stakeholders about partnering, organization design compatible with partnering, documentation, make partnering intentions clear, objectives must be specific and carefully monitored, the partnering workshop, open communication, willingness to accept and learn from mistakes without pointing fingers of criticism at individuals, a problem escalation process, periodic self-evaluation and continuous improvement.

2.7.1 The Need For Commitment

Bresnen and Marshall (1999) recommended that implementing partnering effectively may require rather more than team building, a set of appropriate tools and techniques and strong commitment from top management. Strong and full commitment must come from top management of each stakeholder and it is vital to be sensed by the team. The leadership must be visible, supportive and ongoing. As suggested by Barlow et al. (1997) that top management's support and enthusiasm are vital in generating and sustaining changes as a collaborative approach. This is supported with Fellows (1977) who stated that partnering embraces the continuous improvement philosophy, which originated in Japan, and must be backed by senior management if it is to succeed.

2.7.2 The Need for Trust

According to Barlow et al. (2007) partnering relationships will not emerge without a high degree of trust. Building trust may be the hardest part of creating a partnership. Trust can emerge from an accumulation of shared experiences and from a gradual deepening of mutual understanding. The interdependent of the partners has to be recognized by all. Short term gains that benefit only one partner must outweighed by the benefits of overall performance relative to the overall partnering targets. Wood and Ellis (2005) suggest that changing the culture within the industry is a long term goal, which necessarily relies on the establishment of on-going partnerships. In this way, trust could be established between parties and the true potential for win-win outcomes exploited. Whether this will occur as a natural consequence of changes in procurement methods, it is a debate.

Bresnen and Marshall (2000) argue that whether understanding the workings of the 'technical apparati' of partnering works and whether collaboration can be actively 'engineered' simply by these techniques. It also questions whether trust and cooperation can develop fully in the context of an exchange relationship that may be affected by imbalances in economic power and widely economic conditions.

2.7.3 Equity

All stakeholders' interest are taking into consideration in creating mutual goals and there is commitment to satisfy each stakeholder's requirements (Dombkins and Uher, 1993). In partnering arrangement, it is paramount to have an equity and fairness in order to deter opportunism. According to Ng et al. (2002) it can be achieved by continuously searching for solutions that meet stakeholder's expectation.

2.7.4 The Needs of Preparation and Training To Have Better Understanding

From Ng et al. (2002) he found that it is essential to ensure all stakeholders have complete understanding of the requirements of project partnering and other key attitudinal qualities through adequate stakeholder training. Zawiyah (2002) recommended that in order to create more awareness on partnering is by giving more training and exposure that the parties involved (clients, contractors, suppliers, and government agencies) could have a better understanding of the concept. This is agreed by Beach et al. (2005) suggested preparation should also involve educating staff to ensure they understand how the partnering relationship works as reviewing their professional and social skills to determine how well they are equipped to meet the agreed target.

2.7.5 Development of Mutual Goals

A set of mutual goals must be developed that satisfy the stakeholders' requirements for successful projects (Ng et al., 2002). The stakeholders need to identify all respective goals and jointly developed mutually agreed project goals. This can be achieved by mutual understanding between the stakeholders in accepting differences in attitudes, expectations and limitation of others.

2.7.6 Continuous Joint Evaluation

Continuous joint evaluation is essential to be carried out in order to ensure the success of partnering project is attained. This can be achieved by developing a method of evaluating the effectiveness of the partnering team. The evaluation process is to ensure that the project goals and objectives are on track. (Ng et al., 2002)

2.7.7 Use of Project Partnering Tools and Procedures

One way to achieve a success partnering project is by using the relevant project partnering tool and procedures which helps to maintain focus and direction. These tools encompass the charter, statement of goals and objectives, mission statement, problem identification and resolution process, conflict escalation procedure and etc. Tan's (1999) research underlined the importance of building up a pool of partnering facilitators in Singapore to ensure the success of partnering implementation.

2.7.8 Elements of Leadership

Jones and Mohammed (2003) highlighted that effective leadership is needed within each of the parties in defining their own strategy and position in relation to partnering, and ensuring the necessary internal preparedness. As well as requiring top-level leadership, the intra-organization changes associated with partnering have to be championed and managed at all levels in all functions. This usually requires someone taking responsibility to ensure that internal changes take place in all areas and at all levels of the organization. There is usually one individual who bears the responsibility of being the change agent, champion, facilitator or coach. In an organization of any size, the champion or agent will need the help and support of a group or task force of like-minded individuals to help implement and sustain the partnering approach.

2.7.9 Improvement of Communication

From Azlan et al.(2010) survey, it shows that the majority of players in the Malaysia construction industry find that communication among parties and functionality, which involves conforming the technical requirement of a partnering project, are the two dominant factors in determining the performance of a partnering project.

2.7.10 Empowerment of Stakeholders

It was known historically that all successful teams had been empowered to define their own objectives and limitations (Richards, 1995). This is followed by CIDA (1994), stipulated that higher management should empower their partnering representative with enough authority to make appropriate decisions for the project. It is to ensure that the problem resolution can be done at the lower level and expedite the decision making.

2.7.11 The Need For Effective Measure System

A constant measure and evaluation of the level of success will ensure the achievement of goals (Ng et al., 2001). Therefore, it is very crucial to develop an effective measure system. It can also determine the current health of the relationship among partners and ensure their attitudes are on track.

2.7.12 Willingness to Accept Mistakes without Pointing Fingers to Others

Partnering promotes a win-win situation and eliminates win-lose roles. Therefore, in order to attain a successful partnering project, it is vital for every stakeholder to be prepared and learn to tolerate or accept each other's mistakes. Furthermore, they can also benefit from lesson learnt in order to improve efficiency in the future.

2.8 Problems and Difficulties Occurs in Partnering Projects

Despite the benefits of partnering concepts, there are several problems and difficulties occur during the implementation of partnering projects which are considered as the barrier to the partnering success. This is due to cultural shift in attitudes and a trust and acceptance of stakeholders (Ng et al., 2001). Kwan and Ofori (2001) highlighted that the hurdles which needed to be overcome were bureaucracy, the cultural barrier and the lack of expertise. Basically, there are three (3) major barriers to partnering which are industrial barriers, organisational barriers and cultural barriers that need to be overcome.

Previous studies and researchers have identified that there are several barriers to partnering success. Zawiyah (2002) studied that commitment from parties involved is not the main problem in partnering and suggested that the other problem that need to be looked into are extra work load, time, difficult to change mind set, cooperation within organization, understand the other partners' objective, non-transparency between partners, uncertainty with new group involved and ability to understand the partnering concept. Meanwhile, Beach et al. (2005) found from his survey that the clients were found to be major barriers to the construction industry's adoption of partnering.

Chan et al. (2008) listed several major difficulties in implementing partnering which are as the following:

Dealing with large bureaucratic organizations impedes the effectiveness of partnering

Uneven levels commitment were found among the project participants

Parties were faced with commercial pressure to compromise with the partnering attitude

Parties had little experience with the partnering approach

Contractors and sub-contractors do not understand partnering. All stakeholders need to be educated on what partnering is all about and the benefits it is likely to bring

Risks or rewards were not shared directly. Conflicts arose from misalignment of personal goals with project goals

Parties did not have proper training on partnering approach

Parties were conditioned in a win-lose environment

The partnering relationship created a strong dependency on other parties.

This is supported by the previous cross analysis made by Ng et al.(2001), that there were fifteen (15) identified problematic issues which contributed to the failure of project partnering arrangement in government construction projects which are as the following:

Lack of continuous open and honest communication

Stakeholders not developing a "win-win" attitude

Stakeholders are not committed to partnering arrangement

Lack of intimacy in the partnering relationship

Issues are allowed to slide and escalate

Some partners are unwilling to compromise

Lack of empowerment in the client's controlling bodies

Commercial pressures compromising the partnering attitude

Lack of training and guidance in the project partnering arrangement

Use of competitive tendering arrangement inhibits flexibility

Problems with drawings and specification

Key subcontractor is not included in the partnering process

Partnering is not suitable for a particular project

Weaknesses of partnering

Developed strategies to partnering

However, the results from the survey indicate that the unwillingness of the client to fully commit to partnering agreement was the main reason for ineffective projects partnering. They recommend that the public clients must ensure that they are willing to ease their unnecessary restrictive regulations and administrative procedures to improve the contractor's financial position.

2.9 Disadvantages of Partnering To Stakeholders When Use Partnering Approach

Dispute to the benefits of partnering; partnering has several disadvantages which Olsson and Espling (2004) identified such as the following:

Partnering requires more management involvement, especially when introducing and starting up the partnering process, as well as during the period of running the project

According to Barlow et al.(1997), there is over dependency on the partnership and maintaining the value received

The client may take the opportunity to transfer benefits that are uncalled for, to partners

The government operated or controlled contracting; a partnering relationship could not place non-partnered contractors at disadvantage during bidding on subsequent contract. This may minimize competitiveness, which is contrary to expected governmental practices.

2.10 Conclusion

From the previous studies and literatures, the implementation of partnering is not as simple as it may seem, however, it is clearly possible to practise. In addition, despite there is evidence of several successful partnering reports in the construction industry but not all partnering projects meet prior expectations or goals. Even though partnering approaches give benefits to all stakeholders involved, it is essential to identify the difficulties and problematic issues that might occur should it be implemented in projects. It is essential to overcome the three (main) barriers in order to attain successful partnering projects.

Partnering approaches have several advantages and disadvantages that need to look into before deciding to implement the concept of partnering in projects.

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