Small Subcontractor Companies And Partnering Alliance Construction Essay

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Partnering, as every contractual relationship in construction sector, despite of all arrangements before starting this alliance, sins to have problems related with untruth, misunderstanding, lack of cooperation and confrontation.

This report settles down how Managers of University of Giessen face usual approach to a partnering relationship focusing in issues regarding the subcontractors and self employees` point of view.

This report starts explaining why a partnering association has been adopted for this particular studied case, it goes on analyzing the problems that small subcontractor companies and self employees suffer in partnering alliance when they rarely are asked to join to and ends providing solutions for the existing problems suggesting some tools to achieve the goal target such as Web-based subcontractor evaluation system, Partnering Temperature Index Automation Suite and adapting a Danish cooperation experiment.

2- THE PROJECT IN A GLANCE

One of the most important objectives in this paper is how to deal with the redevelopment of the areas of the University of Applied Sciences in Giessen because the existing buildings are too small so it is needed new ones which provide more space in the future.

Also new structure arising is needed which satisfy required standard and start the demolition of old and outdated structures.

In this redeveloped area, after the demolition works, it is going to be carried out big and long term works such as parking excavation, basement construction, parking construction and arising of four brand new buildings with different uses as described below:

a) Lab and Technology Centre with 4632 m2 constructed in total.

b) Application centre for medical engineering with 1145 m2 constructed in total divided in two buildings.

c) Office Building with 910 m2 constructed in total.

The total estimation cost is around 20 million € and it has been established a 20 months deadline.

For the overall work it is not difficult to make and estimation and realize that in this project many parties will be involved (client, engineers and architects, main contractor, suppliers, subcontractors and finally final users) and there is a need of coordinating this large number of people.

Taking into account the need to administrate and save money as much as possible and coordinate many parties which have made people from university start thinking and seeking to in new ways of coordination and interaction.

Here is first time where Partnering appear in this tremendous project as a solution for a huge number of issues related with it and also as an interesting experiment to extract ideas, conclusions and studies from, as it is displayed in next points.

3- WHY PARTNERING IN THIS PROJECT. BENEFITS

When staff from University of Applied Sciences in Giessen received the OK from German Government, they started facing main problems in the project and execution phase, and final decision was to adopt the Partnering as a way of solve different problems along diverse phases in project due to different benefits which have been developed after this introduction; but it is important to remark that only adopting partnering, the benefits are not assured. Nevertheless Partnering can help in construction projects when it is developed efficiently, rapidly and cost effectively. It is written in some papers that partnering can reduce construction time and can help to make more efficient the work on site.

A good definition for Partnering word which fits with the objectives of this report is the one provided by Cox and Townsend (1998):

"Partnering is a long term commitment between two or more organizations for the purpose of achieving specific business objectives by maximizing the effectiveness of each participant's resources. The relationship is based on trust, dedication to common goals and an understanding of each other's individual expectations and values. Expected benefits include improved efficiency and cost effectiveness, increased opportunity for innovation, and the continuous improvement of quality products and service."

As said before, partnering will be the selected way to work, instead of the traditional procurement methods. Many definitions have been given to Partnering word and here is a mix of them to highlight principal advantages applying the obtained results to our project.

Specifically in Giessen University project we are carrying out the short term partnering, also called project partnering, is the cooperation of the different parts during the duration of a specific project focusing on the benefits in a short term, this cooperation transforms contractual relations into a common project team with common objectives, solving conflictive situation quickly and efficiently, using clear procedures (Beach, et al.,2005)

As it is reported in Shek-Pui Wong & Cheung (2004) partnering applied to the construction has been suggested as a way to offer contracting parties benefits that other traditional procurement methods hardly obtain.

There are also several profits that partnering can provide us which are performed in Black & Fitzgerald (2000) as quality and safety improvement due to involvement of parties of the project working more closely together, sharing of risk between the different parties, Another big profit of partnering is the possibility of combine and share resources, experiences and expertise, with an increasing likelihood of success.

This access to resources combination is really useful for small to medium companies (subcontractors and self employed people who we are dealing with in this report), since through this partnering approach helps them overcome the barrier of don't having the enough pre-qualification.

Through the partnering is desired a trust ambience and openness of all the parties involved in it; thus a better environment is achieved making working easier and avoiding the confrontation atmosphere, that has been demonstrated to have negative effects on the project development and performance.

All benefits described in three previous paragraphs are applicable to our specific case since important authorities involved in project from University are trying to achieve such as enhancement of quality in deliverables, increase the safety measures reached by working nearly together all parties implicated.

Most important is the fact of gain experience from working teams in private sector such as main construction companies in Germany or Europe, also from small enterprises and self employed people with a lot of knowledge in specific duties which is used by university staff to elevate their own knowledge.

It is also reliable that for project manager in the university is better to work in a good ambience without discussing and having confrontations than in a negative atmosphere therefore a long term relationship is required and desirable.

There is the possibility of make bigger the relationship with different parties and start having contacts and learning from some foreign enterprises keeping in mind their way of thinking or working.

All parties implicated in this project also are looking for and expecting reductions in workdays, wastages and ultimately save money since they have been enrolled in partnering alliance.

To give the project an overall view of how partnering could enhance it in general terms there are some research which show us different data from UK 12 years ago, it is exposed that the site worker was only effective the 37% of the time (Egan, 1998).

The studies also conclude that introducing the partnering today is possible to reduce the total time in 10% and also reduce wastes more than 20% per year (Packham, 2003). But there are also some negative aspects reflected in the report, like the non participation of the subcontractors in the partnering process, so they don´t receive any benefit of the partnering.

It seems that only clients and contractors are enjoying the benefits of the partnering (Packham, 2003).

Staff from Giessen University who is in charge to start conversations for the partnering alliance has realized that using this procedure after the analysis of cost, time, efficiency and flexibility there is a substantial saving in cost, time and workdays which is in accordance with their needs cause it is compulsory to finish and deliver the finished work in a short term; partnering, as a way of work, fits the initial requirements perfectly.

These results are in accordance with figure shown below in which Beach, et al (2005) reproduces tangible benefits of partnering and also gives some percentages and some detailed information of the improvements with partnering performance.

Figure 1. Tangible benefits of partnering (Beach, et al., 2005)

Staff representing the position of University gives great importance to put in common all the objectives of the different parts involved in the project because they are sure that by this way the final result will satisfy to almost all of them.

There is lot of competence and also exist high level of risk in construction industry field due to the conflicting objectives of the different parts involved in the industry.

One of the most important premises for people in the university side is to avoid the confrontation as it has been explained in previous paragraphs remarking and being aware of the fact that there had been occurred lots of judicial processes between clients and contractors.

As a part of the research study carried out by researches in Giessen University the partnering has been chosen as a way of "long term integrated industry" and some studies are going to deal with this task according to Chan, et al. (2006) who say that It is necessary to develop an integrated construction industry that is able to have continuous improvements, to develop teamwork culture.

4-SUBCONTRACTOR`S PROBLEMS IN PARTNERING ARRANGEMENT

Over this report´s point it is going to be analyzed and summarized main problems that small construction companies have to deal with when they are forming a partnering alliance. In this case, particularized for subcontractors involved in developing the area, excavating and constructing the parking box and also constructing the four buildings in University of Giessen.

Performance of partnering in actual construction field is something still not well defined and sometimes it is not really clear and produce unequal results; even considering the benefits of the partnering application, recent studies still continue underlining that the profits obtained with the implementation of partnering benefit only to client and contractor, so other parties implicated such as subcontractor and consultant don´t obtain their pie slice.

In this section the report deals with the problems that makes appear this emerged situation of inequality in the construction industry, focusing on the subcontractor´s point of view.

To carry out the study of this real case it is important to remark that to show the problematic all the comments and data are going to be referred to different studies, some articles and also parts of interviews related in several sources trying afterwards to apply this problematic to the studied real case.

The subcontractor`s decision hasn`t been taken into account or they have been one of the lasts involved parties to take decisions in a construction project.

The decisions used to be taken by contractor and client, and then, subcontractor merely had to obey the orders coming from other parts in the alliance without possibility of changing anything; if unequal power relationships exist, it is conceivable that small construction companies are failing to benefit from the partnering process (Bresnen & Marshall, 2000).

Litigation in the construction industry has been rising in last year's until nowadays, even more in traditional procurement contracts as it is reported by MacBeth and Ferguson (1994) "the exploitation associated with traditional procurement routes is believed to be the most important reason for the move to partnering". This situation has debilitated all the contact among the different implicated parts, and so the subcontractors and self employed haven`t been kept in mind by General Managers and main contractor in the taking decisions process, and also in the development of the construction project also in a partnering relationship.

Engineers have designed scrappy plans and specifications, incomplete and without consistence, owners have delegated responsibility in technician and don´t want more problems. The contractors have been too optimistic when studying and offering the lowest prize. And finally the construction industry, and specially the subcontractors who are the last link in the chain and who has suffered the inequity faced up to contractors and clients, have supported all these situations. Due to all this problematic that finish in litigation or in a worst situation, construction sector has become a weaker and untruthful industry.

It is usual that the disputes appear when a part involved doesn´t pay attention to another part`s recommendations, when the weak part is under valuated; this is what commonly happens to the subcontractor who works obeying the orders, for the fixed prize and there is nothing that could be changed. Staff from Giessen University is trying to avoid this situations occurring by partnering alliance application.

Analysis of a small construction company`s GM about subcontractor's role

General Manager of a small construction company working as a subcontractor in partnering alliances was asked in an interview about partnering incorporation in his organization and after summarizing their answers it is possible to list and describe main problems in his point of view as follow:

Main disputes with contractors are still related with cost adjustment, and he explained that it is not first time that main contractor manager ask him to make "extra works" not included in contract. Once these works have been priced and sent to main contractor`s quantity surveyor, they were often disputed, breaking the rules previously adopted in partnering process.

Another issue acting as a handicap is the continuous contract changes in terms of time and specifications and also there are some problems related with work`s reprogramming. Sometimes Main Contractors (MC) want to save time making subcontractors and self employed working overtime and rising time that they spend in construction site.

If subcontractor enterprises aren´t agree sometimes they run the risk of being fired from the project construction, because there are lots of little companies ready to work in those poorer working conditions which satisfy the MC`s cost requirements.

If subcontractor enterprises are agree with MC conditions but ask them for help to cover the additional costs involved in the process, MC refuse to afford their cost demands and as a consequence this unwillingness to compromise is another source of conflict.

When the general manager (GM) was asked if his company has been treated fairly he answered that in general, he has observed that whilst good relationships had been established with company directors over a period of time, these relationships were less valued by lower management levels. As a result, the relationships and trust that had been formed in initial project negotiations were usually not carried through to project completion. Thus, once a project had commenced he(the GM) felt that the firm was often excluded from the decision-making process and were 'bullied' into courses of action that were typically to the detriment of the firm's overall profitability ( Packham, et al.,2003).

It is not difficult to realize that if MC don`t finish with power orientated tactics which provide them advantages on subcontracted enterprises, this individual will always go on behind the first.

The GM explained an example of how the bad communication between parts can influence in the company, in the contractor and the subcontractor. "Under one multiple site project the same skilled worker was required on the same day. Instead of reaching a compromise, the site managers of the main contractor decided that their site was most in need of the worker provided by the company and the resulting dispute led to increased house building time and inefficiency. The company was subsequently forced to justify why it had taken longer to complete a given operation at an inflated cost despite the conflict being caused by the main contractors" ( Packham, et al.,2003).

In other matters, data was collected from the industry`s MC using a survey questionnaire to obtain a general approach of how MC consider the subcontractors` labor. All the responses indicated that they had large contacts with a little number of key subcontractors who they described as partners involved in partnering relationship. Due to this new situation, MCs have ceased searching for new subcontractors and suppliers in the market penalizing newly established enterprises with high technical level and renewed points of view, these kind of small new enterprises find huge number of problems because MCs have already done strong links with a few number of known enterprises and they require from these new enterprises hard standards to get joined in a partnering alliance.

So, until these subcontractors don`t get implicated in a partnering relationship they will find impossible to reach new goals, try to be established in the sector and get new and large contracts with government administrations or big private clients.

Further 57% of MCs had plans to reduce the total number of subcontractors and 97% of respondents indicated that they believed that partnered subcontractors would provide them with a better service (Beach, et al., 2005).

It is usual to find situations in which client and MC join their efforts to look for subcontractors just to save costs and obtain better quality in chosen material trying to push the situation to unimagined levels, in these cases the most injured is the subcontractor who is manipulated and treated as not worth in order to fit a high number of requirements from client and MC side, here is a good example stated in Construction Best Practice Programme (1999): " the client's team and Design-Build team worked as one group in selecting subcontractors, reportedly resulting in cost savings and better quality materials".

Another example of subcontractor getting disadvantaged by MC and client decision is contained in Black, et al. (2000) which recognize that suppliers and subcontractors must strive to make continuous improvements or the client may decide to partner with a competitor and also the fact that in means of subcontractors and suppliers, the MC benefits from partnering with them obtaining higher margins, lower costs, better value for customers, a larger market share, quality improvements, design-cycle time reductions and increased operating flexibility.

Previous paragraph highlights that the main bodies in partnering alliance just want subcontractor`s services to gain more money, enhance material quality and reduce design-cycle time. On the other hand, it is a reality that companies are increasingly being dependent from subcontractors and suppliers.

Another big problem related with relations among different parts involved in partnering alliances is the lack of credibility and trust between all of them, in relation with this issue people from Giessen University don´t want any setback regarding the untruth. Using partnering they try to avoid a wide range of disjunctive surged when MC and consultants try to show that whatever problems occurred on site are the result of the incompetence of the subcontractor. If Giessen University people avoid these behavior among different parts implicated in, they will save lot of money in inspection systems as control measures because cost involved is enormous.

Sometimes, but it use to be rarely there is an Untrustworthy information and it use to happened when information that project participants are expected to receive and go on is incomplete, biased or wrong, trust is always at risk because defensive responses and risqué answers are rapped out.

This posture is clearly reported by Cheung, et al. (2003) who say that It is not uncommon in construction that information is withheld either totally or in part, typically with two intents: to hide deficiency or to deceive the other. When these happen, trust development will be severely hampered.

Despite of partnering in construction advocates cooperation which cannot be achieved if the contracting parties do not trust each other there are some episodes of failure of integrity in which one of the parts cheat or lie to others causing again a lack of integrity and trust.

To add a new example and also as a conclusion of this point, just to remark the outputs that MCs expect from subcontractors, it is shown in next figure which are the main profits that MCs obtain from partnering association sorted from highest to lowest in order of importance from 34 interviewed MCs point of view. It is also remarked the rows in which it is expected MCs get benefits at the expense of subcontractors and self employed people while is in a partnering relation with them.

Figure 2. Benefits of partnering for MCs point of view (Beach, 2005)

5- SOLUTIONS TO SOLVE SUBCONTRACTOR´S PROBLEMS

After this study management team from University of Giessen has taken into account the problematic previously developed in the point developed above and afterwards they are also going to focus in a few number of solutions explained in following paragraphs related with real practice examples which can help them to solve all kind of unfavorable situation which could occur whilst developing their project.

Throughout this point it is going to be focused the perspective of the subcontractor, making emphasis in partnering as a tool which should help to equilibrate the inequality situation of the subcontractor faced up to the contractor to have a better communication between the different parts, to reduce costs as much as possible, to reduce time and wastes, to create and enhance an environment of collaboration, cooperation, resolution of problems and disputes. It also should improve to have a more collaborative environment in the construction site, letting the subcontractor take part on the decisions which are going to be taken and other relevant steps of the process.

In University of Giessen a good connection among the parties is required to improve the relationships between contractors and subcontractor, and staff of this University will be intermediating in the partnering alliance. It is necessary that in a building construction process like the one that is going to be built in the University of Giessen, the relations between subcontractors and the other parties involved in the construction process are all right, because if the subcontractor feels that he isn´t really necessary to take decisions or to manage the works, the final result won´t be as good as it could be. The subcontractor mustn´t be a mere participant on site, a person who does his work accomplishing the orders of the superiors, without the opportunity of saying something; he must be a person motivated with the work, taking part in all the project stages.

How problems can be solved?

Subcontractors play an important role in the achievement of construction projects. The success level of these projects may depend on the philosophy of selecting "the right person for the right job" (Palaneeswaran & Kumaraswamy, 2000). So in this approach, to avoid problems in coming events during the construction process in a partnering association it is transcendental for the MCs the right choice of the subcontractor who is working with. There are many duties to take into account such as quality and safety, efficiency, skilled and qualified workers, company worth, accessibility to the company, meet the deadlines on time and cost reduction. To enhance the subcontractors` skills, to avoid problems related with quality of work, delay in duration, generate additional costs in construction projects and also to avoid unfair competition; there are several tools related with information technology applications that can be an effective way in the SC evaluation process when the MC want to meet a partnering alliance. This evaluation method can reject inexperienced and incompetent subcontractors and keep less prepared subcontractors away, reduce hazards and is helpful to meet the project goals.

A few examples are QUALIFIER-1 created by Russell and Skibniewski (1990) and afterwards Russell et al (1990) developed the QUALIFIER-2 with the basis of QUALIFIER-1. WEBSES (Web-based subcontractor evaluation system) which was achieved by Arslan, et al. (2008).

WEBSES provide pertinent information services, improve communication among partners, time saving and also problems that arise from traditional practices can be avoided through an assessment process supported by four main inputs; cost, quality, time and suitability which can be subdivided in several smaller tasks such as timely payment to laborers and completion of job within the budget. In this software, subcontractors are part of a database and they are able to enhance their performance by means of feedback periodically. All people working for a company which works with this software just need to get connected to internet and with a password they can get all the data regarding a high number of subcontractors. So it is not difficult to realize that applying this tool to the partnering time reduction, money saving and adequacy is achieved.

In this particular case managers coming from University of Giessen are going to ask MC to use this useful tool to avoid problems with subcontractors during partnering relationship in terms of quality of work, delay in duration and generate additional costs in construction projects.

As it has been stated in previous point It is difficult to assess the implementation of partnering in construction projects, to evaluate the real partnering achievement during a partnering alliance there exist a power tool called Partnering Temperature Index (PTI), this idea is covered in Cheung, et al. (2003). It has a clear similarity with previous proposed solution since this one uses also an internet technology and database. Due to this on line performance achieve results with time savings, it helps people involved in partnering to manage and face problems surged during the partnering relationship providing a flexible, speedy and online platform for customer doubts.

The monitoring system described therefore consists of a set of partnering measures and evaluation ratings to be provided by the project participants. The PTI Automation Suite can be extended to incorporate other key performance indicators to serve as a total project management tool (Cheung, et al. 2003).

PTI Automation Suite seeks to provide indexed solutions to assess the partnering status, in doing so, the points below are involved:

- To identify measures that are most reflective of the partnering status;

- To collect data of the current partnering status; and

- To compare historical data with current data.

In means of previous points, subcontractors can evaluate in each moment how they are in a current status and also this tool allow them to improve their weak points in this alliance. This tool provides an effective way to identify areas where partnering is failing, hence trouble areas can be corrected effectively by all parts implicated, it can be useful when subcontractor is not taken into account and relegated to the background by MC and due to the lack of communication, after appealing to the PTI tool, subcontractor can achieve a higher level of performance in each step of the partnering relation facing the main problems to deal with MC and also searching for possible solutions.

How does PTI Automation Suite work? Before each review meetings, evaluation forms are fulfilled by project participants, in these questionnaires different parties assess the partnering current status; afterwards project manager collects all the questionnaires and update the result into the PTI system. Nowadays, with the Internet support, project participants can fulfill these forms directly on a web page obtaining direct results.

This is the way that people from University of Giessen want to apply before each review meeting to see how partnering is achieved and how to avoid problems related with relationship among all the participants since they have all the trustable data from them to manage the different problem situations which could appear.

A Danish cooperation in construction approach

Following the procedure applied in the whole document, it is going to be presented the next solution in subcontractors` point of view in order to achieve more concrete results for the actual case in which we are dealing with.

In the BygLOK project (Dam and Elsborg, 2003) it was kick off the question of "How to create a good building site", the workers (small subcontractors and self employed people) gave their opinions and the majority of them were related with high level of information and a good communication, to have more responsibility and also to be asked when the important decisions are going to be taken, respect in their respective jobs and cooperation.

It was stated that during the last meeting among all the parts involved in the partnering relation it could be appreciated that a higher level of commitment has been performed in this project in comparison with other traditional ones, even though the workers comment that the work had become enjoyable.

All these goals were reached and despite the reluctance of the MC the project did increase profits, reduce construction time and improve quality and safety on site.

Worth the hard work accomplished during the project processes and also in the weekly meetings if a Real Partnering is performed where there are not problems in communication among subcontractor and MC, problems related with untruth, and other problems such as to be relegated in important decisions making and being not taken into account in the design of a framework to work in, inequality within the partnering relationship or to be exploited in MC own benefit.

During the performance of BygLOK activities, all parts involved have tried to keep the appropriate work environment and the development of all the employees and small subcontractors in different ways:

-Workers working with a high level of intercommunication among them and also with manager from MC and GM.

-Workers from subcontractors constantly implementing their personal and professional skills.

-Self employees, small subcontractors and also Main Contractor company employees taking ownership and working with a high degree of responsibility. The experiences up till now point to benefit to MC as well as for small subcontractors and self employees.

Managers from University of Giessen think that this experiment can help in the development of the cooperation between workers and managers, among subcontractors and MC if it is applied in any construction process. But nevertheless it is necessary to change the habits of all people involved in such a singular project, because even if applying this method, if nobody changes his mentality, nothing will change in the process.

The staff of the university seeks to achieve a similar experiment among the partners whilst the construction processes is being carried out "from the cradle to the grave".

The performance will be split in three main parts:

1- Make some team sessions with all the parties involved. This is also a way to encourage social activities in team already achieved in Managers but not so much developed in small subcontractors and self employees who doesn´t know so much about this.

2-The second part focused in the effort made every day on the construction site. All parties implicated in the partnering relation also discuss about the general process and if the objectives have been achieved or not, comparing the theoretical results with the real ones, and they try to improve the cooperation.

3- Evaluation of the accomplished efforts. There is also planned to make individual and group interviews to develop and collect new learning.

6- CONCLUSION

The aim of this report is to pose, analyze and solve problems surged in redevelopment of the areas of the University of Applied Sciences in Giessen in subcontractors` point of view.

Staff from University of Giessen have thought in Partnering as a tool to avoid problems related with traditional construction procedures due to discussions and confrontations which create a negative atmosphere, they also have taken into consideration to keep away usual conflicting objectives of the different parts involved in the industry.

Throughout the study it has been listed main issues that Managers from the University have to deal with such as the inequality when sharing the benefits between all parties implicated or MC paying less attention than required to subcontractor`s decisions and demands.

Another big problem to eliminate is related with relations among different parts involved in partnering alliances and their lack of credibility and trust among all of them to save lot of money in inspection systems as control measures because cost involved is enormous.

Solutions regarding to a partnering performance have been suggested in order to achieve a better communication between the different parts, to reduce costs as much as possible, to reduce time and wastes, to create and enhance an environment of collaboration, cooperation and resolution of problems and disputes from University of Giessen staff.

Managers from University of Giessen are going to accomplish and apply these different solutions to prevent future displeasing events trying to cover the maximum range of risky activities in which problems could appear.

There are several tools to enhance the subcontractors` skills, to avoid problems related with quality of work, delay in duration, and also to avoid unfair competition related with information technology applications Such as WEBSES Arslan, et al. (2008).

To assess the implementation of partnering in construction projects there is an indicator really useful in subcontractors´ point of view called Partnering Temperature Index (PTI), (Cheung, et al. 2003) to enhance time savings, it also helps parties involved in partnering to manage and face problems surged during the partnering relationship.

Thanks to the application of a variation of the BygLOK project (Dam and Elsborg, 2003) subcontractors implicated in this project have obtained with high level of information and good communication, responsibility and also to be asked when the important decisions are going to be taken and cooperation.

As a conclusion Managers from University of Giessen think that thanks to different solutions applied in the University of Applied Sciences in Giessen and related in this study, problems regarding to this partnering performance will decrease in relation to a traditional construction procedure and the experience gained by all parts involved in the project will increase, creating an added value apart of the economic benefits.

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