Term Paper on "Construction Subcontracting"

Term Paper 26 pages (7083 words) Sources: 25 Style: APA

[EXCERPT] . . . .

Subcontracting Analysis (Cont'd)

What factors should be evaluated when selecting a subcontractor? What are the typical methods used to evaluate these factors and are these methods effective?

Outsourcing may be a term of fairly recent origin, but the practice itself is truly ancient because humans have been compelled to organize themselves into cooperative networks throughout history just to survive. Indeed, many of the same reasons for such practices remain applicable today. Few companies today possess the expertise, talent and resources to accomplish everything required of an organization in-house and most therefore outsource some component of their business systems (Child & Faulkner, 1998). From this perspective, it just makes good business sense to ally with others that are in a better position because of superior talent, expertise and resources to do certain types of work more efficiently - and the construction industry is no exception.

In fact, although some automobile consumers, for example, may still possess the mechanical aptitude needed to work on cars today, few will likely possess the ultra-expensive computerized diagnostic equipment and sophisticated tools required to do so efficiently so it just makes sense to have "Mr. Goodwrench" do the work instead. According to Brimmer (1992), "The subcontractor works below the general contractor. This is usually a small firm (it could be a single individual with a few employees) that obtains work from the general contractor. The subcontractor may also be highly specialized for certain projects" (p. 43). Likewise, many contractors may lack to expertise or requisite experience needed for a given project and will require the assistance of numerous subcontractors to help complete the project on time and on budget (Applebaum, 1999).

In this regard, Brimmer adds that, "The key general and subcontracting firms have typically gained expertise by specific experience. For instance, an electrical contractor is nearly always an electrician, a plumbing contractor is a plumber and a mechanical contractor is a mechanic. The opportunity to enter early and master these trades is vital to success" (p. 43). In almost every case, there will be certain components of a project that can only be accomplished by certain trades and there will be local, state and federal laws to take into account as well (Sims, 2002). These are critical issues given the nature of the enormity of the construction industry in the United States today and the amounts of money that might be involved in a major project. For example, Brimmer (1992) emphasizes that, "The construction industry is a major force in the U.S. economy. It is a mainspring of economic growth and generates significant jobs and revenue" (p. 43).

According to Applebaum (1999), the construction industry can be divided into three fundamental components:

General building contractors;

Heavy construction contractors; and,

Specialty trade contractors.

This author reports that, "General building contractors build residential, industrial, commercial, and other buildings. Heavy construction contractors build sewer systems, roads, highways, bridges, tunnels, dams, and other projects. Specialty trade contractors are engaged in specialized work activities such as carpentry, masonry, plumbing, electrical, painting, heating and air-conditioning work, and all other trades that go into the building of a structure" (Applebaum, 1999, p. 5).

Research Approach. In order to gain as much insight as possible into what factors should be evaluated in selecting a subcontractor, this study employed a mixed methodology using both a critical review of the relevant literature and a case study of general contractors in the construction industry and how they have gone about accomplishing and evaluating the process in different settings for different types of projects. According to Gratton and Jones (2003), a critical reviewing of the timely literature is an essential task in all research. "No matter how original you think the research question may be, it is almost certain that your work will be building on the work of others. It is here that the review of such existing work is important" (p. 51).

In addition, the literature review is a useful way of developing the background required for the research, where it is important to demonstrate a clear understanding of the relevant theories and concepts, the results of past research into the area, the types of methodologies and research designs employed in such research, and areas where the literature is deficient (Gratton & Jones, 2003). In this regard, Wood and Ellis (2003) provide the following as important outcomes of a well conducted literature review as it specifically relates to the construction industry today:

It helps describe a topic of interest and refine either research questions or directions in which to look;

It presents a clear description and evaluation of the theories and concepts that have informed research into the topic of interest;

It provides insights into the topic of interest that are both methodological and substantive;

It clarifies the relationship to previous research and highlights where new research may contribute by identifying research possibilities which have been overlooked so far in the literature;

It demonstrates powers of critical analysis by, for instance, exposing taken for granted assumptions underpinning previous research and identifying the possibilities of replacing them with alternative assumptions;

It justifies any new research through a coherent critique of what has gone before and demonstrates why new research is both timely and important.

As to the case study approach, Zikmund (2000) reports that the case study method is "an exploratory research technique that intensively investigates one or a few situations similar to the researcher's problem situation" (p. 722). The main advantage of incorporating this approach into a research project is that a subject area can be investigated in depth and with great attention to detail (Leedy, 1997).

Intent and Outcome. The intent of the foregoing approach is to provide industry professionals will some timely guidance concerning what techniques have proven successful in evaluating different subcontractors for a given project, notwithstanding the enormity of differences that each such project will entail.

Research Findings and Discussion.

The construction industry uses many of the same management techniques that are used in other fields, but the fact remains that there are some aspects of the construction industry that set it apart from other fields that suggest some management styles are just not appropriate or transferable. For example, as Sebestyen (1998) emphasizes, "Over the past 100 years, management in industry has emerged as a scientific discipline, with many new ideas such as ensuring competitive advantage, down-sizing, de-layering, concentration on the core business and human aspects, and re-engineering. Management in construction, on the other hand, has always been based on experience and organizational talent" (emphasis added) (p. 265). The experience and organizational talent that characterize successful general contractors will also widely vary.

For example, today, construction work is typically performed and coordinated by the general contractor who also may specialize in either residential or commercial and industrial building; the general contractor assumes complete responsibility for the project (in some cases the owner of a project will assign certain parts of the work to be performed by others such as outfitting a hotel with beds, furniture, drapes, pictures, lamps, and so forth, installing the special conveyor systems in a factory, or installing the racking systems that are needed for clothing in a warehouse) (Applebaum, 1999). This author notes that, "Although general contractors may do a portion of the work with their own crews, like carpentry, concrete, and masonry, they often subcontract most of the construction work to heavy construction contractors and to the specialty trade subcontractors" (Applebaum, 1999, p. 6).

Because the practice is so common and does not appear to be going anywhere soon, understanding which factors are typically used by construction contractors to select their subcontractors has assumed new relevance for industry observers and professionals today. It is reasonable to suggest that every contractor will have unique selection criteria by which they evaluate prospective subcontractors depending on the type of project involved and their own experiences with comparable projects in the past. Furthermore, it is also reasonable to suggest that previous experiences with subcontractors will play a large part in whether the same company is considered for a future job as well, just as word of mouth recommendations from other contractors will likely be taken into account.

Some of the most important - and intuitive -- factors to be taken into account when considering which subcontractor is most appropriate for a given project is whether the subcontractor possesses the requisite resources, skills and experience to accomplish the job in a timely fashion according to the project specifications and budget. According to Black's Law Dictionary (1990), the selection criteria used by most general contractors relates to which ever company emerges as the lowest responsible bidder, which is the "bidder, who not only has lowest price which conforms to with the specifications, but also is financially able and competent to complete the work as evidenced by prior performance" (p. 947). Therefore, selecting a subcontractor may require a specific trade or even general contracting experience, but the selection criteria involved will clearly directly relate to the job at hand, how well the company… READ MORE

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