The British Construction Industry Construction Essay

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The British construction industry is presently going through a difficult time. Poor economy and credit crunch forcing the industry to take reform initiative and bring changes in procurement strategies. It is significant that these initiatives are becoming evident in parts of the construction industry are already sweeping through many other industries in the west. This has happened because assumptions on which western managers have traditionally based their working methods produce inefficiencies where ever they are applied. Slow deliveries, poor quality, high prices and broken promises are no longer tolerated. As a consequence, managers in every industry have been forced to make fundamental changes have been abstracted from the Japanese way of management. Amongst them one is concept of partnering. There are a number of significant benefits to the partnering process. These include: early problem identification and solution; increased job safety; greater mutual understanding; and early dispute resolution.

It is the partnering process which seeks to distinguish what all the parties� goals are, to educate all parties to all other parties� goals, and to mould them into common goals and mission. It is the moulding of these sometimes common, sometimes divergent goals of all team members into one cohesive team and purpose which leads to a successful project.

Many partnering programmes include safety goals and incentives. This may not affect one project�s cost of insurance, but just ask any general contractor how beneficial it is for their insurance, experience modification rate (EMR) to go down! In addition to the obvious benefits of greater work site safety and a better working environment, this is a powerful incentive.

Background and Justification

As defined by the Construction Industry Institute�s Partnering Task Force, 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.

Few years back the construction industry of British has faced with many problems, such as little cooperation, limited trust and ineffective communication resulting in an adversarial relationship and over engineering. This kind of relationship is reflected in project delays, difficulty in resolving claims, cost overruns, litigation and win-lose climate.

Contractors responds to these controls techniques by developing their own quantity surveying capabilities, adding to site overheads and generating the distinctive twin hierarchy of site management, with contract manager focusing on time and quality, and the site surveyor focusing on cost. As cost are largely determined by design decision in competitive tendering on complete designs, and contract price are fixed through that process, there is a little opportunity to reduce costs this is a cost control, rather than a cost reduction process. This dynamic of adversarial relations interacts with a second dynamic of over-engineering. Clients are naturally concerned to pass complete responsibility for design to their professional advisors. Designers wish to protect themselves against litigation for defects in their designs, but they face the responsibility of opportunistic behavior from contractors. The concern to minimize opportunistic behavior by contractors obliges designers to specify the product completely, yet their(inevitable) lack of experience the site process means that their specification decision do not reflect site conditions or capabilities of contractors. This creates rigidity in the design which tends not to be fully optimized in relation to the problems of construction. It also encourages designers to allow high safety margins in their designs leading to over-engineered and hence costly designs. In the absence of the ability to change the specification to better match their capabilities, contractors maximize their flexibility. Thus contractors retain a preference for craft forms of work organization, which delegate considerable control over the work process to the operatives.

As it is seen that, partnering is a process by which each of the team�s partners can achieve their respective goals while together achieving the owner�s goals for the project. Partnering is, and should be viewed as, a process or a continuum. The greatest value is achieved when it is viewed as a process, and integrated into the project from its conception to its final result, the completed project. For those who view it as a claims-avoidance technique, just another management tool, or communication technique. Thus contractors retain a preference for craft forms of work organization, which delegate considerable control over the work process to the operatives, particularly in the form of labour only gangs. This in turns freezes the construction technology, preventing contractors innovating to reduce the pressure on their margins. As a result further opportunistic behavior occurs (Winch, 2002).

Rationale

The basis of this research lies in the fact that the cost increase and delays in the construction projects are mainly due to traditional adversarial relationships between the project�s participants.

AIM & Objectives

The aim of this research is �opening of new horizon in terms of partnering in construction industry�.

* To explore the reasons for implementing the concept of partnering in the construction industry.

* To evaluate critical success factors for partnering in Tesco construction projects.

* Critical evaluation of problematic issues associated with partnering.

* The reasons for partnering improving organisational learning.

* To examine the impact of the privatization on relations between government departments and private sector construction organisations.

Hypothesis

Partnering is like commitment between two or more organisations for the purpose of achieving specific business objectives by maximising 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. The greatest value is achieved when it is viewed as a process, and integrated into the project from its conception to its final result, the completed project. For those who view it as a claims-avoidance technique, just another management tool, or communication technique.

Research Questions

1. Who were the major stake holders?

2. What other parties involved in Partnering?

3. What are the problematic issues with partnering?

4. What are the main obstacles in partnering process?

5. Does Partnering team posses effective communication skills?

6. Are stakeholders committed to the project goals? If not why ?

7. What Contribute stakeholders to win-win attitude?

8. Are activities well coordinated with partner?

Literature Review

Traditionally construction industry has used procurement methods and contractual arrangements that have encouraged clients and contractors to see themselves as adversaries and that have reinforced any differences in values, goals and orientations that exist within the construction team. In recent years, however all this is expected to have changed and considerable attention has been directed towards forms of client contractor relationship. That move away from tradition adversarial approach to one based more upon cooperation and trust. The recent changes in the relationship approach can be seen as a result of pressure of internationalization of world economies. High levels of inward investment by foreign, particularly Japanese manufacturing firms have also led to pressure for change as they bring with them their usual Japanese construction managers. As Dawkins(1986) put in, life depends not on the survival of the fittest but of the �fittingest� , by which he means that have survived are the one able to cooperate best with their environment. Among these new changes, which have been evolved through different concepts, one is the implementation of partnering in construction. Most commentators attribute the emergence of partnering as a force in the construction industry in the late 1980s to the work of the construction industry institute of United States(CII) and the adoption of partnering by the US Army corps of Engineers. However in UK this gain in momentum as a result of Latham and Egan Reports (Latham, 1994; Construction Task Force 1998). Latham recognized the need for industry to move from its traditional adversarial approach to one based on cooperation and trust. Eagan took this conclusion further in recommending an action plan that draws on the ideas of lean thinking and partnering. Partnering is a long term commitment between two or more organization for the purpose of achieving specific set business objectives with the view to maximizing the effectiveness of each participant�s resources. The relationship should be blessed on trust, dedication to common goals and an understanding of each other�s individual expectation and values.

Partnering As a Method

Partnering is now being used extensively in the construction industry and has stimulated considerable interest in it as a method to create better working environments. Partnering is also said to:

Improve Project Quality

* reduce claims and litigation;

* reduce cost up to 30 per cent; and

* Cause projects to finish on time.

Partnering Centers On

* Teaming up of key personnel from the client, contractor and important subcontractors trust building; and openness between the parties (transparency amongst the partners).

The partnering process is intended to create a win-win situation where each partner gains more than they would have, through a non-partnering relationship.

Fig(A). The Partnering way of contracting out the project.

Background of construction system

The current trend in the construction industry is now moving towards higher quality. Contractors are forced to upgrade the quality of their service. This orientation towards quality has been brought about by the following reasons. First, clients are becoming increasingly more knowledgeable. Some of the larger clients also have international assets and interests. With increased affluence and knowledge, clients are demanding better quality because in many construction projects, clients often find themselves paying high prices for defective works that do not satisfy their needs. Such situations often result in disputes that result in higher costs to the client at the end of the day. According to �quality is customer satisfaction�.

On the larger projects such as cathedrals, considerable amounts of design activity were required in order to co-ordinate the works. This was usually carried out by master-masons who became increasingly specialised in design, as opposed to construction, activities and were much sought after by bishops wishing to glorify God in gothic stone. However, these �architects� grew from the ranks of masons and remained intimately involved with the work of craftsmen they directed. The craft system passed on its distinctive organisation of construction around the materials used carpenter, mason and so on which is still prevalent today. In the craft system, conception and construction were the combined responsibility of the master craftsmen, while control was carried out directly by the agents of the clients such as it clerk of works. Clients were also very happy to involve themselves deeply in the design and construction processes.

Professional system

An important feature of this emerging system was the general contractor undertaking work conceived by others, and subject to independent control. For the first time, a project actor emerged to whom the client could effectively transfer some of the risks inherent in the construction process. During the second half of the 19th century the building of the infrastructure of the first industrial nation turnpikes, canals, and railways -was undertaken on the basis of private promotion. These promoters were sometimes landowners or other interested parties, but particularly with the advent of the railways, they were themselves engineers. Initially, the actual works were divided into small lots and let to local contractors who were closely supervised by the engineers, but during the 1830s the role of the general contractor who took on a broader responsibility for the works emerged. As the momentum of railway building grew, contractors increasingly took over the promotion task as well, raising the finance for speculative new lines. The financial crash of 1866 took away much of the competitive advantage of the promoter - contractors, and banks increasingly preferred to lend to governments and established firms rather than finance speculative projects. Clients were increasingly public authorities like the Metropolitan Board of Works, and during the last quarter of the century, competitive tendering for civil engineering contracts became universal. The consulting engineer became more important, earning Brunel�s jibe that the consulting engineer was a man who was prepared to sell his name but nothing more, while the enterprise increasingly took the form of the civil engineering contractor of today.

But the rise of the general contractor stimulated those not included within its scope to organize themselves on a different, professional basis. During this same period, many of the institutions that later served to give the professional system its enormous momentum were founded the Institution of Civil Engineers in 1818, the (Royal) Institute of British Architects in 1834, and the (Royal) Institution of Chartered Surveyors in 1868. This dynamic relationship between entrepreneurial contractors and professionals was part of a more general trend in mid-19th century Britain, from a society dominated by the entrepreneurial ideal and regulated by Smith�s hidden hand, towards the beginnings of a society dominated by the professional ideal in which the role of the professions was to regulate the free market in the interests of the wider community. This:

implied a major change in attitude towards the entrepreneur, from the assumption that he could, unless proved otherwise, trusted to pursue the common good pursuing his own self-interest to the assumption that, unless the temptation to exploit the weak and the community at large were removed, he would pursue his own self-interest to the detriment of the common good. (Perkin, 1969 p. 439)

The manifestation of this more general societal development within the contracting system was the insulation of the activities facing the highest uncertainty in the design stages from market forces altogether, through the development of the professionally organized consultant architect or engineer reimbursed on a fee basis, and the evolution of control actors responsible for regulating those activities that remained subject to market forces principally construction on behalf of the client and the wider community. It is for this reason that the system that emerged in the early 19th century is defined here as the professional system.

However, these developments did not greatly affect the organisation of labour, which remained rooted in the old trade system organised on the basis of traditional crafts, a trend reinforced by the rise of trade�s unionism in the industry in the latter part of the century. Contracts were let on a lump sum basis by competitive tender to general contractors who employed many of the trades directly, while sub-contracting for the more specialist ones. Encouraged by Ruskin, architects increasingly defined themselves around a distinctive competence based on creativity as artists rather than intimate participants in the construction process.

The state grew increasingly important as a client in three ways. First, the role of the municipalities in the governance of the country grew in importance, creating a demand for town halls and other civic buildings. Second, local boards provided more and more services directly in education, increasingly in health, and especially in housing. Third, the state took over from private promoters, the development of infrastructure and thereby became the dominant client for civil engineering works. The general effect of these developments was to reinforce the features of the professional system, ensuring that the position of the professionalized actors was protected, and that competitive tendering on price was the predominant way to select a contractor. Technological change led to the proliferation of professions and crafts new technologies were adapted to the system, rather than the system adapting to take best advantage of new technologies.

It was not until the 1960s that alternatives to the professional system began to be tried in Britain. Innovations in tendering procedures were made, particularly a shift towards selective rather than open competitive tendering, and the first applications of a new form of procurement imported from the USA management contracting were made. The post-war housing programmes encouraged the use of continuity contracts and package deals with the suppliers of industrialized housing systems. The long post-war boom expansion in output came to an end in 1973. For a time, this meant an absolute drop in output but perhaps more importantly, the annual fluctuations in output grew in amplitude, both in comparison to the previous period in the industry, and also in comparison to the economy as a whole. This period saw a much greater interest in, and use of, new forms of procurement new forms of strategy by contractors which emphasized flexibility (Lansley, 1987); growing use of trade subcontracting and plant hire; and a strategic shift to the greater use of self-employment .

As growth returned in the 1980s the pace of change increased, led by private sector rather than public sector clients. In particular, the conditions of the property boom of the mid to late 1980s encouraged innovation. First management contracting and then construction management were increasingly used. Package dealing also found an expanding market. However, these innovations were largely confined to the building sector, and the organisation of civil engineering remained along traditional lines.

Application with the Professional System

At its best, the professional system reliably delivered high quality buildings, but it delivered them slowly and expensively. As it came under pressure, its strengths began to turn into weaknesses. The process of institutionalization became one of ossification, and reform initiatives threatened the interests of powerful stakeholders. By the mid-1960s, the professional system had become �the establishment ,more concerned with protecting its own interests than meeting client needs. It allocated roles, defined responsibilities, and specified liabilities. Effectively it de-fined some actors as proactive, and others as reactive; dubbed some with the rank of profession, and tarred others with the brush of commerce. Crucially, it established the reward and penalty structure for the actors in the British construction industry. The principal problem generated by this establishment was the double dynamic of adversarial relations and over engineering illustrated in Fig. (B)

Fig. (B). The dynamic of adversarial relations and over-engineering (source: winch (2000c)).

Central to the professional system is the selection of the contractor on the basis of lowest price after a competitive tender on the basis of a complete design. Curtis et al. (1989) authoritatively demonstrate how the desire by the client to get the �best deal� creates a dynamic of adversarial relations in which transaction costs escalate as production costs appear to be pushed down. As clients pressed down on production costs after the output peak of 1971, they saw their transaction costs rising inexorably the number of construction cases tried in the High Court Official Referee�s Division more than doubled between 1973 and 1991. Litigation is, however, only the tip of the transaction cost iceberg � much more insidious is the effort spent by all parties on avoiding disputes through writing increasingly complex contracts, auditing the performance of suppliers by hiring third parties to `manage� them; and the opportunity cost of the effort not spent in actually trying to reduce production costs. The professional system became a low-trust system in which all actors spent a growing proportion of their time covering their rear rather than moving forward.

An important element in the adversarial relations dynamic is that of control. Clients determined to ensure that the keen prices obtained through competitive tendering are not competed away through opportunistic behavior by contractors have developed the role of that distinctively British control actor the quantity surveyor. An extensive apparatus of in-project cost control has evolved which, given the contracts are typically fixed price, can do little more than manage the shape of the project cash-flow s-curve. Contractors respond to these control techniques by developing their own quantity surveying capabilities, adding to site overheads and generating the distinctive twin-hierarchy of British site management with the contract manager focusing on time and quality, and the site surveyor focusing on cost. As costs are largely determined by design decisions in competitive tendering on complete designs, and contract prices are fixed through that process, there is little opportunity to reduce costs this is a cost control, rather than a cost reduction process.

This dynamic of adversarial relations interacts with a second dynamic of over-engineering. Clients are naturally concerned to pass complete responsibility for the design to their professional advisors. Designers wish to protect themselves against litigation for defects in their designs, but they face the possibility of opportunistic behaviour from contractors. The concern to minimize opportunistic behaviour by contractors obliges designers to specify the product completely, yet their (inevitable) lack of experience with site processes means that their specification decisions do not reflect site conditions or the capabilities of contractors. This creates rigidity in the design which tends not to be fully optimized in relation to the problems of construction. It also encourages designers to allow high safety margins in their designs leading to over-engineered, and hence costly, designs. In the absence of the ability to change the specification to better match their capabilities, contractors maximize their flexibility. Thus contractors retain a preference for craft forms of work organisation, which delegate considerable control over the work process to the operatives, particularly in the form of labour-only gangs. This in turn freezes the construction technology (Winch, 1998), preventing contractors innovating to reduce the pressure on their margins. As a result, further opportunistic behavior occurs. Thus competitive tendering, despite its emphasis upon lowest price, was not actually delivering low production costs; in addition, it was also generating very high transaction costs. The requirement that designs be fully specified at tender made heroic assumptions regarding the competence of architects and other designers in the technical details of a wide range of construction technologies, and the ability of the client to keep requirements fixed over a period of years. In practice, designs were rarely fully specified and changes were inevitable, and so complex contracts developed that enabled such changes to be negotiated. Quantity surveyors became guardians of the contract on behalf of the client, making sure that the possibility of opportunistic behaviour by contractors keen to recoup the profit margins that had been competed away during tender was minimized. The cycles of adversarial relations and over-engineering were in place, at the expense of removing any incentive for an actor to reduce budget costs, as opposed to control costs against an agreed budget. Professionals paid on a fee, calculated as a proportion of the construction budget, have no incentive to reduce budget, while contractors have no incentive to offer a reduced budget because there is no mechanism in lowest price tendering to share potential savings between those that can offer them and the client. The professional system became a risk-shedding rather than a risk-sharing system.

Methodology

* Literature review

This study will review the relevant literature on the subject of partnering, in particular, looking at the reason why the construction industry moved from traditional approach to one based on cooperation and trust (partnering). This literature review will cover textbooks, institutional and statutory journals, periodicals and trade/academic journals.

* Interviews

The literature review will be followed by a pilot study which will take the form of interviews with clients and contractors who have commissioned and experienced both the traditional approach and the partnering.

* Questioners

Questionnaires will be sent to construction firms, project managers, quantity surveyors, engineers, contractors, etc.

Research Programme:

Research programme will be done in different phases.

Phase 1 Literature Review

Phase 2 Data Collection

* Interviews

* Questionnaire Survey

Phase 3 Data Analysis

* Qualitative analysis

* Quantitative analysis

Phase 4 Compilation of Research

* Writing

* Printing

* Binding

* Submission

Partnering as a Professional Method of Working in Construction of Tesco Express

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